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Battle Over Ex-Im Bank and Airline Competition Will Rage Once Congress Returns
Posted at 2:51 p.m. on July 3, 2014
There’ll be an intense effort this month to find the revenue to sustain the faltering Highway Trust Fund. But perhaps the most heated transportation fight in July will come on an entirely different issue – reauthorization of the Export-Import Bank.
The Export-Import Bank provides direct loans, loan guarantees, and credit insurance to both foreign and domestic buyers to support the export of U.S goods and services, such as Boeing aircraft. Last year it was authorized to spend $27.3 billion.
Long the target of fiscal conservatives, the bank became a political hot spot two weeks ago when soon-to-be House Majority Leader Rep. Kevin McCarthy, R- Calif. announced on “Fox News Sunday” that he’d allow its authorization to expire in September.
McCarthy was one of 147 House Republicans who’d voted to reauthorize the bank in 2012.
But he told Fox’s Chris Wallace that “one of the problems with government is [that] it’s going to take hard earned money so others do things that the private sector can do. That’s what Ex-Im Bank does.”
Ex-Im Bank, he said, offers a service “that government does not have to be involved in. The private sector can do it.”
Democrats pounced on McCarthy’s switch, with Sen. Maria Cantwell, D- Wash., saying she was “shocked” at McCarthy’s announcement. Her state, with its big Boeing plants, is especially reliant on Ex-Im Bank’s promotion of foreign sales.
Cantwell said that McCarthy and other Republicans “now all of a sudden have either amnesia or have forgotten what is so important about this program.”
And Sen. Charles Schumer, D-N.Y., told a conference call this week that it was “just the latest series of examples of our colleagues on the other side of the aisle opposing the clear interests of the small business community.”
Ex-Im Bank appears to be shaping up as a wedge issue that Democrats hope to use to split some sectors of the business community from House Republicans.
Schumer said the Democrats will bring a reauthorization to the Senate floor “before the August break. And we hope that businesses around the country, small businesses in particular, will rally to our side…”
He added, “If we can pass it in the Senate, and particularly with a good bipartisan majority” that “it’ll put pressure on the House.”
Politics aside, Ex-Im Bank does raise difficult policy questions — is it subsidizing foreign firms that are competing with U.S.-based companies?
In testimony last week before the House Financial Services Committee, Delta Air Lines CEO Richard Anderson criticized “the Bank’s use of billions of dollars in Treasury-backed loan guarantees to support foreign airlines’ purchase of widebody aircraft. Many of those airlines are themselves owned or heavily subsidized by foreign governments. Emirates, for example, is owned by Dubai and receives benefits from that ownership that make it an extraordinarily strong competitor.”
He added, “Emirates is backed not only by its government, but also by our own.” That backing, he contended, has helped Emirates to jostle with Delta and other U.S. carriers.
“Emirates can devote a substantial portion of its Ex-Im sponsored savings to enhance its competitive position vis-à-vis U.S. carriers. For example, Emirates recently introduced service between New York’s John F. Kennedy Airport and Milan, quickly surpassing the capacity of existing service providers on that route. As of mid-2013, before Emirates introduced this route, three U.S. carriers (Delta, United, and American) and Italy’s flag carrier (Alitalia) offered service between New York and Milan.”
He urged Congress to bar the Bank from financing widebody aircraft to airlines that “are owned by foreign states, supported by foreign states, or creditworthy in their own right. Those airlines do not need U.S. government subsidies.”