23a. The Export–Import Bank Should Be Abolished (Summary)

Posted2024-08-13

Updated2024-08-13

ByC. Sparks

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Author: Veronique de Rugy

Origins and Purpose of EXIM: Established in 1934, the Export–Import Bank (EXIM) provides taxpayer-backed financing to support U.S. exports, with the intent to boost American jobs, support small businesses, and enhance competitiveness.
Criticism of EXIM’s Effectiveness: The agency primarily benefits large corporations such as Boeing and does not significantly help small businesses. EXIM is criticized for favoring politically connected firms, thereby distorting the market and risking taxpayer money.
Employment and Economic Growth: Claims that EXIM creates jobs and promotes exports are disputed. Evidence suggests that most jobs and exports would have occurred without EXIM’s involvement, and the agency’s role in economic growth is overstated.
Impact on Economic Competitiveness: EXIM is seen as contributing to a misallocation of resources by subsidizing exports, which may lead to inefficiencies rather than genuine economic growth.
Focus on Competing with China: While recent arguments advocate for using EXIM to counter China’s economic strategies, there is skepticism about the effectiveness of this approach. The Bank has not substantially altered its operations to meet this challenge.
Conclusion: The chapter argues for the abolition of EXIM, suggesting that it wastes taxpayer money, does not effectively promote economic growth, and distorts the market by favoring large corporations over small businesses.

Market Distortion: If the U.S. government were to abolish EXIM, it could potentially lead to a more level playing field in the market, reducing the influence of large corporations with political connections.
Economic Impact: The elimination of EXIM might have little to no negative impact on overall U.S. exports or job creation, as these are primarily driven by market forces rather than government subsidies.
China’s Economic Strategy: Abolishing EXIM could remove a tool that some see as necessary to counter China’s aggressive export financing tactics. However, the chapter argues that this approach is misguided and unlikely to succeed.
Taxpayer Savings: Ending EXIM’s operations could save taxpayers money by eliminating the risks associated with the agency’s financing activities, which often support large, financially stable companies that do not need subsidies.
Impact on Small Businesses: Small businesses, which already receive minimal support from EXIM, might benefit from a market less skewed by subsidies to large firms, potentially leading to fairer competition and better opportunities.

Introduction and Acknowledgments