Don’t buy the pro-Ex-Im hype

Media outlets big and small readily accepted the recent claim by Boeing officials that hundreds of impending layoffs in Southern California are the consequence of Congress rejecting reauthorization of the Export-Import Bank. Yet Boeing has shed more than 25,000 jobs in that state while becoming the bank’s biggest beneficiary. Just a bit of skepticism and a simple Google search generates enough facts to fly a jumbo jetliner through the aerospace giant’s account. 

As Boeing tells it, the June 30 expiration of the Ex-Im charter prompted Asia Broadcast Satellite (ABS), a global telecommunications firm, to cancel its $85 million order for a Boeing satellite. Without subsidized financing from Ex-Im, the deal was a no-go, company officials say. 

{mosads}Boeing and ABS certainly have relied on Ex-Im financing in the past. However, that does not mean that affordable financing is not otherwise readily available. In fact, workforce reductions by the company are primarily the result of fewer government satellite orders and other industry trends, which together have reduced by 50 percent the number of jobs in Boeing’s Defense, Space and Security division since the late-1990s. 

Boeing and other Ex-Im proponents have spent tens of millions of dollars in the past 18 months attempting to convince Congress and the public that Ex-Im is a lifeline for American jobs. Tying the latest round of layoffs to the cancelation of the ABS deal fits neatly within that narrative. In fact, Ex-Im finances a meager 2 percent of U.S. exports, which means that 98 percent of American exports (and the millions of jobs that produce them) don’t depend on Ex-Im at all. 

Without Ex-Im, both Boeing and ABS have enviable access to private capital by virtue of their financial well-being. Boeing’s market cap exceeds $105 billion, and its finance subsidiary holds $4 billion in assets. The company also is running a backlog of $500 billion in orders—enough work to fill seven years of production. Fitch Ratings recently reported that “Boeing has the financial strength to add customer financing assets to its balance sheet while maintaining its current ratings.” 

ABS is also well positioned. The Bermuda-based company is owned by Permira, an international private equity firm with €25 billion in committed capital and a record of strong performance. 

The more plausible explanation for the looming layoffs involves fewer satellite and other defense-related orders from the government. The Tauri Group, which compiles an annual report on the satellite industry, noted slower growth in 2014 “due to a smaller number of expensive commercial GEO and government satellites.” 

The satellite manufacturing industry posted a measly 1 percent growth globally between 2013 and 2014, and U.S. satellite manufacturing revenues (as measured by 2014 launches) dropped 9 percent in the same period. Job losses exceeded 10,000. 

The timing of the ABS order cancelation is also worth noting. ABS announced the satellite order—its third from Boeing—on June 12, 2015. That was just 18 days before the Ex-Im charter was set to expire. It is hard to imagine that the two companies did not recognize the likelihood that Ex-Im financing was in jeopardy. Yet they went public with the deal nonetheless. That would seem to indicate a certain confidence that financing was not a deal-breaker. 

Another June event was likely significant—the explosion of a Falcon 9 satellite launcher on June 28. Following the explosion, SpaceX, the owner of the rocket, informed customers booked to fly on upcoming launches to expect months-long delays. These delays will further extend the time it would take for ABS to begin generating revenue from a new satellite. Because the new satellite was to feature all-electric propulsion—rather than conventional rocket propulsion—the time to reach proper orbit would also take weeks longer. 

Boeing is the largest beneficiary of Ex-Im subsidies—profiting from a whopping 40 percent of all bank transactions in 2014, according to government data. For obvious reasons, they are doing everything in their considerable power to revive the bank charter, such as linking layoffs to the Ex-Im charter expiration. 

That’s all the more reason for the media to carefully examine the claims of Boeing and those of their compatriots. Lawmakers and the public must understand that the end of Ex-Im is not hurting the economy. Private financing is readily available, as reflected in the record levels of U.S. exports in recent years—again, 98 percent of which do not receive Ex-Im support. They must also understand that export subsidies carry considerable costs to American businesses that are left to compete against foreign firms subsidized by the U.S. government. 

The moral of the story is, don’t believe everything you read on the Internet (or in the newspaper).

Katz is a senior research fellow in regulatory policy for the Heritage Foundation. de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Both are authors of research published by the Mercatus Center on “The Export-Import Bank’s Top Foreign Buyers.”


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