NORTH CHARLESTON, S.C. -- South Carolina Sen. Lindsey Graham said he’s backing legislation that will reauthorize the Federal Export-Import Bank, a Depression-era agency that was set up to build trade with the former Soviet Union.
By Chuck Crumbo
Published April 4, 2012
NORTH CHARLESTON, S.C. -- With eight out of every 10 planes Boeing builds at its new plant in North Charleston headed to foreign customers, U.S. Sen. Lindsey Graham said it’s important for him to support legislation backing reauthorization of the Federal Export-Import Bank.
Normally, Graham’s remarks would garner little notice, but these days, the agency has wound up in the crosshairs of some congressional conservatives who think the government shouldn’t be in the business of offering loan guarantees.
“This is not a bailout,” said Graham, a South Carolina Republican. “This is a financing mechanism that will allow transactions to take place between American manufacturers and certain overseas markets. And, those markets are being aggressively pursued by other countries.”
The Ex-Im Bank, which is self-financing and backs loans helping U.S. firms selling goods overseas, is up for re-authorization. Advocates also want to raise the bank’s cap on loan guarantees of $100 billion by 40%.
Back in 2006, the agency was reauthorized for four years with little controversy. The U.S. House approved the measure by voice vote and the Senate offered unanimous consent. That authority expired Sept. 30, and the agency has been granted three temporary extensions.
The latest extension ends May 31. If a deal is not struck, the agency that was created in 1934 by executive order to build trade with the former Soviet Union will go out of business.
Graham thinks that without the Ex-Im Bank, the future of Boeing and other manufacturers in South Carolina is in jeopardy.
“Long story short, if Ex-Im banking goes away in America, that ability for a Boeing, a GE and small businesses in our state to get market share in international markets is going to be destroyed,” Graham said. “It means that the growth of Boeing in South Carolina ceases to exist.”
Graham, though, finds himself at odds with the state’s junior senator, Jim DeMint. The Greenville Republican, regarded as a Tea Party favorite, has been leading Senate efforts to shut down the Ex-Im Bank on the grounds that it’s a corporate welfare agency of the federal government.
Boeing directly employs more than 6,000 people in South Carolina and has $700 million worth of contracts with 250 S.C. suppliers, Jim McNerney, Boeing president and CEO, said in a letter to Graham.
Without the support of the Ex-Im Bank, “many of our customers will choose to purchase airplanes from Airbus, made in Europe, built by European labor, sold with the aggressive banking of multiple European export credit agencies,” McNerney said.
An example of the Ex-Im bank’s value to Boeing and South Carolina is offered in the January 2006 deal with Air India. According to a Boeing news release, Air India signed an order agreement for 68 jets, the single largest commercial airplane order in India’s civil aviation history, with a value of more than $11 billion at list prices. The order included 27 of the 787-8 Dreamliners, which are built at the North Charleston plant.
Boeing has been a major beneficiary of Ex-Im Bank aid, according to a 2009 study by the nonpartisan Pew Charitable Trusts. Pew’s Subsidyscope project found that in fiscal year 2008, the Ex-Im Bank issued $8.1 billion worth of long-term guarantees on loans made by banks in 23 countries.
“Of this amount, nearly $5.5 billion, or 67%, supported the sale of Boeing airplanes in nations such as Brazil, Canada, Ireland and the United Arab Emirates, the four largest recipients,” the Pew report said. “In FY 2007, loans for Boeing aircraft accounted for $4.5 billion, or 62%, of $7.2 billion in long-term guarantees. Boeing reports that sales to foreign customers accounted for about 40% of the company's revenues in 2008.”
In order to expand, the South Carolina economy needs the Ex-Im Bank, said Lewis Gossett, president and CEO of the S.C. Manufacturers Alliance.
“If our manufacturing base is to grow, we must continue to expand our ability to export goods from South Carolina facilities,” Gossett said. “Given the key role the bank plays in facilitating export sales, failure to reauthorize it would be devastating to existing industry and to those that we hope to create in the future.”
Gossett, in a letter to Graham, added that small businesses are benefactors of the Ex-Im Bank, too. “You should know that most manufacturing facilities in South Carolina employ between 20 and 400 folks,” Gossett said. “Many of those businesses depend upon the bank for financing that cannot be obtained elsewhere.”
More than 80% of the Ex-Im Bank’s transactions support small business, said Bryan Derreberry, president and CEO of the Charleston Metro Chamber of Commerce, adding that his organization recently re-established the World Trade Center Charleston.
“The World Trade Center Charleston’s goal is to help our region’s small business community … expand by selling their products and services on the global marketplace,” Derreberry said.
While he supports the concept of open markets, Graham said the Ex-Im Bank helps level the playing field for U.S. firms selling products overseas — especially in emerging markets where traditional banks and financing do not exist. U.S. manufacturers would be at a disadvantage against competitors in other countries, the senator added.
“I would love a world without ex-im banks, but that world does not exist,” Graham said.
Reach Chuck Crumbo at 803-401-1024, extension 204.