In the final days before the charter of the Export–Import Bank (Ex–Im) is set to expire, supporters of its export subsidies are claiming that Congress must reauthorize and expand Ex–Im if the U.S. commercial nuclear industry is to succeed internationally. We should take the concerns of the nuclear industry seriously—but not accept Ex–Im as a solution.
Those who advocate for Ex–Im as a necessity for the U.S. nuclear industry’s success argue:
- Without Ex–Im, the U.S. nuclear industry cannot compete with aggressive Russian expansion in nuclear energy exports, which is heavily financed by the Russian government. As the argument goes, Russian financing not only threatens the U.S. nuclear industry’s ability to compete, but it fosters the region’s overdependence on Russia for energy.
The response to Russia’s strategy is not to reciprocate with a similar, albeit milder, policy that encourages cronyism and puts taxpayers on the hook for corporate interests. The right approach is for the U.S. government to streamline export regulations with nations with whom we have entered into nuclear agreements and for nuclear companies to compete by offering superior products and services. Subsidies only undercut the industry’s competitive strength.
American companies already have a distinct advantage over the Russian nuclear industry in the same regions Ex–Im supporters claim particular concern. European nations are willing to pay for secure access to energy resources, and the European Union has launched a strategic initiative to diversify the energy options of member nations.
- Without Ex–Im, the U.S. nuclear industry is at a competitive disadvantage in international bids. Bank proponents claim an export credit agency like Ex–Im is often a requirement in bidding for major international projects. Foreign developers can demand support from export credit agencies for the simple reason that such support is available. In its absence, developers can hardly ignore U.S. firms that have access to private financing. The U.S. nuclear industry is prized for its reliable and efficient products, its operational excellence, and its safety culture. It is the gold standard for nuclear power generation. American products and expertise are highly desirable in international markets. As it is, the U.S. industry has been competing on a tilted playing field, winning contracts over companies that are directly financed by foreign governments. The best way to curtail the distortions caused by such subsidies is to work to eliminate them—not expand their use.
- Failure to reauthorize the Ex–Im charter raises uncertainty among potential international customers, hurting U.S. competitiveness. Ex–Im’s unpredictable future makes the nuclear industry look less reliable as well, according to Bank supporters.
As a government entity, Ex–Im operations are inherently political. Reauthorizing Ex–Im perpetuates that politicking and only continues to subject legitimate business activities to the uncertainties of politics. Some claim the trade-off is worthwhile, arguing that billions of dollars in U.S. nuclear exports and thousands of jobs are at stake. The potential for growth in the international nuclear market is massive and provides a good opportunity for American companies. However, the very debate the nation is having now on Ex–Im is exactly where a cozy relationship between government and industry gets us: talking about politics rather than building nuclear power plants.
The Real Problem
The biggest threat to the competitiveness of the American nuclear industry may in fact be the American government. The Nuclear Regulatory Commission currently has 60 rulemakings underway and operates under an outdated regulatory system that unnecessarily inflates cost and that makes bringing new technologies to market prohibitively difficult. Commercial nuclear exports are likewise inhibited. The commercial nuclear export regime is convoluted and burdensome and spread between three different federal agencies—all of which increases costs, imposes delays, and limits innovation.
Ex–Im subsidies grant Washington too much power in determining who succeeds or fails in the market. By intervening, the government directs investors’ capital toward politically favored projects irrespective of merit, leaving fewer resources for projects that don’t receive government favor. These are the unseen victims of Ex–Im. Ex–Im subsidies also supplant investors who otherwise would customize financing for higher-risk projects. That leaves fewer resources available overall.
In truth, subsidized financing is not even good for the long-term health of the nuclear industry. By receiving a subsidy, a recipient is able to offer its product at a lower price or pocket higher profits than normal. This creates a sense of dependence on the subsidy. Without subsidies, a company would need to innovate or adapt to become more competitive, a situation which is better for industry, customers, and taxpayers.
The Real Solution
While supporters of the Bank accuse opponents of choosing an unusual “hill to die on” for “some ideological jihad,” the argument is easily turned. If the nuclear industry’s claims are true, should it not be frightening to Congress that the U.S. nuclear industry relies so heavily on, and its success is so intertwined with, the existence of Ex–Im and backing by the U.S. taxpayer?
By reauthorizing Ex–Im, Congress only deludes itself into thinking that it is setting the industry up for success. The U.S. government could do far more for the American nuclear industry by developing a modern regulatory system and addressing the many government-erected barriers thwarting a competitive American nuclear industry. Getting rid of the subsidies could focus attention on those underlying problems.