Foreign companies build factories and airlines; Ex-Im makes the US pay for it

Source: Washington Examiner | February 14, 2017 | Timothy P. Carney

General Electric closed an appliance factory in Bloomington, Indiana, last year. The most luxurious of the GE refrigerators Hoosiers used to make there are now made in Mexico, and have been for many years. GE’s factory complex in Mexico was subsidized years ago by the U.S. Export-Import Bank, a federal agency.

You could say that Mexico built a factory and made the U.S. pay for it.

President Trump, during the primary, said that he agreed with conservatives that Ex-Im, which extends taxpayer-backed financing to foreign companies and governments that buy U.S. goods, should be abolished.

Last week, however, Sen. Heidi Heitkamp, D-N.D., a champion of Ex-Im, emerged from a White House meeting declaring that Trump was now an Ex-Im supporter, and that he would push Congress to fill out the agency’s board, thus empowering Ex-Im to approve subsidized deals of greater than $10 million.

This would be a mistake. Trump ran promising to drain the swamp. Ex-Im is the swamp. Touted as a way to help the small businessman or factory worker, it instead serves primarily to enrich foreign companies and Beltway insiders, while harming the rest of the economy.

Ex-Im doesn’t create jobs or boost the economy. “Subsidized export financing,” the Congressional Research Service explained, “merely shifts production among sectors within the economy, rather than adding to the overall level of economic activity, and subsidizes foreign consumption at the expense of the domestic economy.”

That last part is key. Ex-Im only indirectly subsidizes U.S. manufacturers. The direct recipient of Ex-Im aid—especially the large loans and loan guarantees that a full board would approve—is always a foreign company.

The company that receives the most subsidized financing from Ex-Im is Pemex, Mexico’s national oil company. (In 2014, Veronique de Rugy of the Mercatus Center found more than $7 billion in Ex-Im financing to Pemex since 2006.) For instance, Ex-Im in 2015 extended a $1.3 billion loan guarantee to subsidize Pemex’s drilling rigs.

In the GE deal, Ex-Im subsidized a GE joint venture with a Mexican company, building a new refrigerator plant in Mexico. The factory would use some U.S.-made equipment, and so Ex-Im provided taxpayer-backed financing to the Mexican GE venture. This new factory allowed GE to lay off hundreds in Bloomington in favor of cheaper Mexican workers.

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