tag:theconversation.com,2011:/africa/topics/us-export-import-bank-15587/articlesUS Export-Import Bank – The Conversation2017-04-24T16:29:29Ztag:theconversation.com,2011:article/760772017-04-24T16:29:29Z2017-04-24T16:29:29ZTrump’s brand of economic populism gets a makeover in first 100 days<p>How can we make sense of the economic policy roller-coaster ride of Donald Trump’s first 100 days as president? </p>
<p>Trump’s statements soon after taking office made many <a href="http://theweek.com/articles/673976/what-hope-age-trump">hope</a> (or <a href="http://www.newyorker.com/news/john-cassidy/donald-trump-the-impulsive-demagogue-in-the-white-house">fear</a>) that a new form of populism had become the guiding ideology of the White House. But a dizzying series of reversals in recent weeks has led others <a href="https://www.washingtonpost.com/business/economy/trump-takes-a-centrist-tack-on-economic-policy-abandoning-campaign-pledges/2017/04/12/95376192-1fc3-11e7-be2a-3a1fb24d4671_story.html?utm_term=.3e12407c8c12">to conclude</a> that the new administration’s economic approach will be Republican “business as usual.”</p>
<p>Has Donald Trump really changed his tune on the economy since the inauguration? Have his policies served the interests of his working-class base, or are they friendlier to his friends in the corporate world? And what does his behavior tell us about the remaining three years and 265 days of his presidency?</p>
<p>To answer these questions, let’s examine the president’s campaign promises and his actual record (or lack thereof) over the past three months. </p>
<h2>Trump on trade</h2>
<p>As most of us remember from the campaign, Trump was full-throated in defending a populist, “<a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">America First</a>” vision for trade. He would use his deal-making skills to protect U.S. workers and to ensure that America wouldn’t be taken for a ride by its trading partners, above all China. </p>
<p>One of Trump’s first actions upon taking office, in fact, was to <a href="https://www.nytimes.com/2017/01/23/us/politics/tpp-trump-trade-nafta.html">pull the U.S. out</a> of the Trans-Pacific Partnership (TPP), a comprehensive deal that would have created a free trade zone with 11 other Pacific trading powers, including Japan and Australia. </p>
<p>However, since this initial populist move, Trump seems to have <a href="https://www.theatlantic.com/business/archive/2017/04/trump-economic-policy-reversals/522849/">moderated</a> his trade policy considerably. For example, Trump’s nominee for chief trade negotiator has signaled <a href="https://insidetrade.com/daily-news/lighthizer-does-not-rule-out-resuming-ttip-talks-non-committal-tisa">an openness</a> to continuing talks on a <a href="https://theconversation.com/us/topics/ttip-12692">massive trade agreement with Europe</a>, making it less likely to meet the same fate as the TPP. And Trump has <a href="http://thehill.com/policy/finance/328547-trump-throws-support-behind-ex-im-bank">abandoned efforts to eliminate</a> the trade-promoting Export-Import Bank. </p>
<p>Perhaps most consequentially, at the president’s recent Mar-a-Lago summit with China’s Xi Jinping, the two leaders came to an <a href="http://www.cnbc.com/2017/04/07/trump-xi-agree-to-100-day-plan-to-discuss-trade-issues.html">agreement</a> to avoid a trade war, and Trump soon after decided <a href="http://www.cnn.com/2017/04/16/politics/donald-trump-china-currency-manipulators/">not to label</a> China formally as a currency manipulator. </p>
<p>Still, Trump <a href="https://www.nytimes.com/2017/04/20/business/trade-canada-trump-steel.html?ref=business&_r=0">recently ordered</a> a massive review of steel imports, with an eye toward possible protectionist measures, and also openly criticized Canada on its dairy rules. These actions serve as a useful reminder that, despite his recent moderation, Trump is still not a “normal” Republican president. </p>
<h2>Trump and taxes</h2>
<p>Taxes were another key campaign issue for Trump. </p>
<p>During the campaign, he <a href="http://www.politifact.com/truth-o-meter/promises/trumpometer/subjects/taxes/">promised</a> to make deep cuts “for everyone” while simplifying deductions and imposing “<a href="http://money.cnn.com/2017/02/27/news/economy/border-adjustment-tax-trump-trump-congress/">border adjustment” taxes</a> on corporations. </p>
<p>With the recent focus on health care, little progress had been made on taxes, but in the last few days Trump <a href="https://www.bloomberg.com/politics/articles/2017-04-23/mulvaney-says-trump-tax-plan-details-won-t-be-ready-until-june">has said he’s readying</a> a “big tax reform and tax reduction plan.” It’s not expected to include the border adjustment or to be revenue neutral, and the administration has claimed it’ll pay for itself by boosting the economy – a point of <a href="https://www.forbes.com/sites/timworstall/2017/04/22/trumps-tax-reform-plans-to-depend-upon-an-untruth-that-tax-cuts-pay-for-themselves/#51093d6e48db">contention</a> among economists. </p>
<p>It’s also not likely to happen anytime soon as details aren’t expected until June. And Democrats have vowed to oppose any Trump tax proposals <a href="https://www.nytimes.com/2017/04/17/us/politics/tax-code-overhaul-trump.html">until he releases</a> his income tax returns.</p>
<p>In the meantime, Trump has <a href="https://www.usatoday.com/story/news/politics/2017/04/21/trump-executive-orders-target-tax-rules-too-big-fail-financial-institutions/100738548/">used</a> his executive powers to make as many changes in the tax code as he can unilaterally.</p>
<p>Taken together, Trump’s tax policy seems to conform quite closely to traditional Republican support for tax cuts, particularly those that benefit disproportionately the rich – hardly populist.</p>
<h2>Infrastructure, deregulation and the dollar</h2>
<p>Three other economic policy areas – infrastructure, deregulation and the dollar – have received less attention but were also important Trump campaign promises. </p>
<p>Trump’s proposal to invest in infrastructure was one of his few ideas to generate support beyond his populist base, yet the plan <a href="http://www.nydailynews.com/news/politics/trump-promises-infrastructure-package-schumer-shrugs-article-1.3070794">remains far from becoming a reality</a>. </p>
<p>Apart from withdrawing from the TPP, <a href="https://www.wsj.com/articles/trumps-deregulation-project-1492470927">deregulation</a> may be the only economic policy area where Trump has taken visible and consequential action. This fact is likely the result of his ability to alter many regulations by executive fiat, an approach that seems dear to Trump’s heart. To take an example, since January Trump has signed executive orders <a href="http://www.businessinsider.com/trump-executive-orders-memorandum-proclamations-presidential-action-guide-2017-1/#executive-order-march-28-dismantling-obamas-climate-change-protections-12">eliminating</a> environmental and worker protections implemented during the Obama years. </p>
<p>Finally, while presidents rarely inject themselves into debates on monetary policy, Trump has taken the unusual step of advocating a <a href="http://www.foxbusiness.com/markets/2017/04/12/trump-says-yellen-is-not-toast-as-says-dollar-is-getting-too-strong.html">weak dollar</a>. This view is, of course, <a href="http://www.businessinsider.com/why-trump-favors-a-weak-dollar-2017-1">at odds</a> with the traditional Republican preference for a strong dollar and low inflation, but it is in keeping with Trump’s emphasis on improving the trade balance and putting people back to work. </p>
<p>So, what do these three policy areas tell us about Trump’s economic ideology? His support for a weak dollar is, at least in some sense, populist: It prioritizes high employment over low inflation. But the infrastructure plan (aside from the Mexican wall) is quite centrist, and deregulation fits very comfortably into past Republican efforts to make business more profitable. </p>
<h2>Which Trump?</h2>
<p>It does seem, then, that Trump has shifted his economic policy preferences from the populism of the campaign trail to a more familiar pro-business conservatism – though this is truer in some policy areas than others.</p>
<p>So why this change in tune? Is it just that Trump is an <a href="http://www.mercurynews.com/2017/04/13/robinson-trump-may-be-most-erratic-president-in-u-s-history/">erratic president</a>, whose behavior is inherently irrational and unpredictable? Or, in a <a href="https://www.nytimes.com/2017/04/12/us/politics/export-import-bank-janet-yellen-china-currency.html">battle of advisers</a>, have moderate voices such as son-in-law Jared Kushner and economic consigliere Gary Cohn prevailed over populists like Steve Bannon? </p>
<p>I tend to think Trump’s changes are more a result of either <a href="https://www.reviewjournal.com/news/politics-and-government/analysis-trump-values-winning-over-ideology/">strategy</a> – he’s following whatever economic line suits his political interests at the moment – or <a href="https://www.theatlantic.com/politics/archive/2017/02/trump-constraints-opposition/516825/">feeling constrained</a> – he would prefer a more reactionary agenda but institutions like Congress, the courts and the media are hemming him in. </p>
<p>As a result, I suspect that Trump’s economic policies will continue to vacillate during his term. But, at the same time, they will remain constrained within certain limits, in action if not in rhetoric. </p>
<h2>How does Trump stack up?</h2>
<p>Whatever the case, perhaps the most striking feature of Trump’s economic record over the last 100 days is not its constant vacillation but its thinness. </p>
<p>In <a href="https://www.theguardian.com/us-news/2017/apr/23/100-days-how-trump-compares-to-last-five-presidents">comparison</a> with <a href="http://www.politifact.com/truth-o-meter/statements/2017/apr/24/donald-trump/how-do-donald-trumps-first-100-days-rate-historica/">other presidents</a> in their first 100 days, Trump has little to show, at least in terms of legislative accomplishments on the economy. </p>
<p>For example, within a month of taking office Barack Obama signed the <a href="https://www2.ed.gov/policy/gen/leg/recovery/factsheet/overview.html">American Recovery and Reinvestment Act</a>, which combined a massive stimulus with unemployment assistance, infrastructure payments, investment in research and other provisions. </p>
<p>Similarly, George W. Bush <a href="http://www.gallup.com/poll/1768/after-100-days-publics-perceptions-bush-remarkably-unchanged.aspx">was well on his way</a> to passing tax cuts and education reform, and Bill Clinton saw through the adoption of the <a href="http://www.presidency.ucsb.edu/ws/?pid=46777">Family and Medical Leave Act</a>.</p>
<p>That said, the first 100 days is an arbitrary standard for evaluating a president, and Trump is not the first to have experienced setbacks during this period. For example, the first Bush was unable to win approval for John Tower, his defense secretary nominee, and Clinton presided over the tragedy at the Branch Davidian compound in Waco.</p>
<p>On balance, however, for a president who has vowed great economic change, Trump has yet to deliver.</p><img src="https://counter.theconversation.com/content/76077/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A flurry of policy reversals in recent weeks suggests Trump has changed his tune from his populist campaign promises. Has he?Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/422342015-06-23T16:02:15Z2015-06-23T16:02:15ZWhy Congress should keep the imperiled Export-Import Bank<figure><img src="https://images.theconversation.com/files/86149/original/image-20150623-19377-15z31lg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Export-Import Bank provides financing and other services to help foreign companies buy US products like Boeing's 787 Dreamliner.</span> <span class="attribution"><span class="source">Boeing 787 via www.shutterstock.com</span></span></figcaption></figure><p>Last summer, a debate over the historically ho-hum <a href="http://www.exim.gov/about/facts-about-ex-im-bank">Export-Import Bank of the United States</a> (aka Ex-Im Bank) simmered over and went mainstream as a growing chorus of Republicans and many companies demanded its dismantling. </p>
<p>Like many government agencies, the Ex-Im Bank – which provides financing for exports of American goods and services – requires reauthorization every so often. And during the 2014 debate to do just that, some major US businesses petitioned Congress to terminate the bank, while others fought fiercely to preserve it. </p>
<p>Congress kicked the can down the road by offering a one-year reprieve, a stay of execution that expires on June 30. If lawmakers don’t act in the next few days, the bank and its US$140 billion in financing firepower will be lost. </p>
<p>Delta and Boeing are <a href="http://www.nytimes.com/2015/04/07/business/boeing-delta-air-lines-export-import-bank.html">leading the fight</a> in corporate America on both sides of the issue. Delta stands opposed, arguing the bank gives its foreign rivals an unfair advantage. Boeing, whose customers get the lion’s share of Ex-Im loans, says the bank is essential to support American jobs. The bank doesn’t cost taxpayers a dime; indeed, it makes hundreds of millions of dollars a year. </p>
<p>So is the bank a boondoggle that subsidizes risky foreign companies, picking winners and losers at the expense of domestic businesses, or an important (and very profitable) generator of US jobs and exports? </p>
<h2>What the Ex-Im Bank does</h2>
<p>Franklin Delano Roosevelt established the Ex-Im Bank’s foundations in the 1930s to <a href="http://www.presidency.ucsb.edu/ws/?pid=14772">provide</a> loans and export support to Depression-era American exporters by reducing barriers to trade. </p>
<p>In 2014, the bank <a href="http://www.exim.gov/sites/default/files/reports/annual/EXIM-2014-AR.pdf">supported</a> $27.4 billion in US exports, issued $20.5 billion in loans and sustained 164,000 jobs, while generating $675 million in profit, according to its latest annual report. This support comes in the form of loans to foreign buyers, insurance for American sellers, and loan guarantees for exporters working with private lenders.</p>
<p>Insurance is actually one of its most important functions. When US companies do business abroad, they take on several types of risk unfamiliar to purely domestic operations. Some are easy to manage, such as foreign exchange risk, which can be hedged in financial markets. </p>
<p>Other types, such as political risk, are much more difficult to insure against because of the many uncertainties surrounding it. Political risk includes things like instability, war, regulatory changes, expropriation and other legal and extralegal changes that affect in-country business operations.</p>
<p>The Ex-Im Bank thus steps into this breach, encouraging export sales by reducing the riskiness of selling overseas. </p>
<h2>The case for the Ex-Im Bank</h2>
<p><a href="https://www.uschamber.com/international/international-affairs-division/show-your-support-export-import-bank">Proponents</a> of the bank, such as the US Chamber of Commerce, claim the it supports jobs, small businesses and manufacturing in the United States. </p>
<p>Almost 90% of its loans <a href="http://www.exim.gov/about/facts-about-ex-im-bank">support</a> small businesses, which generated $10.7 billion in exports from these companies last year, according to the bank. That’s helped it support 1.3 million private sector jobs since 2009. </p>
<p>Without this support, many small businesses wouldn’t be able to compete with foreign competitors in overseas markets. Governments in many countries subsidize local businesses, while potential US customers often have a hard time securing financing to buy American products. </p>
<p>Most of the bank’s loans and guarantees go toward large companies like Boeing and General Electric, ensuring there’s plenty of financing for expensive and infrequently purchased items like airplanes and boats. But even that support trickles down and helps support many small- and medium-sized businesses that supply the likes of Boeing. </p>
<h2>The case against</h2>
<p>Opponents of the bank claim its more like “crony capitalism,” distorting free markets and picking winners and losers as taxpayers pick up all the risks. </p>
<p>One way they make this case is by taking aim at the Ex-Im Bank’s claimed profitability, citing a <a href="http://cbo.gov/sites/default/files/cbofiles/attachments/45383-FairValue.pdf">Congressional Budget Office report from 2014</a> that showed the Ex-Im Bank losing $2 billion over the next decade after adjusting the accounting method used, a sharp contrast with the bank’s projected $14 billion profit. </p>
<p>They also note that an independent Government Accountability Office <a href="http://www.gao.gov/assets/660/654925.pdf">reported concerns</a> in 2013 that the overall risk of the bank’s loan portfolio could be higher than estimated and recommended changes to its forecasting model. </p>
<p>Opponents also suggest that if the government were not propping up these businesses, the market would redeploy resources more usefully in the classic economic sense.</p>
<p>As the Wall Street Journal’s editorial board <a href="http://www.wsj.com/articles/an-open-letter-to-republicans-on-the-ex-im-bank-1433372926">declared</a>, the fight over the Ex-Im bank is part of a larger battle over economic freedom: </p>
<blockquote>
<p>Commercial activities today are increasingly driven neither by customer wants nor by entrepreneurial judgments but by bureaucratic directives and political preferences.</p>
</blockquote>
<p>Another charge is that given the amount of money on the line, its economic contribution is very small. While the 164,000 jobs the bank says it supports seems large, it’s fewer than the number of new unemployment claims <a href="https://research.stlouisfed.org/fred2/series/ICNSA">filed</a> in the last week of May alone (230,055).</p>
<p>In addition, the Ex-Im Bank <a href="https://jameshoward.us/2015/05/10/economic-effects-of-the-ex-im-bank/">supports</a> only about one-tenth of 1% of the United States economy, while <a href="https://www.apple.com/pr/library/2014/10/20Apple-Reports-Fourth-Quarter-Results.html">Apple’s 2014 revenue</a> was more than six times the size of the bank’s loan portfolio.</p>
<h2>Keeping the bank alive</h2>
<p>Like other Washington debates, the reality lies between the competing narratives, and the numbers justify continuing the bank’s charter. </p>
<p>In terms of risk, the Ex-Im Bank has a remarkably <a href="http://www.forbes.com/sites/lorenthompson/2015/02/23/ex-im-bank-death-would-devastate-thousands-of-small-businesses-2/">low default rate of less 0.2%</a>. Because so few foreign companies have defaulted on their loans, the bank has returned billions of dollars to taxpayers in interest income, $7 billion since 1992 alone. The bank expects to make another $14 billion in the next nine years.</p>
<p>And the CBO report uses a flawed analysis to show the bank will lose money rather than make a tidy profit. It overweights near-term losses while underweighting long-term gains by using a higher discount rate than it should. The “discount” interest rate is used to figure the net present value of future cash flows. The analysis leaves the outflows, or loans, untouched, yet reduces the value of future payments, so that even if a borrower repays in full, it would show up as a loss in the present. </p>
<p>As long as the Ex-Im Bank charges interest rates higher than its own borrowing rate and keeps default rates low, the bank will remain profitable for the government.</p>
<p>In sum, the Ex-Im Bank provides a benefit to the US economy by supporting big businesses and small ones alike and bolstering employment, especially endangered manufacturing jobs. By providing investment guarantees, the bank encourages both foreign buyers and domestic manufacturers to work together when private insurance solutions are unavailable. </p>
<p>Other industrialized nations provide similar services to support their own manufacturers. Cutting off an essential financial security layer will harm American businesses.</p>
<p>This success, at no expense to taxpayers, shows why Congress should keep the bank alive.</p><img src="https://counter.theconversation.com/content/42234/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James P Howard, II works for Eagle Ray, Inc., providing strategic transformation services to U.S. Citizenship and Immigration Services, a part of the United States Department of Homeland Security.</span></em></p>The more than 80-year-old credit agency is set to expire at the end of the month if Congress does not act to keep the profitable bank alive.James P. Howard II, Adjunct Faculty, Public Administration, University of BaltimoreLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/389192015-03-23T23:35:23Z2015-03-23T23:35:23ZLooming exit of the US Ex-Im Bank leaves questions for Australian companies<figure><img src="https://images.theconversation.com/files/75658/original/image-20150323-17688-1773wc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The activities of the US Export Import Bank effectively subsidise both the exporting company and the importing company in another country.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/sgmdigital/2356213808/in/photolist-4Addh1-bLCHRB-pjNZu5-fctMUc-bCqQau-aQxMq-8tYcFk-eY5j4H-eY5e2F-jwgj8c-6X88VZ-ntMRW8-5aD2Nt-5vhqmN-6nY6VN-rCVTRj-7gSuyn-bVZ99X-c7pLms-jweZiH-4XiAf5-jhG2vF-KYfuH-ffpYsT-fHDUQB-5Zmc78-a8QAEb-qnZvR7-q8Q4Gt-99QyVU-dPyVLb-hXm4F3-p47qne-5YJuGj-6au3FL-5qwgGJ-udRjV-8PijHe-bWk1zc-MFR4o-4k8wLj-9xs8o4-72Bkf5-5CwZJz-6mDEHV-9tgU8i-6oXwaa-iahAGY-bG2yYZ-9owpXx">Flickr/Scott Maxworthy</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The closure of the US Export-Import Bank is being mooted by both sides of US politics. </p>
<p>The Ex-Im bank, as it is commonly known, helps support US exporters and the buyers of US goods. But it will cease its financing operations in June unless its charter is extended by US Congress, amid opposition from some Republicans who believe it helps foreign firms at the expense of local ones, and who want the current restrictions on its funding of coal-fired power stations to be lifted. </p>
<p>While the main impact would be felt by US companies, it would also affect Australian companies which have benefited from importing from them. One of its most high-profile customers is Gina Rinehart’s Hancock Prospecting, which last year <a href="https://theconversation.com/why-the-us-export-import-bank-backed-rineharts-roy-hill-24793">received US$694.4 million</a> for acquisition of equipment from US companies. </p>
<h2>What do Ex-Im banks do?</h2>
<p>An Ex-Im bank is the official provider of export credits by the government of a country to support its companies in exporting. At least 40 countries are known to have Ex-Im banks which make low or no interest loans, or effectively grants to their exporting firms. The funding assists the importing company in another country to finance the purchase of the exports. </p>
<p>Part of the rationale is that exporting is a risky business relative to domestic sale. It is more difficult to access finance and markets for exports. It is more costly to facilitate the sale and delivery of products across borders. </p>
<p>The Ex-Im bank fills the gap and provides a guarantee of payment to the exporter through financing a line of credit to the importer. In effect the Ex-Im bank’s funding is a grant or subsidy to both the exporting company and the importing company in another country. It amounts to a form of foreign aid to the importing country. Another part of the rationale is of course the exporting country’s geopolitical strategic considerations. </p>
<h2>What are the effects of Ex-Im bank funding?</h2>
<p>Policy arguments for export funding from the Ex-Im bank include increased company profits, employment and growth in the economy of the exporting country, as well as promoting technological advance in export industries. Costs may include increasing market concentration as some favoured companies are able to grab bigger shares of the market and extract monopoly type profits, as US debate around its Ex-Im bank indicates. The ability of Ex-Im bank finance to increase employment depends on its ability to stimulate activity in the exporting and importing countries.</p>
<p>But here we’re interested in the potential benefits and costs accruing in the economy of the importing country. These include benefits and costs as described above for exporting countries. In addition, the costs to importing countries may include tying trade to the countries from which Ex-Im bank credits have been obtained and limiting opportunities with other trading partners. </p>
<p>Foreign subsidies may be directed toward activities with negative side effects such as environmentally damaging, carbon or resource intensive activities in the importing country. Hence the complaints coming from the US oil industry about the proposed Ex-Im bank closure. And the US Ex-Im bank grants to Australian companies would seem to favour resource and energy intensive companies, such as mining, transport and aviation. This reflects the resource and manufacturing slant in the US companies which receive the Ex-Im bank funding. </p>
<h2>Scale of US Ex-Imbank funding</h2>
<p>The proposed closure of the US Ex-Im bank would put at stake funding which was US$20.5 billion in 2014, supporting the US$27.5 billion worth of US exports selected by the Ex-Im bank. This is <a href="http://www.exim.gov/customcf/congressionalmap/us_map.cfm">75% of the value of those exports</a>. This suggests a highly corporatist relationship between government and company in the supposed bastion of the free market.</p>
<p>However the funding itself is small beer. Based on the most <a href="http://databank.worldbank.org/data/views/reports/tableview.aspx#">recently available figures on US export value</a> in 2013, Ex-Im bank funding amounted to less than 1% of the total value of US exports, US$2.3 trillion dollars. Of course as a loan instrument, much larger ongoing values remain on the books of the Ex-Im bank. However US$162 billion in existing total authorisations in 2015 is still not enormous, although the effects on employment in US politically marginal regions may be substantial. Other forms of domestic subsidy in the US since the global financial crisis have been much greater.</p>
<h2>The US Ex-Im bank and companies in Australia</h2>
<p>US Ex-Im bank funding toward companies in Australia for importing from the US was US$297 million in 2013, an even smaller percentage of Australian import value, at less than one tenth of 1% of the value of Australian imports in 2013. While Ex-Im bank funding of US exports to Australian companies is volatile, it is still small in the scheme of things. It appears that a handful of large companies operating in Australia would be affected. As well as Hancock Prospecting, these have included Qantas, Australia Pacific LNG Processing and the Jabiru Satellite Program. </p>
<p>A lot of questions remain unanswered. Whether the Ex-Im bank funding is on a scale sufficient to affect the business decisions of the importing companies warrants further investigation, particularly in relation to employment impacts. How does the decision to import from the US impact on the industries related to those companies’ activities? </p>
<p>We also don’t know whether the Australian companies could have otherwise obtained the sought-after equipment elsewhere possibly more cheaply, and that includes sourcing domestically or from other countries. </p>
<p>It is possible that the US Ex-Im bank grants have tempted companies here to locate imports from the US, rather than importing from somewhere else or producing for those requirements here. This raises questions of efficiency as well as geopolitical concerns. Nevertheless we would expect the overall effects at the economy-wide level to be limited. </p>
<p>In the case of Hancock Prospecting, <a href="http://www.smh.com.au/business/mining-and-resources/gina-rineharts-roy-hill-project-gets-backing-from-us-government-agency-20131220-2zols.html">it was reported</a> the US Ex-Im bank funding included trains from GE and trucks from Caterpillar for the US$10 billion Roy Hill project. The Japanese and Korean Ex-Im banks also provided more than US$1 billion each for the project. Even if costs were increased by obtaining the US imports elsewhere, it is doubtful this would have held up the project. </p>
<h2>Closer to home</h2>
<p>Compare these figures with the scale of China’s Ex-Im bank and Development Bank activities, <a href="http://www.ft.com/intl/cms/s/0/488c60f4-2281-11e0-b6a2-00144feab49a.html#axzz3UoALNQfP">estimated by the Financial Times</a> at more than US$110 billion for 2009 and 2010. China’s Ex-Im bank has also offered extensive support to Australian companies, <a href="http://www.miningaustralia.com.au/news/-1-2-billion-chinese-mining-investment-for-palmer">for instance</a> A$1.2 billion to Clive Palmer’s A$8 billion dollar mining and infrastructure project back in 2011. It has arrangements with at least two major Australian banks for facilitating trade between Australia and China.
The US Ex-Im bank is not the only fish in the sea.</p><img src="https://counter.theconversation.com/content/38919/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Margaret McKenzie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The US Export Import Bank is facing closure unless it gains last minute Congressional support. How will it impact on Australian companies?Margaret McKenzie, Lecturer, Department of Economics, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.