The shutdown of the Export-Import Bank of the United States may prove to be temporary, the result of a nasty political fight in Washington, but it has American plastics companies who rely on it for international sales nervously watching and waiting.
“It is important to us and it has worked well for us in the past,” said Russ LaBelle, president of equipment maker Wilmington Machinery Inc. “Frankly I think it would be a mistake not to continue it.”
The Wilmington, N.C.,-based maker of injection and blow molding equipment uses Ex-Im financing for about one-third of its exports, often to developing countries.
With exports making up about half its total sales, it's an important tool for the company, particularly against European competitors who can receive similar support from their governments, LaBelle said.
But the 80-year-old bank, which is a U.S. government agency that guarantees loans from private banks to finance exports from American companies, shut its doors June 30 after conservative Republicans in Congress blocked its reauthorization.
Opponents of the bank call it corporate welfare, with groups including Americans for Tax Reform challenging the notion that it's crucial to exports.
They cite an analysis of U.S. government data by the Mercatus Center at George Mason University in Fairfax, Va., which showed that only 1.9 percent of U.S. exports by value were financed with the bank.
“Needless to say, without the Ex-Im Bank, American exports will not collapse,” according to Veronique de Rugy, a senior research fellow at Mercatus.
An April report from Mercatus argued that its mainly big businesses that benefit, and they could obtain financing elsewhere. All of the 10 biggest users of the bank overseas are large corporations buying from U.S. multinationals.
Half of those 10 are foreign airlines buying Boeing aircraft (Boeing is the single biggest U.S. user) and the other half are involved in the exploration or production of oil, it said.
The overseas firms that receive the loans can wind up competing against U.S. companies, bank opponents argue.
But supporters of the bank such as plastic packaging manufacturer Multifilm Packaging Corp. in Elgin, Ill., say the bank's financial guarantees are a big help in its efforts to boost sales, particularly in emerging markets without well-developed financial systems.
“What the Ex-Im Bank allows us to do is be a little bit more gutsy,” said CEO Olle Mannertorp. “Mexico and South America and to a certain extent the Caribbean, these are economies that are so-called cash economies.”
Exports are more than half of Multifilm's business and helping customers get financing at U.S. interest rates is a key selling point, he said.
“How do you go about trying to grow in that part of the world?” Mannertorp said. “We have a hard time competing on price with the low labor cost there. If you offer high quality product that also includes a line of credit, you have a good offer.”
The Ex-Im loans to Multifilm customers have been good investments and have not required bailouts, he said: “We haven't cost Ex-Im a penny.”
Losing the bank won't hurt business with its existing, established customers, but it will make it more difficult to close deals with new customers, Mannertorp said.
Bank supporters like the Ex-Im Coalition say the default rate on Ex-Im loans is less than 2 percent over its history, and was less than 1 percent in 2014, after a tightening of lending rules in 2012.
A broad coalition of business lobbying groups, including the National Association of Manufacturers and the U.S. Chamber of Commerce, are lobbying for the bank's renewal, arguing it matches the similar services offered by more than 50 other countries.
Wilmington Machinery's LaBelle said in his company's experience, Ex-Im backed loans go to overseas customers with established track records that can show several years of profitability.
“I feel it will be reauthorized, since it's one of the few tools we have to promote exports,” LaBelle said. “Let's face it, European competition is very stiff.”
For legislators who oppose the bank, stopping reauthorization has been a significant political victory. The fight is expected to restart in September, when Congress returns to session.
“If you're a politically connected bank or company that benefits from Ex-Im, no doubt you would like it to continue,” said Texas Republican Rep. Jeb Hensarling, one of the bank's most vocal opponents. “After all, it's a sweetheart deal for you. Taxpayers shoulder the risk and you get the reward.
“But if you work at a small business or other American company competing in the global marketplace, it's unfair,” he said. “Ex-Im effectively taxes you while subsidizing your foreign competitors.”
