Protect the Ex-Im Bank and protect U.S. jobs

To paraphrase Winston Churchill, a taxpayer-funded U.S. bank that helps multinational companies like Boeing and GE is the worst form of export policy — except for all the others.

We're stretching the statesman's point about the imperfect nature of democracy to add some necessary perspective to a debate over the role of government in business and the future of the Export-Import Bank of the United States.

The government bank did about $27 billion in business last year, supporting large and small U.S. exporters by:

• Issuing credit insurance, which makes it easier for companies to secure working capital and lets business owners sleep better: They don't worry as much about foreign customers paying their bills.

• Guaranteeing loans, giving private banks the reassurance they need to finance trade deals.

• Lending directly to foreign customers, so they will choose to buy U.S. goods.

For 80 years (yes, since FDR's New Deal), the Ex-Im Bank has done this without much notice. And why should anyone notice? Credit insurance isn't very sexy, nor is the bank controversial. It supports American jobs, is self-sustaining and survived the global financial meltdown with minimal losses.

To those who believe in the idea of limited government, attacking the bank might seem like a good strategy. The bank needs congressional reauthorization by Sept. 30, and critics hope enough votes materialize to kill it. U.S. Rep. Eric Cantor, R-Va., supports the Ex-Im, and he lost his primary race last week.

Even Fred Hochberg, head of the bank, says it would be great if the private sector did all the work of financing U.S. exports. But that's not the reality in the global economy, especially in the developing world, where government entities do play a role in facilitating deals for everything from chocolate to train engines. Many transactions are privately financed, but for 10- or 15-year loans on construction projects or big-ticket capital equipment in dicier parts of the globe, government loans or guarantees are often necessary.

The question for Americans is whether we want our companies to compete aggressively for those sales, or should we risk letting European and Asian manufacturers — backed by their export banks — grab the business? The Chinese, in particular, loom large; their export bank is about four times bigger than ours is.

So take the case of W.S. Darley & Co. of Itasca, Ill., which makes fire trucks and firefighting equipment in the Midwest. Darley last year sold 32 fire trucks to the state government of Lagos, Nigeria, because the family-owned company came to the table with a $15.7 million direct Ex-Im loan for the Nigerians to use. Peter Darley says the Chinese are active competitors in Africa, but the Nigerians liked the idea of the United States viewing the Lagos government as creditworthy. And of course they liked Darley's beautiful red pumpers.

Darley & Co. figures the sale supports 100 jobs. When you think about it, the deal also supports U.S. foreign policy. The Chinese aren't just after our fire truck business in Africa, they're targeting minerals, construction and political alliances. Ceding Africa would be foolish.

For bigger companies selling airplanes or construction equipment, it's just as crucial to have Ex-Im involvement because of post-financial-crisis regulations on international finance. Those big long-term loans are now too risky and expensive for conventional banks — unless a government export bank guarantees the loan. So Boeing will lose sales to archrival Airbus, which gets European government help. Can't Boeing just finance foreign plane sales itself? Doubtful. The company already invests capital in new airplane design and manufacturing. A worst-case scenario: For lack of Ex-Im, Boeing shifts some production overseas to places like Japan, which would love the jobs and be thrilled to make Boeing a customer of its export bank.

That said, Ex-Im and Boeing are way too chummy. Nearly 45 percent of the bank's portfolio is tied to the Chicago-based company. That's partly because the loans are big and remain on the books a long time. Something else unfortunate about the relationship: When the bank makes a loan to a foreign airline to purchase Boeing widebodies, it can indirectly hurt U.S. carriers such as Delta, which must compete with those airlines. Delta is rightfully furious.

We'd like to see Ex-Im do more for small and medium business, and less with Boeing. But the bank's strengths far outweigh its weaknesses. And despite all the conservative fulminations about "Bank of Boeing" and such, Ex-Im is the kind of bureaucracy a conservative should love: It helps U.S. business and is profitable, actually returning money to the Treasury.

Not reauthorizing Ex-Im would hang U.S. companies — and jobs — out to dry. Locomotives and fire trucks and airplanes for export will still get made. They'll just be made in China or Europe instead of in the United States.