What happens when politics stands as the sand in the gears of cross-border transactions? Inaction — and very, very small deal sizes. And perhaps even the hobbling of trade finance itself.
It has been a year, noted The New York Times Tuesday (June 28) since the Export-Import Bank has been allowed to approve deals that cross above the $10 million threshold, in the wake of the Congressional decision to revoke the government agency’s charter. That meant limitations on all sorts of deals of size, especially for bulk or expensive manufactured goods – you know, like electrical equipment or airplanes.
Now this is gridlock on a grand scale: Picture 30 transactions, as tallied by The Times, worth at least $20 billion, in what might be termed cross-border limbo, so much so, that U.S. firms must look for “assistance from their buyers,” chiefly through devout wish that Alabama Sen. Richard Shelby, a Republican, will lift his objections and let the agency function fully as it had been intended upon creation during the New Deal decades upon decades ago.
That wish is only a wish, built on gossamer strings of hope that bipartisanship may again come back to the halls of Congress – and may operate in a manner similar to that seen in December when the agency was brought back to life. In the meantime, GE and other manufacturing giants are in the midst of bringing operations and perhaps as important, people, to other nations. To wit: GE is moving some of its staff – as many as 1,000 people – to the Czech Republic, moving work away from the States.
The Times noted that Shelby, who holds sway and power as the Senate Banking Committee, has kept the full nomination process of the bank’s board in check, and so there is a hobbled presence operation in place – there needs to be three votes via quorum to approve transactions above $10 million, and that quorum is simply not in place. Similarly, just a few weeks ago, the firm said it would bring gas turbine manufacturing ops to France, in lieu of South Carolina, and in return would get export financing from France, for sales that would in turn be made into Brazil and Mexico, among other nations. Boeing, in turn, will work with Britain in an effort to finance airplane deals, and the customers in those deals must agree to Rolls Royce engines.
For the biggest deals, such as multibillion-dollar deal that would allow Westinghouse to build half a dozen nuclear actions in India, an Ex-Im bank, as it is known, would be essential. Smaller deals would need the backstop of an export credit agency, and in some of these cases, U.S. companies are finding that in return for the backing of foreign entities, they need to create jobs in those countries.
Shelby himself has said via statement, as reported by The Times, that “nearly 99 percent of all American exports are financed without the Ex-Im Bank, which demonstrates that the bank is more about corporate welfare than advancing our economy.”