The GOP is divided over 'Ex-Im' [Commentary]

Tea party republicans want to eliminate the U.S. Export Import Bank while others want to protect it

Most people have never heard of it. Fewer still understand how it operates. But it is the focal point of a (mostly) intramural Republican fight playing out in the halls of Congress. Its ultimate resolution will have dramatic impact on a number of high profile American manufacturers — and the thousands of high profile jobs they represent.

I refer to the Export-Import (Ex-Im) Bank of the United States. Its charter is to act as a lender/guarantor of last resort (where private sector investment is not available) on behalf of foreign purchasers of U.S. produced goods — mostly high ticket airplanes and state of the art energy generation equipment.

The heated debate over the propriety of such a financial entity is not new. Free market conservatives have sought to terminate "Ex-Im" for years. But the push for elimination ("de-authorization" in Congressional speak) gained momentum when newly installed House Majority Leader Kevin McCarthy, a California Republican, indicated his opposition to reauthorization once the bank's charter expires on Sept. 30.

Predictably, the debate splits so-called "establishment" Republicans from their more doctrinal colleagues on the right. The former view the bank as a legitimate financier in business to help protect America's industrial base. For example, Boeing Company's wide body jets are a prime beneficiary of the bank's largesse; the aircraft giant secured approximately two-thirds of Ex-Im's fiscal year 2013 long-term loan guarantees.

Supporters point to foreign finance entities that perform similar financing arrangements on behalf of foreign competitors. They ask why we would unilaterally disarm in the high stakes, high reward world of international trade — especially where the long-term future of the U.S. industrial base could hang in the balance. Also on the plus side is Ex-Im's unique status, which allows it to turn a profit. In fiscal year 2013 for example, the bank returned more than $1 billion in profit to the Treasury (out of a total authorization of $27 billion).

Advocates include a murderers' row of business interests with serious Washington push. Besides Boeing, General Electric Co., the National Association of Manufacturers and the U.S. Chamber of Commerce are actively weighing in with Republican House members.

The lobbying is intensely personal to boot. According to recent media reports, every member of Congress will shortly receive an index card pointing out the businesses in their districts that enjoy Ex-Im support. The card will also reflect the jobs represented by these businesses.

Detractors within the GOP conference (including many tea party affiliated members) view the bank's operation as classic corporate welfare-ism. This group is particularly sensitive to "crony capitalism," whereby Uncle Sam plays Santa Claus by picking winners and losers with taxpayer money. Recall the Obama administration's record of failed green technology start-ups for context. These fiscal hawks would rather the free market determine survivors without taxpayer subsidy and without giving rival carriers overseas (the sometimes beneficiaries of Ex-Im support) an undue advantage through lower finance costs.

The most prominent domestic critic in this regard is Delta Airlines — a competitor that often cites Ex-Im's finance cost subsidy as an unfair advantage in a hyper-competitive marketplace. The airline has even gone to court over Ex-Im's backing of several major airplane deals alleging the bank's failure to fully weigh adverse impact on other U.S. manufacturers.

Unlike most Washington policy showdowns, the battle over Ex-Im's future has been confined to the GOP side of the aisle. Relatively few Democrats sought to make hay of the issue, although then Sen. Barack Obama cited Ex-Im as a prime example of corporate welfare during his presidential campaign in 2008. Now the president supports it and wishes to expand its financing authority.

The ascension of the tea party within the GOP has brought the debate front and center; there is little reason to believe it will subside in the short term. Even some establishment figures such as 2012 vice presidential nominee Rep. Paul Ryan, a Wisconsin Republican, and House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, are on record as opposing reauthorization. But you can bet big business will continue to fight hard to protect this unique institution and its mission.

My prediction: A coalition of Democrats and mainstream Republicans will help Ex-Im survive this latest attempt on its life. The argument against unilateral disarmament and the reality of subsidized foreign competitors should carry the day. But serious reforms could be in play if the present uprising continues to gather steam. Stay tuned on this one.

Robert L. Ehrlich Jr.'s column appears Sundays. The former Maryland governor and member of Congress is a partner at the law firm King & Spalding and the author of "Turn this Car Around" and "America: Hope for Change" — books about national politics. His email is ehrlichcolumn@gmail.com.


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