Rethinking the Export-Import Bank
September 18, 2002
In June, Congress extended the charter of the Export-Import Bank of the United States (the Ex-Im) through 2006. Trade experts believe this was a mistake.
The Ex-Im Bank was created in 1934. Its original purpose was to lend money to the Soviet Union. The U.S.S.R. no longer exists, but the Bank lives on. It is the primary vehicle by which the U.S. government subsidizes U.S. exports around the world. And its mission is still political: to provide business subsidies that are not justified by economic logic, experts say. They believe it's time for the Ex-Im's doors to close.
- Private credit markets are far deeper and are more accessible than when the Bank was founded.
- The Bank's resources are overwhelmingly used to assist large corporations that have no trouble obtaining financing on the open market.
- Export subsidies don't increase employment, affect the balance of trade, or translate into better overall export performance for those countries that offer them.
- It is neither fair nor constitutional that taxpayer dollars are being used to support particular businesses.
If Congress wants to help U.S. exporters compete with foreign export subsidies, trade experts recommend the following:
- Reduce the authorization the Ex-Im Bank currently enjoys. The 25 percent cut requested by the Bush administration earlier this year was a laudable proposal, but did not go far enough.
- Immediately restrict Ex-Im financing to only those cases in which an American exporter faces verifiable subsidized competition abroad.
- Retire the Bank as soon as possible, as such corporate welfare programs have no rightful place on the U.S. trade policy agenda.
Ultimately, U.S. policy should be consistent with the goal of maintaining a prosperous national economy as opposed to benefiting particular industries and firms. The Ex-Im Bank, as a corporate-welfare agency, should thus be closed down.
Source: Aaron Lukas and Ian Vásquez, "Rethinking the Export-Import Bank," Trade Briefing Paper No. 15, March 12, 2002, Cato Institute.
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