"But, Mommmm...Other Kids Are Doing It!"
Economist Veronique de Rugy dispenses with that particular argument for saving Ex-Im and its welfare (um, they prefer the term "subsidies") to mega businesses like Boeing, writing at NRO:
There appears to be one last argument standing. Some Bank supporters still claim that the US must continue subsidizing a few choice exporters because other countries do it, too. Why should the US adopt free market policies when France and China and Germany continue to engage in self-destructive mercantilism, they ask. They conclude that the US must jump off the bridge of protectionism just like the other kids....There are three important points here:
1. it is in every country's self-interest to engage in free trade by ending export subsidies even if other countries don't do the same,
2. the incentives are such that countries tend to adopt policies that are not in their best interest, and
3. countries tend to only agree to reduce their export subsidies it if other countries do it as well.The result of this self-defeating protectionism is tragic. It would be like an unhealthy person only agreeing to watch his cholesterol if everyone else did it, too. In the meantime, that person gets sicker and sicker. But it doesn't make it okay. In fact, this is an argument for ending the Bank right now since its existence exacerbates lawmakers' tendencies to do the wrong thing; the Ex-Im Bank is the bad incentive.
She also links to this Keith Hennessy piece.
Not saying they are going about it the right way, but this isn't simply an issue of propping up a cheese doodle manufacturer.
Last I checked our entire military airlift capability is pretty dependent on Boeing planes for which we have long term purchase options and maintenance contracts.
Do you really want to put them out of business, and buy Russian jets instead?
It will be a lot more expensive to the tax payer than making sure Boeing stays in business.
Isab at July 4, 2014 5:44 AM
Boeing uses ex-im loans for 18% of their funding, and they're enjoying an increase in demand lately. They'll probably survive w/o those loans, and could probably finance it themselves.
Airlines like Delta and Hawaiian lose out when Arab Emirates and India Air use these cheap loans to buy more Boeing planes which flood the market.
Jason S. at July 4, 2014 7:25 AM
Boeing uses ex-im loans for 18% of their funding, and they're enjoying an increase in demand lately. They'll probably survive w/o those loans, and could probably finance it themselves.
Airlines like Delta and Hawaiian lose out when Arab Emirates and India Air use these cheap loans to buy more Boeing planes which flood the market.
Posted by: Jason S. at July 4, 2014 7:25
In the world of defense procurement "probably survive" is not sufficient reassurance.
Airline routes are heavily regulated already. Delta and Hawaiian are not going to be allowed to compete directly with either India Air or Arab Emirates.
And if the Boeing planes were not subsidized, both airlines would be most likely buying from Airbus which are subsidized.
Isab at July 4, 2014 12:57 PM
Emirates isn't buying anything from Boeing right now. They've pretty much been the patron saint of the Airbus A380, accounting for nearly half of all orders.
I'm in favor of eliminating the Ex-Im bank too, but I think de Rugy is a bit too quick to dismiss the concern about subsidized competition. History shows that, at least in the short to medium term, protectionism often works. It may eventually break down, but by then the non-subsidized competitors are usually out of business.
Cousin Dave at July 4, 2014 1:36 PM
Do you really want to put them out of business, and buy Russian jets instead?
Then Boeing should bid the actual cost + adequate profit, instead of lowballing it and hoping to make it up with subsidies. It might actually encourage competition.
I R A Darth Aggie at July 4, 2014 4:28 PM
Then Boeing should bid the actual cost + adequate profit, instead of lowballing it and hoping to make it up with subsidies. It might actually encourage competition.
Posted by: I R A Darth Aggie at July 4, 2014 4:28 PM
You might see having a Chinese or Russian company design and build classified missile guidance systems and sophisticated computerized navigation systems for US warplanes as a desirable thing.
I do not.
This is why contracts involving classified technology like this are usually sole source, and not bid competitively.
Isab at July 4, 2014 7:06 PM
Emirates isn't buying anything from Boeing right now. They've pretty much been the patron saint of the Airbus A380, accounting for nearly half of all orders.
According to this article, Emirates made a record making buy of Boeing planes last Novemeber:
And they did buy from Airbus, too.
Jason S. at July 7, 2014 11:44 AM
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