It’s no accident that I’ve been ignoring the raging Washington debate over reauthorizing the Export-Import bank – which will determine whether the official trade financing agency lives on or dies. I sympathize with the idea that the U.S. government should fight foreign subsidies with subsidies of its own. Unfortunately, the overall scale of foreign subsidies (especially from competitors whose national finances are much stronger than America’s) renders this option completely unaffordable; therefore, the best U.S. response is imposing tariffs. (The widely supported belief that the nation can offset foreign tax breaks and lower corporate rates with comparable measures suffers similarly fatal flaws.)
Then there’s the actual magnitude of Exim’s operations – they facilitate only a small fraction of U.S. export sales. If supporters like President Obama were really interested in addressing trade market rigging by foreign governments, they’d be thinking way beyond Exim. Ditto for major beneficiaries of the Bank, like Boeing and General Electric. But these multinational firms strongly back the U.S. trade policy status quo mainly because they benefit hugely from foreign subsidies and other predatory practices like currency manipulation when they manufacture abroad or procure foreign parts and components. Of course, these practices are now central to multinationals’ business models.
Still, one aspect of the Exim debate is so hypocritical that it cries out for spotlighting: the claim by U.S. airlines that Exim subsidies for Boeing disadvantage them versus their foreign competitors by enabling these rival carriers to buy new jets from Boeing for a song. This complaint is hypocritical because U.S. airlines get the same kind of price break when they buy from Boeing’s European rival, Airbus.
Despite numerous trade cases filed by Washington in the World Trade Organization and its predecessor global trade body. Airbus has continued to enjoy major European government support. In fact, it wouldn’t exist in the first place if not for an official European decision to create a viable commercial aircraft industry practically from scratch.
But Delta, which has spearheaded the corporate anti-Exim lobbying drive in Washington, has been happy to free ride off of European taxpayers, as the company’s own data shows. All those jets whose model names start with “A” come from Airbus. Obviously, the same is true for other U.S. carriers.
Tea Party-oriented Republicans and other conservative reformers in particular have portrayed the Exim fight both as a battle over principle, and as a great political opportunity to show voters that they’re much more strongly opposed to crony capitalism than Democrats. In fact, the Exim controversy is best explained as a clash of opposing business lobbies. And if reform conservatives want to establish truly impressive anti-cronyism bona fides, they’ll need to take on much more important targets than the Exim Bank.