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U.S. Chamber of Commerce Wants to Make Ex-Im Bank Great Again
But Trump’s pick to run the bank wants it killed dead.
There’s a battle brewing between big business and the Trump administration over an obscure but important corner of U.S. trade policy, the Export-Import Bank. It’s an epic showdown between President Donald Trump’s desire to reinvigorate U.S. trade might, on the one hand, and his desire to dismantle the federal government, on the other.
The U.S. Chamber of Commerce sent a letter to the Senate Banking Committee Monday opposing the nomination this spring of former New Jersey congressman Scott Garrett to run the Ex-Im Bank. As with other agencies — like the Department of Energy and the Environmental Protection Agency — Trump has picked people to run parts of the government who have spent years railing against those very agencies.
An outspoken critic of Ex-Im Bank, Garrett has described it as an agent of crony capitalism, corrupting the free enterprise system. During his tenure as a Republican congressman, Garrett repeatedly voted against renewing the bank’s charter. (Some conservatives say the bank offers a form of “corporate welfare,” while many trade experts say it underpins U.S. exports overseas.)
At any rate, the bank is all but paralyzed. With the Senate blocking appointments to Ex-Im’s board, it lacks a quorum to approve deals worth more than $10 million. That means about 80 to 90 percent of its activities are shut down.
“Mr. Garrett has failed to in any way publicly describe any change of heart towards Ex-Im to explain why he now wants to lead the organization that he spent so much of his career trying to shutter, nor has he committed to returning Ex-Im to a fully functional state,” Suzanne Clark, senior executive vice president of the U.S. Chamber of Commerce, wrote in Monday’s letter.
Why does the fate of a government-run export bank matter? As Clark writes, the Ex-Im Bank, by offering credit and loan guarantees for American firms, helps level the playing field with foreign competition, most of whom get plenty of financial support from their governments.
Countries like China, Japan, India, Germany, South Korea, and more all use state-backed or other official forms of export support to make their firms more competitive overseas, notes Gregory Chin, an industrial policy expert at York University. Last Spring, for instance, the Japan Bank for International Cooperation — a public finance institution and an export credit agency — agreed to finance a $480 million deal with Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking, allowing the Iraqi government to buy power equipment from Japanese companies.
With China expanding export credit as part of an attempt to wrest market share from the United States even in advanced manufacturing, said Kristen Hopewell of the University of Edinburgh, crippling Ex-Im would fly in the face of Trump’s plan to strengthen American manufacturing and make it more competitive.
Garrett “seems like a very perverse choice,” she said. “It’s hard to see it as anything but an act of sabotage.”
Moreover, the Ex-Im bank came to serve as a credit lifeline in the aftermath of the financial crisis, when the private sector was reluctant to provide loans for deals in foreign countries, said Caroline Freund, a senior fellow at the Peterson Institute for International Economics and a former chief economist for the Middle East and North Africa at the World Bank. That kept support for U.S. exports humming along even in the worst days of the credit crunch, giving the economy an additional shock absorber. But the fact that it’s a government agency handing out credit and loan guarantees paints a target on its back for many in the GOP.
“They want a feather in their cap for hitting away at welfare more broadly,” said Freund.
Some conservatives say the desire to rein in the Ex-Im Bank is all about supporting true free-market principles. Government support, whether through subsidies or export supports, distorts the market and gives the government an outsize role in the economy, they say.
If Garrett poses a threat to the status quo of the Ex-Im Bank, said Veronique de Rugy, a senior research fellow at the Mercatus Center, a pro-free market think tank at George Mason University, that’s a good thing. Why should huge multinationals like Boeing and General Electric need the bank’s taxpayer-funded support?
“The Chamber of Commerce is an ally of the free market on taxes and regulation, but they don’t understand the profound distinction between being pro-free market and pro-business,” she said.
Photo credit: Spencer Pratt/Getty Images