On the same day that Malaysian Flight 17 was shot down killing 298 people, Russian President Vladimir Putin was returning from a trip to Brazil where he met with leaders of the so-called BRICS nations – Brazil, Russia, India, China and South Africa.
While the world’s attention is riveted on events in the Ukraine, Putin’s intent to enhance Russia’s global stature is obvious, particularly in countries with fast-growing economies.
The BRICS nations have become very significant in recent years. They account for more than 40 percent of the world’s population, and 21 percent of global gross domestic product, or GDP. In the last 10 years, their combined GDP grew by 400 percent while the developed economies of the world grew by about 60 percent.
There are 66 nuclear reactors under construction in the world and 50 of them are in the BRICS countries. They have formed an “energy association” that will include a fuel reserve bank, an energy policy institute and a New Development Bank with combined resources of over $200 billion aimed at fostering economic development among the five emerging markets. In the U.S. we have an Export-Import Bank that provides similar functions to the New Development Bank, but instead of meeting the challenges from new emerging market alliances, some in Congress want to kill the Export-Import Bank.
It’s time to face reality: If Congress shuts down the Export-Import Bank, it will deal a devastating blow to the U.S. nuclear industry, to their thousands of suppliers and it will put a real dent in the economies of Georgia and South Carolina.
The bank is a government agency that helps American companies sell products overseas. It backs loans made primarily to foreign companies that want to buy our goods and services.
Last year, the Export-Import Bank supported $4 billion in exports from 175 Georgia companies, including 115 small businesses. It backed $2 billion in exports from 57 South Carolina companies, more than half of them small businesses.
Exports from Georgia and South Carolina have grown rapidly every year since 2008. Last year, the bank’s lines of credit nationally supported $37 billion in exports, which translated into 205,000 U.S. jobs, including many in the Southeast. According to the Bureau of Labor Statistics, the bank has supported 1.2 million jobs since 2009. About 70 percent of the 6,000 U.S. companies that have been aided over the past five years have been small businesses.
The Export-Import Bank costs the American taxpayer nothing. Last year the interest and fees from its loans earned a sizable profit for the U.S. Treasury of more than $1 billion.
The Export-Import Bank is very selective and diligent before issuing a credit resulting in a loan default rate of less than 1 percent.
Some in Congress want to dismantle the Bank. U.S. Rep. Jeb Hensarling, R-Texas, who is chairman of the House Financial Services Committee, described it as being the “poster child of the Washington insider economy and corporate welfare.” In his view, there is nothing that the Export-Import Bank does that private banks can’t do better. But this criticism is unwarranted. The reality of global trade is that the Export-Import Bank extends credit to many American companies dealing in risky parts of the world. Why is that?
In the real world, private banks don’t provide such financing.
If U.S. companies are shut out of undemocratic or unstable countries, their foreign competitors in China, France, and other countries that face no such constraints will get the business instead.
The U.S. Chamber of Commerce and the National Association of Manufacturers warn that failure to renew the Bank’s charter would put U.S. companies at a serious disadvantage in world trade. Among those that would be hardest hit is the nuclear industry, which is competing for an estimated $740 billion in global business over the next decade. Beyond their substantial benefits to U.S. exports and job creation, U.S. exports of nuclear equipment and services promote nuclear safety, security and nonproliferation.
Government export credit is now a fixture of international trade. A study by the Organization for Economic Cooperation and Development determined that export credit agencies worldwide provided more than $1 trillion in trade finance credit in recent years.
If the U. S. dismantled the Export-Import Bank, American companies could lose billions of dollars in overseas orders. Some might move their operations to other countries that provide generous export financing. Many overseas companies prefer – or even require – that their suppliers have financial assistance from their government. Virtually all of our competitors in the global market receive export credit from their governments.
Why do political opponents of the Export-Import Bank want to deny the advantages of government loans to U.S. companies seeking to export their products? Some members of Congress prefer demonstrating their ideological conviction even if it means that our companies can’t compete in the global marketplace and people lose their jobs.
The Export-Import Bank’s charter will expire in September unless Congress renews it. For the well-being of the economy and the millions of American workers who owe their livelihoods to exports, Congress should renew the Bank’s charter.
Clint Wolfe is an Aiken resident and an active advocate of nuclear energy and science, technology, engineering and math – or STEM – education.
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