On June 30th, the US Congress will vote on whether or not to extend the charter for the US Export Import Bank. Also known as the ‘Trade Bank,” this organization acts as a secondary bank, supporting international trade deals through financing only after private sector options have been exhausted. In 2014, the bank extended nearly $16.6 billion in support of US manufactured exports, making up less than 2% of all exports.
After more than 80 years of existence, the fate of the bank is in jeopardy. Critics label it as “Boeing’s Bank,” citing the staggering amount of loans and guarantees that directly benefit Boeing, Co. According to the 2014 EXIM annual report, $8.4 billion of the $20.5 billion the bank lended in 2014, or 41%, supported the aircraft and avionics industry. Opponents also point to the corruption within the organization as a reason to let the charter expire.
Regardless of your political or economical stance, it is hard to debate the fate of small businesses in the short-term if the bank were forced to halt its lending. Two groups of small businesses in particular could be hard hit.
The first, and more obvious, are the thousands of businesses that will lose business to competitors due to a lack of sufficient financing. EX-IM reported support of $5 billion to small businesses in 2014. Some of this could feasibly be taken on by private banks, but jobs and revenue would be sure to take a hit at small businesses nationwide that rely on international trade. As reported on in more detail in this Washington Post article, small business owners who operate oversees will face a new obstacle, and potentially have to cease operations altogether.
“We have a bunch of European competitors that have comparable or better financing options,” said Bowe, president of Baltimore-based Ellicott Dredges, which manufactures dredging equipment used in mines, harbors and canals and sells to clients in more than a dozen countries.
“If Ex-Im isn’t reauthorized, those competitors will be able to go to our customers and offer affordable five-year financing,” Bowe said. “Those customers are going to turn to us and say, ‘What can you offer us?’ Our answer would be ‘Nothing.’ ”
Consequently, without Ex-Im’s financing programs, Bowe expects his company would be in jeopardy of losing between 10 percent and 20 percent of its sales to foreign competitors.
The second group of small businesses to take a hit are the companies who act as suppliers for the likes of Boeing, Co. According to the Wall Street Journal, 15% of Boeing deliveries in 2015 were expected to be covered by deals backed by the Ex-IM Bank.
Boeing Chief Executive Jim McNerney has said he expects Ex-Im Bank to be reauthorized, though in lobbying for it also has warned that the company may look to shift some production overseas to countries with export credit agencies if Ex-Im is dissolved.
If Boeing were to move some operations oversees, it would make business sense for them to look for new suppliers as well.