Ex-Im Bank the ‘lender of last resort’ for aerospace industry

We’ve all heard some version of this classic joke: “An optimist falls off a 10-story building. As he passes the sixth story, someone yells from the window, “How’s it going?” The man yells back, “So far, so good!”

It seems many of the critics of the U.S. Export-Import (Ex-Im) Bank are optimists, trying to argue that U.S. manufacturers and the U.S. economy have managed just fine without the bank having the authority to approve financing of sales of more than $10 million.

{mosads}It’s a shame they did not spend time with small- and medium-sized aerospace companies from across the country, like I did, this week at the Aerospace Industries Association’s (AIA) Spring Supplier Management Council meeting in Seattle. If they did, they might come to realize their optimism is more likely delusion and just as misplaced as the optimism of the man in the joke. 

The Ex-Im Bank recently reported it was only able to authorize $5 billion in financing last year, a quarter of its financing activity when it was last fully operational in 2014, and its lowest level in 40 years. This activity can be connected to the direct support of 52,000 jobs and $284 million in interest and fees from foreign customers sent to the U.S. Treasury.

This would not happen if — as its critics mistakenly claim — the Ex-Im Bank was providing “subsidies” instead of loans requiring repayment. Those numbers could have been much higher, with action on forty deals worth $30 billion that cannot be reviewed and approved until the Trump administration puts forward nominees for the bank’s five board of directors positions and fills a quorum.

The huge bipartisan majorities in both the House of Representatives and the Senate that reauthorized the Ex-Im Bank’s operations in late 2015 would take swift action to approve these candidates if given the chance.

This issue is not an academic exercise or a philosophical debate regarding the role of government in the economy, and it certainly is no joke to more than 6,000 U.S. companies in the civil aviation supply chain.

These small- and medium-sized suppliers are willfully overlooked by Ex-Im Bank critics who throw around terms like “corporate welfare” and “crony capitalism” as if large companies make every part of an aircraft all by themselves and reap all the benefits of export sales. 

My organization, AIA, recently reported the U.S. aerospace and defense industry generated $146 billion in exports and a trade surplus of $90 billion in 2016, the largest of any sector. I can already hear the argument: “If the Ex-Im Bank was not available to support this success, then why is it even necessary?”

The answer is rooted in what the bank is, namely, a “lender of last resort” when private-sector financing is otherwise unavailable. While private export credit financing has become more readily available since the global financial crisis, there will always be sales that would benefit from the support of a government export credit agency like Ex-Im Bank.    

The other point that is frequently missed is that close to 60 percent of this export value can be attributed to the American supply chain. These companies win twice when the Ex-Im Bank can offer financing that is otherwise unavailable for an aircraft export — selling parts and components that are initially incorporated into the aircraft, then selling these same parts and components for a higher margin in the global maintenance aftermarket.

President Trump and Commerce Secretary Wilbur Ross understand the value of getting the best deal for America, fixing our debt and trade deficit, and ensuring U.S. manufacturers have a level playing field.

When considering the future of the Ex-Im Bank and Secretary Ross’s stated goal of having it “help small businesses more,” they should remember the aerospace supply chain companies that form the backbone of our industry.

We otherwise risk making the U.S. civil aviation supply chain a punchline, the butt of jokes by our foreign competition, as we remain sidelined by our own elected officials. It’s one thing to be optimistic about how we’ve weathered the fall so far, but the landing will be no laughing matter.

Lt. Gen. David F. Melcher (U.S. Army-Ret.) is the president and CEO of the Aerospace Industries Association.

The views expressed by contributors are their own and not the views of The Hill.