- The Washington Times - Tuesday, July 8, 2014

A campaign by congressional Republicans to eliminate the Export-Import bank clouds the outlook for America’s premier exporter, Boeing Co., Standard & Poor’s Corp. warned on Tuesday.

The world’s top manufacturer of commercial aircraft competes for business around the world with Airbus, a European consortium which receives financial backing  and loan guarantees from European countries.

While Boeing currently does not rely much on the Ex-Im bank for financing, it has depended heavily on the government-subsidized loans during economic downturns in the past, S&P said. Currently, it finances about 18 percent of its exports through the bank, while in 2010 after the Great Recession that share was 30 percent.

“The long-term impact of Ex-Im’s dissolution on Boeing’s credit quality could be significant, especially in a future downturn,” said S&P analyst Philip A Baggaley. “It could hurt the company’s competitive position because Airbus would still be able to offer [government-subsidized] financing, and this could be a deciding factor for some new aircraft contracts, especially in emerging markets and for sales to start-up or financially weak airlines.”

Boeing is America’s biggest and most important exporter, and has held that distinction through decades when the nation has run large trade deficits in manufacturing with most other countries in the world.

By virtue of the sheer size and value of aircraft sales, Boeing is also Ex-Im’s top beneficiary, accounting for about one-third of Ex-Im’s total commitments from 2007-2013, S&P said.

Many House and Senate Republicans are trying to de-fund and de-authorize the government bank precisely because it does devote so much of its financing to big, profitable corporations like Boeing. Ex-Im’s authorization runs out in September and House Republicans are opposed to renewing its authority.

The campaign gained momentum, as incoming House Majority Leader Kevin McCarthy, California Republican, came out last month against a reauthorization vote for the bank before a Sept. 30 deadline.

Critics on both the left and right have argued that the bank amounts to corporate welfare, with much of the bank’s subsidies going to the business interests who can afford to lobby for the money.

However, the bank’s supporters, including centrist Democrats, major business groups such as the Business Roundtable and U.S. Chamber of Commerce, and many business-oriented Republicans, argue that some government support is needed to offset the advantage Airbus enjoys from European subsidies.

The House Republican campaign against Ex-Im also could cause other major U.S. exporters like General Electric, Caterpillar and United Technologies to lose some export sales because they would have access to less favorable financing, S&P said. But it added that those companies would be hurt less than Boeing because they generally rely on Ex-Im for only 2 percent of their sales.

“Should the U.S. Congress fail to reauthorize Ex-Im before September 30, Boeing is the most likely of the U.S. exporters we rate to feel a credit impact,” Mr. Baggaley said. “None of the other rated companies rely on Ex-Im’s financing and guarantees as much or face the kind of competitive pressures Boeing does.”


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