America has never shied from a fight – and we know the folly of letting down our guard or accepting false “peace dividends” and unilaterally disarming while our enemies gather strength. As Russia continues its regional aggression and steps up exports of its most dangerous weapons, North Korea perfects its nuclear weapons and the means to deliver them, and Iran uses the cover of peace talks to step up military activity in the Persian Gulf, we would never think to disarm or stand down.
Yet in the economic arena, too many of our leaders seem willing to entertain this ideology of defeat. International trade is a critical economic engine for American jobs, prosperity, and strength. For this reason, most nations heavily subsidize their own industries to make their products cheaper and more appealing in the international marketplace. That harms American jobs and stifles American prosperity and puts our businesses at an unfair disadvantage.
While direct government subsidies aren’t the American way and I would never endorse them, neither is economic unilateral disarmament.
Yet, that is precisely what some assert we should do when they argue we should abolish the U.S. Export-Import Bank. The Export-Import Bank does not subsidize U.S. firms. Instead, it provides financing and insurance – services that are paid for at market rates – to U.S. manufacturers and their customers, large and small, to export goods to foreign buyers.
The Export-Import Bank does not compete with private sector lenders. It is a “lender of last resort” and simply provides economically sustainable loan guarantees where they are not otherwise available — filling in banking gaps so that U.S. goods can be exported to nations where commercial financing is unavailable. It doesn’t interfere in the market, it makes the market work better, creating an avenue for these fully private sector deals to proceed proceed and leveling the market playing field because so many of our foreign competitors cheat and actually get direct government aid and government financing.
The Export-Import Bank doesn’t cost taxpayers a dime — it is self-sustaining and actually returns money to the U.S. Treasury – more than $7,000,000,000 over the last two decades. Its default rate today is a microscopic .175 percent – far lower than virtually any private sector lender. And because highly-valued manufactured goods are part of the collateral for these loans, the risk of loss is very low even in the event of a default.
As a conservative, I oppose subsidies, high taxes, burdensome regulations, cronyism, and restraints on trade — all of which prevent Americans from successfully competing in the international marketplace. I have spent my adult life fighting for free markets and smaller, less intrusive government. I know that American innovation and entrepreneurialism produces the best products on the planet. When American firms compete based on quality, and price in a fair competitive fight, they will win.
That is exactly why so many of our competitors subsidize their major corporations — to distort the competitive battlefield and steal business by regulatory arbitrage that they cannot win on the merits alone. China, France, Brazil, Russia and many other nations provide large subsidies and promise below market financing to buyers to undercut American businesses and workers. They offer as much as ten times the credit America’s Ex-Im is allowed to lend. As a result, American firms not only have to compete with foreign companies, but with foreign governments as well.
The Export-Import Bank is periodically reauthorized and is up for reauthorization this year. Historically, it has been a rather automatic, bipartisan matter. This time it is more contentious.
Many of my fellow conservatives argue that competitive free markets should decide which goods and services are bought and that government should not be involved. I wholeheartedly agree. I only wish we could get China, Russia, Brazil, France and most of Europe and South America to agree as well. But until they do so, we need the Export-Import Bank to level the playing field and give U.S. businesses a fair shot at every single customer, market, and deal that’s up for grabs.
In an ideal world, we’d have free trade agreements across the globe, and other nations would not use industrial policies to tilt the playing field in their favor. But that is not the world we currently live in. And if we unilaterally abolish the Ex-Im Bank without having verifiable and enforceable free trade agreements, we are effectively engaging in unilateral economic disarmament.
Perhaps, this is why President Ronald Reagan backed reauthorization of the Ex-Im Bank. No one can question Reagan’s conservative credentials or his commitment to free markets. But Reagan also understood that unilateral disarmament is the pathway to defeat – on the battlefield, and in the marketplace as well.
George Landrith is the president of Frontiers of Freedom, a policy think tank based in Fairfax, Virginia.