Editorial | The Price of Ideology
Congress’ Ex-Im Shutdown is Already Costing U.S. Companies
It’s not unusual for Congress to break for August recess with unfinished business on its plate, but allowing the U.S. Export-Import Bank to wither on the vine is something else altogether.
First, lawmakers deliberately allowed the Ex-Im’s authorization to expire July 1, making it impossible for the bank to enter into new financing arrangements. Then, they left Washington with no action on the matter, guaranteeing that the bank will remain dormant — it can only fulfill pre-existing agreements — at least until their return Sept. 8, but more likely well into October.
The situation reflects longstanding opposition among free-market conservatives to the bank, which provides backing to overseas buyers of U.S. goods and services. Like its counterparts in France, Russia and elsewhere, the Ex-Im Bank has been very active in the commercial space industry in recent years.
It should be of no surprise to anyone, therefore, that the space industry is beginning to pay the price for the bank’s authorization lapse.
The most clear-cut example is Boeing Space and Intelligence Systems’ contract to provide an all-electric satellite to repeat customer ABS. That deal, valued at well over $100 million but contingent on Ex-Im backing, has been suspended as the companies seek alternative financing arrangements while hoping that common sense prevails when lawmakers return to work.
Given Congress’ behavior in recent years, that’s an iffy proposition.
As was the case with the government shutdown two years ago, the blame lies primarily with doctrinaire conservatives in the House, for whom Ex-Im is anathema to free-market principles. The Senate, despite some opposition, attached an Ex-Im reauthorization measure to a highway funding bill that passed on the floor in late July. But the House, where political ideology all too often trumps pragmatism, did not take up its version of the bill before departing, opting instead to pass a three-month highway bill that expires Oct. 29 and does not contain the Ex-Im provision.
Bank opponents have either ignored or played down Boeing’s potential loss of the ABS contract, with some offering platitudes about taking a stand against “crony capitalism.” But there can be little doubt their principled stand is having a real-world and decidedly negative impact, and it goes beyond the ABS satellite contract and its associated revenue and jobs.
Daniel Friedmann, chief executive of Canada’s MDA Corp., which owns U.S. communications satellite manufacturer Space Systems/Loral, believes the Ex-Im closure is a contributing factor in what has been a disappointing year so far in commercial satellite orders.
There’s also the plan to build nearly 900 low-orbiting satellites in the United States for the OneWeb venture. Although it is not clear whether or how that arrangement will be affected by the shutdown — the prime contractor is a European company — export credit agency financing has long been envisioned for the project.
It’s not just satellite manufacturers that could pay the price of an extended shutdown. SpaceX, which for all intents and purposes is the only U.S. launch services provider active in the international commercial market, has signed a number of contracts backed by Ex-Im loans or guarantees.
Boeing, whose aircraft business traditionally has been the biggest beneficiary of Ex-Im financing, is threatening to move some of its operations offshore if the bank is not reauthorized. Whether or not Boeing is bluffing remains to be seen, but the fact that the company is rattling that saber is significant in and of itself.
The Ex-Im shutdown, of course, is unquestionably real, as are its impacts just two months in. If those holding senior positions in the House are interested in demonstrating responsible, common-sense leadership, they now have a surefire way doing so: Get an Ex-Im reauthorization measure into their version of the highway bill — by any means possible.