Ending Ex-Im is not ‘unilateral disarmament’

The defenders of the U.S. Export-Import Bank deserve credit for their message discipline. Since its charter expired on June 30, the businesses and politicians that benefit from it have used the same phrase to try scaring Congress into resurrecting the bank: An America without Ex-Im has “unilaterally disarmed” itself. President Obama used this exact phrase earlier this week. 

You can see why the bank’s backers chose this message-tested phrase. With the world on fire beyond our borders, it frightens politicians and the wider American public into thinking the Export-Import Bank somehow keeps our economy strong and our country safe. 

But it doesn’t.

{mosads}Ex-Im is an example of corporate welfare and business-government collusion, not something that matters to America’s standing in the world. It sends tens of billions of taxpayer dollars—$20.5 billion last year alone—to businesses overseas, supporting less than two percent of the country’s exports along the way. This helps a select few domestic businesses that export their products, but it simultaneously places their competitors and companies in different industries at a disadvantage. The bank also gives billions of taxpayer dollars to companies and countries that are undermining America’s national security interests. 

This paints Ex-Im in a different light. Eliminating it isn’t unilateral disarmament—it’s common sense. Almost every Republican presidential candidate, and even White House hopeful Sen. Bernie Sanders (I-Vt.), agrees.  

Ex-Im’s defenders typically respond with a simple argument: Other countries have their own Export-Import banks, and we need ours to help “level the playing field” for American businesses. There are two things wrong with this claim.  

First: the bank’s defenders are basically arguing that America should model its economy after the statist examples of China and Russia. Rep. Paul Ryan (R-Wis.) pointed out this foolish reasoning earlier this year, asking why America should say “me too” to corporate welfare and state-sponsored cronyism. The better option, he said, is to “export bottom-up, organic, free-enterprise capitalism”—the same system that made our country the economic envy of the world.  

The second reason is just as strong. Despite its claims, Ex-Im doesn’t actually use taxpayer money to “level the playing field” against foreign companies. It devotes less than a third of its spending to this supposedly central reason for its existence. So where does the rest of the money go? You might be surprised. 

It turns out that Ex-Im has given tens of billions of taxpayer dollars to state-owned companies in China, Russia, and other countries, along with dozens of companies in other not-so-democratic regimes. It’s propping up dictators, communists, and autocrats—not exactly something that’s in America’s national security interests. 

One example stands out above the rest: Ex-Im’s $1.2 billion in taxpayer-backed loan guarantees to the Russian bank VEB, which has recently been sanctioned by the European Union and the United States. No wonder: It finances deals for another company, Rosoboronexport, that supplies weapons to Syria and Iran. Talk about something that needs to be unilaterally disarmed. 

Even when it’s not helping companies like this, Ex-Im still harms America’s interests and economy by its very nature. The bank’s primary argument for its own existence is that it helps the economy and supports jobs. Yet there’s a wealth of research that shows that it does exactly the opposite.  

Every time the Export-Import Bank sends a dollar to a foreign company, it helps that company at its competitors’ expense. And who is included in that list? Often American firms—businesses big and small that are now put at a disadvantage by their own federal government. Ex-Im’s support for their competitors costs them money and ultimately jobs, undercutting the central reason for Ex-Im’s existence. Many American businesses are well aware of this fact, yet Congress has long ignored their pleas. 

Remember that the next time you hear a pundit, politician, or lobbyist claim that America has “unilaterally disarmed” by letting the Export-Import Bank expire. This is nothing more than a last-ditch attempt to convince Congress to re-authorize the bank. In reality, Ex-Im’s expiration was a good thing, both for American taxpayers and the businesses that are finally competing on a level playing field.  

Unilateral disarmament? Re-arming Ex-Im is what Congress should really fear.

Pfeifle is president of Off the Record Strategies. He served as deputy national security adviser for strategic communications and global outreach at the White House, 2007-09.