As the June 30 deadline for the needed reauthorization of the Export-Import Bank of the United States approaches, AIA today placed an OpEd “Re-authorize Ex-Im Bank to keep a level playing field,” in The Hill newspaper. The piece was co-authored by Mike Petters, president and CEO of Huntington Ingalls Industries and AIA president and CEO Dave Melcher. It draws a connection between the collapse of domestic commercial shipbuilding in the 1980s after President Reagan terminated the Construction Differential Subsidy Program and our current situation with the ExIm Bank.
Re-authorize Ex-Im Bank to keep a level playing field
By Dave Melcher and Mike Petters
If you think of the global marketplace as a competitive playing field, it makes sense to think of the government as a referee; its job is to keep the field level for U.S. companies.
Since it was founded in 1934, the Export-Import Bank of the United States is one tool the federal government has used to maintain American competitiveness. Congress must reauthorize the bank’s charter before it expires on June 30, or we are in danger of losing the field entirely.
On occasion, the government has supported U.S. manufacturers against subsidized foreign competition and ensured that a stable industrial base exists for national security purposes.
For instance, at one time, the U.S. government maintained programs designed to preserve U.S. commercial shipbuilding competitiveness. The government offset a percentage of the difference in the cost of commercial ship construction in U.S. shipyards versus foreign shipyards that received large subsidies from their governments.
The cancellation of such programs in 1982 brought on the collapse of large commercial shipbuilding in the U.S., and a vital part of our industrial footprint was lost. We, as a nation, failed to maintain a level playing field in the global commons.
In the 1970s, commercial shipbuilding filled a gap caused by the decline of U.S. Navy work after the end of the Vietnam War.
As the 1980s began, American shipyards employed 187,000 people on all three coasts and the Great Lakes.
After 1982, the U.S. yards became a one-customer industry, and the structure of the market shifted to meet the requirements of the military.
This meant that the 1980s saw the industry shed 40,000 production jobs. It also resulted in the permanent loss of commercial shipbuilding capability and, ironically, inadvertently made the industry more dependent on government, rather than less.
The primary mission of the Ex-Im Bank is to guarantee loans against default, enabling U.S. manufacturers to access foreign markets where the potential customer may not be able to secure financing in the world financial markets without the collateral of a guarantee.
The Ex-Im Bank allows U.S. manufacturers to sell heavy construction equipment, airplanes, engines and thousands of other American-made products to foreign customers who would otherwise turn to our European and Asian manufacturing competitors.
These foreign companies rely heavily on their own national export credit agencies similar to the Ex-Im Bank.
Many of these sales also carry the benefit of sustained aftermarket sales and support opportunities for small and medium-sized U.S. companies. Losing these sales will mean not only lost jobs but also lost capabilities as companies retool their enterprises to focus on more lucrative business lines. This loss of expertise in the aerospace and defense industrial base poses a threat to future capabilities and innovation, potentially risking our ability to respond to a national security crisis.
American manufacturing is still the best in the world, and the Ex-Im Bank facilitates the sale of our products in the global community. In fact, more than 90 percent of customers for American-manufactured products live outside the U.S. The Ex-Im Bank provides our manufacturers the opportunity to compete for their business.
Concern over the size of the federal government is an important matter to debate, but the notion that the Ex-Im Bank is a large and unnecessary federal agency is unfounded.
It is self-funded from fees generated by its loan guarantees and actually returns a profit each year to the U.S. Treasury.
Given the opportunity to compete fairly, American manufacturing can succeed in any industry. The key is a fair and level playing field, and programs like the Ex-Im Bank provide it. American manufacturers cannot afford to lose this type of critical government support.
Reauthorization of the bank’s authority remains a necessary tool for American exporters to succeed in their battle for global competitiveness.