Ex-Im Bank Isn’t Necessary for National Security

Who needs that Export-Import Bank? There is healthy debate going on in Washington. The side that wants Washington to agree to extend the bank charter has pulled out the national security card, suggesting that the bank’s continued existence boosts our security. But they can’t provide a convincing argument that promoting the bank provides for the common defense.

The Export-Import Bank is government’s official export credit agency for assisting “in financing the export of U.S. goods and services to international markets.” It has been around since the Great Depression. The issue before Congress is whether America really needs to the bank to do business in the world or if the bank is just more government left over from the New Deal that we can do without.

For starters, the connection between the bank and national security is tenuous. Ex-Im cannot be involved in financing any defense activities. The law states “[t]he Bank shall not guarantee, insure, or extend credit, or participate in an extension of credit in connection with any credit sale of defense articles and defense services to any country.” That prohibition seems pretty clear.

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There is an argument to be made that the bank could well finance companies that do both commercial and defense work or assist in promoting “dual-use” exports (items that have both civilian and military application). But, is propping up U.S. businesses that might also do military work the best way to sustain the U.S. defense industrial base? I think not.

If Congress really wants a strong industrial base that can adequately support the defense of the nation there are better steps to take than authorizing more corporate welfare.

Most importantly, the government can buy what it needs. The primary reason the American industrial base is underweight is a decades long procurement “holiday” in replacing major weapons systems from surface ships to bombers. At one point, Heritage analysts estimated that Pentagon under funded new equipment at the rate of $50 billion a year.

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At the same time, the U.S. government could become a much better customer by buying military hardware with greater efficiency and predictability.

Next, if the U.S. government really wants to promote selling U.S. military equipment overseas it should put export control and Foreign Military Sales reforms on steroids and just streamline the unnecessary red tape that makes it harder for U.S. companies to do legitimate business. For example, U.S. prohibitions on exporting satellite parts virtually built global competitors for US industries.

Finally, maintaining access to the global industrial base is much more important that attempting to keep anemic companies that can’t compete alive with an infusion of public tax dollars.

The Ex-Im Bank should stand or fall on its own merits. Congress ought to pay more attention to the criticisms of the bank that point out the risks, weak governance, and poor performance that mire the bank’s track record at creating jobs and promoting American industry.