Analysis | Commercial Space Supporter McCarthy Opposes Tool that Supports Commercial Space

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WASHINGTON — House Republicans on June 19 elected Rep. Kevin McCarthy (R-Calif.) as their new majority leader, replacing Rep. Eric Cantor (R-Va.), who was upset in a primary election earlier in June. This should be welcome news for the commercial space industry, as McCarthy has expressed support for the industry in recent years, including sponsoring legislation to “streamline” commercial spaceflight regulations.

That interest is, at least in part, because his district includes the Mojave Air and Space Port, a hotbed of commercial spaceflight activity. On June 21, his Twitter account noted the 10th anniversary of SpaceShipOne’s history making flight from Mojave.

One day later, though, McCarthy expressed his opposition to a financial institution that has supported some commercial space companies in the United States in recent years. In an interview on “Fox News Sunday,” McCarthy said he would vote against reauthorization of Export-Import (Ex-Im) Bank of the United States, which supports financing of exports of products and services created by U.S. companies.

“One of the problems with government is it’s going to take hard-earned money so others do things that the private sector can do. That’s what Ex-Im Bank does,” McCarthy said when host Chris Wallace asked him about the upcoming reauthorization of the bank. “I think Ex-Im Bank is one that government does not have to be involved in. The private sector can do it.” Asked directly by Wallace if he would vote against its reauthorization, McCarthy said, “Yes.”

The Ex-Im Bank has been increasingly used by domestic satellite manufacturers and launch services providers in recent years to provide favorable financing terms for the sale of commercial satellites and launches. For example, in 2012 it backed financing of satellites built by Boeing, Lockheed Martin and Orbital Sciences to customers in Australia and Mexico. Later that year, it financed the sale of satellites built by Boeing and Space Systems/Loral to a Hong Kong-based company; the deal also covered the launch of two of those satellites on a Space Exploration Technologies Corp. Falcon 9 rocket.

Like many other business organizations, the Aerospace Industries Association (AIA) has warned about the potential effects on industry should Congress not reauthorize the bank. “Ex-Im Bank export credit support has helped U.S. companies compete successfully for major foreign sales of U.S. civilian aircraft, launch services and commercial satellites in recent years,” the AIA states in its position paper about the bank on its website. “[T]he Bank helps level the playing field for America’s aerospace manufacturers, who are competing with foreign companies backed by the low interest rates and deep coffers of other nations.”

The head of the AIA, Marion Blakey, appealed to conservatives who oppose reauthorization of Ex-Im by invoking the name of a particular historic figure. “During his presidency, [Ronald] Reagan strongly backed Ex-Im, albeit with necessary reforms,” she wrote in an op-ed published in “Aviation Week” in June. She warned that a failure to reauthorize Ex-Im would “amount to economic unilateral disarmament against 60 other nations whose export credit agencies aggressively support their businesses.” In the space industry, that would primarily be the French export-credit agency, Coface, which has supported a number of space-related deals in the last several years.

That view is echoed by those companies trying to sell spacecraft and launches. “We believe that [Ex-Im Bank reauthorization] is a very important element in making U.S. industry competitive,” said Mike Hamel, president of the Commercial Ventures division within Lockheed Martin Space Systems, in a June 9 interview during Lockheed Martin’s media day in Arlington, Virginia. “In many cases, we find that we have to compete not just with foreign companies but also with foreign governments that are very active in supporting their respective industries.”

The House Financial Services Committee, which counts McCarthy among its members, turned its attention to the Ex-Im Bank during a June 25 hearing provocatively titled: “Examining Reauthorization of the Export-Import Bank: Corporate Necessity or Corporate Welfare?” 

“Ex-Im may not just be guilty of cronyism; it may be guilty of corruption as well,” the committee’s chairman, Rep. Jeb Hensarling (R-Texas), said in his opening statement. “Now I will admit that Republicans may disagree on whether Ex-Im should be reformed or allowed to expire, and I certainly hope this hearing will help illuminate that decision. But we are united in believing we cannot reauthorize the status quo.”

 

Disclosure: Jeff Foust is an analyst at Futron Corp., which has done occasional engineering and related studies for the Ex-Im Bank.