Boeing is concerned that its long-term sales will suffer if conservative Republicans succeed in killing the Export-Import Bank this year.
The South Carolina Post and Courier reported Sunday that, “There’s a good chance the bank will go under this year,” and as its largest customer, Boeing will likely suffer the brunt of the loss. Between 2007 and 2013, about one-third of Ex-Im financing went to Boeing– far more than was awarded to any other company. (RELATED: Is the Export-Import Bank Done?)
Ex-Im drew conservative criticism last year, “with many Republicans seeing the bank’s existence as a form of corporate welfare,” and barely survived a re-authorization battle in September. Lawmakers agreed on a compromise extending the bank’s charter for six months — until the end of June — and opponents are optimistic they will have the votes to kill it at that point.
The Post and Courier claims that “more than 75 percent of Boeing’s future production [is] headed to places like China, India, and Indonesia,” but because of the high cost of aircraft purchases, “many emerging economies in Asia can’t afford them without the bank’s help.” (RELATED: Boeing, Delta Square Off on Export-Import Bank)
According to Aviation International News, U.S. aerospace industry sales grew by about 4 percent in 2014, “with large airliner sales setting the pace.” Civil aircraft sales, which represent the industry’s largest segment, increased from $69.7 billion in 2013 to an estimated $75.3 billion in 2014.
Data compiled by the Aerospace Industries Association (AIA) reveals that “orders increased for a sixth consecutive year, with foreign orders representing 72 percent of the aircraft backlog,” and that the driving force behind that growth was “Boeing’s 1,274 net orders and $40 billion in orders and commitments.”
AIA President and CEO Marion Blakey remarked at a recent luncheon that “You can count on AIA carrying forward the fight for a full reauthorization until a decisive victory is obtained.”
The Post and Courier claims the bank’s supporters “say they don’t know what all the fuss is about, considering that Ex-Im “actually produces a profit—more than $3.4 billion since 2005.” (RELATED: Export-Import Banks Gives Billions to Boeing, Coal to Taxpayers)
Jim Newsome, president and chief executive officer of the S.C. State Ports Authority, told the Post and Courier that Ex-Im is “an effective form of financing that earns money. I don’t understand why you would change it.”
In an op-ed for Reason, Tim Carney disagrees, pointing out that the subsidies awarded by Ex-Im, “put the U.S. taxpayer on the hook if a foreign customer fails or refuses to pay back a loan.”
More than half of the bank’s financing takes the form of loan guarantees, which Carney describes as “mostly a subsidy program for Boeing,” with more than half going to cover Boeing exports over the past three years.
“Luckily for Ex-Im (and U.S. taxpayers), purchasers of jumbo jets have a tiny default rate so far,” Carney says, but he also notes that a growing number of legislators are concerned that Ex-Im could lead to government bailouts like those given out during the financial crisis.
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