More than three months after Congress allowed its charter to expire, the Export-Import Bank is still a hot topic of discussion on the Hill, and some area businesses are urging their members of the House and Senate to reauthorize it.
For the past several months, Leland-based Flow Sciences and New Hanover County’s GE Hitachi – among other North Carolina companies – have been trying to convince legislators that the export bank programs are essential to their well being.
The bank, created by Congress in 1934, is designed to help U.S. companies compete with export credit offered by other countries, according to its website. The bank’s main programs are direct loans, loan guarantees, working capital guarantees and export credit insurance. Until now, Ex-Im has had little trouble being reauthorized by the entity that created it.
Some in Congress, however, oppose the Ex-Im Bank because it provides loans to foreign purchasers of large products from some large U.S. companies, GE and Boeing among them. The legislators point to this practice as constituting corporate welfare.
Those legislators may not understand the Ex-Im’s benefits to small businesses that export, says Steve Janz, vice president of international sales and strategic business development for Leland-based Flow Sciences. The company, which employs 50 people, gets about 30 percent of its revenues from sales overseas.
Rather than looking to the Ex-Im Bank for loans that will help customers in developing nations purchase big-ticket items, small business users of Ex-Im are more often looking for export credit insurance, Janz said Monday.
When Flow Sciences sells equipment to a buyer – especially a new customer or a customer in a developing country – “We are worried about risk when that product leaves our shipping dock,” Janz said. “Ex-Im provides insurance against that customer going out of business or deciding against buying that piece of equipment. It’s a wonderful safety net.”
Credit insurance also enables small businesses like Flow Sciences to offer their customers terms of repayment, and ensures that payment will be forthcoming – from the bank if something goes wrong with the business deal.
Since the bank’s charter expired July 1, however, Janz has seen some potential opportunities vanish, since deals are now harder to negotiate and require much more paperwork without the credit insurance.
“It’s costing jobs because we’re not getting as many orders as quickly,” Janz said.
Flow Sciences has been involved with the Exporters for Ex-Im Coalition, which last week released a short video highlighting the negative consequences for North Carolina manufacturers should the Ex-Im Bank be allowed to die.
Flow Sciences was one of three companies depicted in the video.
"Ex-Im Bank is an integral part of our financing picture. Thirty percent of our revenue is represented with export sales; I can't keep all these people employed if I have a 30 percent whack in my revenue," the video quoted company CFO James Wind as saying.
GE Hitachi is taking a different lobbying tack. This past June it collaborated with GE Aviation to stage a pro-Ex-Im rally
at the companies’ shared site in Castle Hayne. And at last week’s University of North Carolina Outlook event, at which GE Hitachi COO Jay Wileman spoke, the executive encouraged attendees to fill out postcards he had brought, addressed to U.S. Rep. David Rouzer (R-N.C.) in support of continuing the export bank.
“Our competitors aren’t our traditional competitors -- they’re rapidly becoming the Russians, the Chinese, the Koreans as well [competing] against the U.S.-owned energy companies here,” Wileman said. “If I’m going to sell a new unit in Poland or Vietnam or Mexico or anywhere, I want to add jobs here in Wilmington ... I can’t do that if the other countries are out there offering low credit, low financial rates out there, so I’ve been to D.C. As a matter of fact I’m on a plane this afternoon [to talk to Congressmen] … because it’s all about the local jobs.”
GEH spokesman Christopher White was even more direct, explaining Monday that the disappearance of the Ex-Im Bank hurts his company’s ability to bid for projects overseas, since bidders from other countries often have export banks backing them up.
“We’re actively bidding in Poland right now, and if we get the job, hundreds of engineering jobs that would have come to Wilmington will go overseas,” he said.
White also referred to a recent tactic used in the U.S. House to bring the Ex-Im Bank reauthorization out of the House Financial Services Committee and onto the floor. Earlier this month, a majority of House members signed a petition to force a floor vote. This move, called a discharge process, saw 42 Republicans join with most House Democrats to reach the 218 signatures needed to release the bill from committee.
Rouzer and the Wilmington area’s other representative, Walter Jones, are on record against the Ex-Im Bank reauthorization. Monday, Jones' office forwarded the representative's statement on the issue.
“I have stated publicly that I have concerns about the bank. The recent financial crisis reminded us that unexpected market events can strike at any time. When they do, taxpayers are often asked to pick up the tab for a bail out. With that experience still fresh in mind, I am troubled by the prospect of asking taxpayers to continue to subsidize gains and bear the burden for losses on private investments.”
White, on the other hand, says that the Ex-Im Bank is the best deal for the U.S. Treasury "this side of the IRS."
According to Sen. Richard Burr's office, Burr (R-N.C.) supports the bank. North Carolina’s junior senator Thom Tillis does not.
“Senator Tillis has previously voted against reauthorizing the Export-Import Bank because it crowds out private capital and doesn’t do enough to provide a fair playing field for small businesses,” his staffer Meghan Burris said Monday in an email. “Senator Tillis would like to see reforms that allow the bank to function in a lesser role to guarantee loans for investment where private banks are unable to capitalize on the risk or where similar loans exist for foreign competition.”
Janz said reform may be needed, but not before reinstating the charter.
“Reauthorize first, then reform Ex-Im after reauthorization,” he said.