A lot of folks involved in aerospace are keeping a close eye on the debate over whether to reauthorize the Export-Import Bank. Those who want it to fade away say it doles out billions to companies that don't need it. They call it corporate welfare. But those who want it to remain say it's critical to letting U.S. companies stay competitive on the world stage.
The Ex-Im Bank, created in 1934 by executive order as part of the New Deal, is both a bank and federal agency. It provides guarantees, direct loans and other financing to foreign buyers to help U.S. companies sell goods and services abroad. It helps aerospace companies like Boeing, Pratt and Whitney, Sikorsky and others make big sales abroad.
But it's not uniquely American. Other countries, including the U.K., France and Germany, have export credit agencies to help their companies, like Airbus. Canada and Japan also have similar organizations, as does the up and coming aerospace player China.
The argument may be reminiscent of those made over incentives. You may not like incentives, but everyone else offers them and you're at a disadvantage if you don't. The same seems to be the case with export credit agencies. Drop Ex-Im and the U.S. is at a disadvantage selling abroad.
So who wants it killed and who wants it to live? Democrats, some House Republicans, and businesses big and small are backers of Ex-Im. The U.S. Chamber of Commerce and the National Association of Manufacturers are also backers, and created a coalition that includes 865 organizations.
The International Association of Machinists and Aerospace Workers (IAM) is another backer, urging its 600,000 members to oppose efforts to defund the bank. IAM says the bank provides guarantees that supports more than 200,000 U.S. jobs.
"Without Ex-Im Bank financing, the U.S. aerospace industry will be at a severe disadvantage as European and non-European competitors would continue supporting their companies through their comprehensive industrial policies," said IAM International President Tom Buffenbarger. He adds that as China's export credit agency grows, "why would we want to eliminate one of the only effective tools the U.S. has to compete with China?"
But there are plenty of opponents. The Ex-Im Bank debate has split the Republican Party between those concerned about corporate welfare and those committed to the traditional allegiances with big business. Delta Air Lines CEO Richard Anderson has said he opposes reauthorization unless there are changes to the way the bank finances the sale of wide body aircraft. Delta feels Ex-Im gives an unfair advantage to the airline’s foreign competitors.
Because Boeing benefits greatly from Ex-Im, one might assume Airbus would be opposed to the bank. But you would be wrong. Airbus, which could gain significantly if Ex-Im's authorization lapsed, is not opposed to the lender. The aircraft manufacturer told Flightglobal in 2012 that it would welcome financial support for any aircraft assembled at its new final assembly line being built in Mobile, Ala., and exported from the United States.
But Doug Greco, vice-president of sales finance at Airbus Americas, said in March that he has no "thoughts" on Ex-Im reauthorisation. He noted that Airbus expects a significant number of the first A320 family jetliners assembled in Mobile to go to U.S. customers. But that might not always be the case.
For this region, where the aerospace footprint is growing, the benefits from the continuation of the Ex-Im Bank seem apparent. It makes it easier to sell products and services abroad, and while the U.S. market continues to be the world's most robust, the rest of the world is growing in importance. And selling parts of services abroad will be a key to future growth.