Perspectives on the Export-Import Bank of the United States

INTRODUCTION

Chairman Shelby, Ranking Member Brown, and Members of the Committee, thank you for the opportunity to appear before you today to discuss the Export-Import Bank of the United States. It is an honor.

I do not believe that the Export-Import Bank should be reauthorized. I will spend the next few minutes outlining why, with a special focus on the Ex-Im Bank’s impact on jobs.

JOBS IN A GENERAL ECONOMY

In a healthy economy — one characterized by full employment — the Ex-Im Bank, an
open-ended export credit agency that is properly described as offering export subsidies to
selected firms, does not create jobs. This stands in stark contrast to the rhetoric of some of the
Ex-Im Bank’s supporters. But it is the correct conclusion, at least to a first approximation, for
informing the Committee as it debates the appropriate course of action for the Ex-Im Bank.

Imagine an economy like ours, with some firms that export goods abroad and many more
firms that sell only within the United States. All labor resources are utilized. The government
enters and subsidies the exporting firms. This will surely help those firms, and may even increase
the number of jobs those firms can support. But as labor resources were already fully employed,
these new jobs must come from somewhere. What the export subsidy is doing, in effect, is
shifting jobs from firms that do not export to those that do. This does not increase employment
on the whole.

JOBS IN AN ECONOMY WITHOUT FULL EMPLOYMENT

Now, it must be said that there is considerable debate among economists as to whether
the U.S. economy is currently characterized by full employment. Many economists believe we
are quite close to full employment, but I am not among them. Despite a rate of unemployment
that is rapidly approaching one at which the Federal Reserve may be properly concerned about
inflation, it is still the case that employment rates among prime-age workers have not fully
recovered from the Great Recession, the level of involuntary part-time work remains elevated,
and wage growth is unsatisfactory.

In such an environment, it can be argued that export credit may help support jobs. To this
argument I have three replies. The first is that the Congress should not reauthorize a permanent
export credit agency in order to achieve the temporary goal of tightening a slack labor market.
Monetary and fiscal policy are much better tools to tighten the labor market. The second is that
even if the Congress chooses to offer financing to selected sectors to support employment,
exports would not be high on the list of firms or industries to target. Finally, failing to
reauthorize the Ex-Im Bank would not immediately terminate its existing financing
arrangements, and the lives of those arrangements will likely run longer than our current labor
market conditions.

THE ECONOMY AS A WHOLE: GENERAL EQUILIBRIUM CONCERNS

I will now turn from the employment impacts of the Ex-Im Bank to considerations of the
broader economy. Textbook models of international trade for a large economy such as the United
States predict that export subsidies will lower national welfare — will make the United States
worse off — relative to a situation without the subsidies. In contrast, some (though far from all)
more complicated models set in an oligopolistic market environment featuring particular forms
of strategic competition do find situations in which export subsidies can make the nation better
off.

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