Fife company has big stake in D.C. debate over Ex-Im Bank
WASHINGTON — At roughly $25 a pop, there’s good money to be made in supplying the world with plastic traffic poles.
Pexco, a small manufacturing company with 150 employees in Fife, Wash., already ships the poles to 28 countries. If all goes as planned, thousands more will soon be headed to Turkey each year.
“We’ve got good products; we know there’s demand for that,” said Peter Speer, the company’s vice president of sales.
There’s also a danger that foreign customers might not pay, which is why many commercial banks look askance at such deals. But Speer can sleep a little easier knowing the U.S. government will step in if things go bad.
That federal insurance – which covers $2 million of Pexco’s exports – comes from the little-known Export-Import Bank of the United States, which has set off a big spat over the nation’s financing of global trade.
As a federal agency, the bank’s job is to provide credit insurance, loans and guarantees to help foreign buyers purchase U.S. goods and services.
Critics say it’s corporate welfare, unnecessarily putting taxpayers’ money at risk.
As they revive a fight from two years ago, many conservative Republicans in the House of Representatives want the bank disbanded when its funding expires Sept. 30.
Members of the Washington state congressional delegation are among those rallying to save the bank – often called Ex-Im – and it’s easy to see why. Since 2007, 183 of the state’s companies have lined up $111 billion in financing through the bank, with no state benefiting more.
That’s nearly half the national total of $232 billion.
“Here’s the bottom line: If the bank is allowed to go away, thousands of jobs in Washington state will be lost. That’s the fact,” said Democratic Rep. Denny Heck of Washington state, a member of the House Financial Services Committee.
Washington state’s top ranking _ it’s followed by Texas and California, each with $21 billion over the seven-year period _ is due largely to the muscle of aerospace giant Boeing, the nation’s largest exporter.
And resentment against Boeing’s influence is providing plenty of fuel for opponents, many of whom ridicule the bank as “The Bank of Boeing.”
Boeing and four other Washington state companies sent representatives to Capitol Hill to lobby last week, including officials of the Manhasset Specialty Co. in Yakima, which sells music stands, and Janicki Industries, a company in Sedro-Woolley that builds high-precision parts and tooling for aerospace and other businesses.
With so much on the line, the bank won unanimous support from the Washington state delegation when Congress last voted to extend it, in 2012.
“It is trade that unites our delegation more than anything else,” said Eric Schinfeld, the president of the Washington Council on International Trade. “And the reason why is that 40 percent of all the jobs in Washington state are tied to international trade. So they get it.”
In the House, opponents are led by Texas Republican Rep. Jeb Hensarling, the chairman of the Financial Services panel, who in May called the bank the “poster child of the Washington (D.C.) insider economy.” He noted that more than 60 percent of the bank’s financing last year benefited just 10 large corporations, including the likes of GE, Ford and Boeing.
“These multi-billion-dollar companies would do just fine without the Ex-Im Bank’s corporate welfare,” Hensarling said in a speech to the conservative Heritage Foundation.
Hensarling faces opposition in his home state, with Texas leading the nation in exports for the last 12 years, accounting for nearly 18 percent of all the goods sold outside the U.S. Overall, 1,337 Texas companies have had their exports backed by the bank in the last seven years, and many business officials fear they’d stop selling overseas without the federal protection.
“It would be very unfortunate if the Ex-Im Bank would cease to exist. Thousands of jobs will be lost,” said Bill Hammond, the CEO of the Texas Association of Business, in Austin. He said Hensarling and other opponents were pursuing “an irrational crusade” but added: “We’re concerned about it, absolutely. I mean, the chair has a lot of power.”
There’s similar opposition in the Senate, where Utah Republican Mike Lee told his colleagues in April that the bank represents “another taxpayer-funded example of distorted public policy” that subsidizes well-connected private companies.
“This kind of public policy privilege, best described as crony capitalism, is a threat to the free market and its moral underpinnings,” Lee said.
While acknowledging that most Americans have never heard of the bank, Hensarling said that would change in coming months, calling the debate over its future “a defining issue for our party and our movement.”
Democrat Patty Murray, Washington state’s senior senator, defended Boeing, saying its production of airplanes creates plenty of other jobs.
“Critics ignore that for every 777X sale backed by the bank, there are parts manufacturers, repair shops and small businesses in places like Everett and Renton that benefit, too,” she said.
Heck said Boeing’s dominance was “a natural consequence” of what the bank funded, following its charge to operate in markets where traditional financing wouldn’t work.
“Who’s going to finance Uganda purchasing a $300 million airplane?” he asked. “Wells Fargo, Bank of America or your local community bank is not going to do it.” Yet the bank boasted of a default rate of less than 1 percent last year, which Heck said “would be the envy of any commercial bank.”
Hensarling said his committee would hold a hearing soon to examine the bank’s operations. In his speech last month, he said the demise of the bank this year would be “one of the few achievable victories” remaining in the current Congress. In April, when the Export-Import Bank asked Congress to extend its charter by five years and increase its lending cap by $20 billion, to $160 billion, Hensarling said the bank wanted to “fail upward by requesting more money.”
Heck said he was worried about what Hensarling would do at the hearing.
“It’s basically an opportunity for him to attempt to eviscerate the bank,” Heck said. “He’s declared war on the Export-Import Bank. At least he’s being upfront and the agenda’s known.”
Murray, who wrangled with Hensarling when the two co-chaired the “supercommittee” of 2011 that tried but failed to find new ways to cut federal spending, accused the Republican Party of “pushing us toward another avoidable crisis.” She likened the effort to last fall’s government shutdown, which she blamed on the GOP.
“Every member of the House and Senate should know that Americans are sick of a minority of members in Congress hurting our economy by governing from crisis to crisis,” Murray said.
While only 93 House members voted to dismantle the bank two years ago, Heck said opponents had gained momentum. He and other backers expect a tougher vote this time around.
“We all predicted this two years ago: that we were only kicking the can down the road to have the real fight now,” Schinfeld said. “So it’s not a surprise.”
Opponents of the bank include Atlanta-based Delta Air Lines, which says the bank is unfairly subsidizing the airline’s foreign competitors.
Many business groups are pushing hard to get the bank’s charter renewed, including the U.S. Chamber of Commerce and the National Association of Manufacturers. In a letter to Hensarling, they warned that failing to reauthorize the bank “would amount to unilateral disarmament in the face of other nations’ aggressive trade finance programs.”
In his speech, Hensarling dismissed the concern, saying, “I’m not interested in engaging in a taxpayer-funded subsidy arms race with the rest of the world.”
At the Pexco plant in Fife, Speer is hoping that Congress keeps the bank alive.
He just hired a new international sales manager. And after traveling to Turkey to meet with officials of the government in Ankara, he’s hoping to seal a deal soon that will be worth at least a quarter of a million dollars each year.
But he said Turkey might be a risky market. A few years back, before Pexco had insurance through the Export-Import Bank, it shipped a container of traffic safety equipment to a Turkish customer who then never paid for it.
“Here’s a market where several years ago we took a bath,” Speer said. “But the Export-Import Bank can help us connect the dots.”