Conservatives attack ExIm Bank again; Embraer v Bombardier

Conservative tax groups are once again attacking the US Export-Import Bank and its funding of US exports, including Boeing aircraft.

ExIm was created during the Great Depression to support US exports. It get attention because Boeing is the most visible beneficiary. The think tanks believe ExIm financing amounts to corporate welfare–a position that is 180 degrees from their usual approach to corporations.

Delta Air Lines is leading corporate attacks because it contends that foreign airlines get preferential financing and put it at a disadvantage.

Delta says that carriers like Emirate Airlines hardly need ExIm support, and it has a point. But less well-capitalized airlines like LionAir certainly could use it. Some further reform may be needed; international rules to bring ExIm fees and interest rates to market rates were already adopted. Tightening eligibility may be fair.

Delta had this to say in an Op-Ed piece in Forbes. You have to click past the advertising page to read it.

But eliminating ExIm? We disagree, as we have written on several occasions. The think tanks would hand this market support over to Airbus, which benefits from the European Credit Agencies export financing and this wouldn’t go away. This would put Boeing and its supply chain at a disadvantage to Airbus in international sales.

Embraer vs Bombardier: Here’s an interesting article explaining how Embraer sees the market a bit differently than Bombardier.

23 Comments on “Conservatives attack ExIm Bank again; Embraer v Bombardier

  1. I thought that Delta had a ‘special’ deal with Boeing wrt plane pricing.

    An interesting twist will be if US-built Airbus can benefit from US Export-Import Bank financing. That would be interesting 🙂

    • That would IMO be crazy – unless “US-built” actually means 50%+ U.S. content by value (excluding engines, since Exim should be able to support their export directly). Of course, to my mind, the same question could be raised about Boeing programs – especially the 787.

      • Assembled in the US should suffice for that, shouldn’t it?
        ( but I expect Airbus to get much more scrutiny than Boeing for content distribution.)

      • If the point of these programs is to encourage transactions that have a positive impact on balance of trade, then it seems to me that supporting sale of items that are more not-US, than US value is counter productive.

      • Why?
        Even if the added value is only 10..20% it makes sense.
        This is not an either or thing but one of synergies.

      • The value question is easy – it’s just accounting. Where do you ascribe the value of the product of labor? at the supplier or during assembly?

        i.e. do the seperate parts of an a/c have value before it becomes an entire aircraft? A wing might serve as a novelty rooftop – but it would be worth a fraction compared to when it is attached to make a complete aircraft…

  2. Delta could just order Airbuses and have them financed by the EU equivalents. Problem solved. 🙂 The EU states will never close down their export-credit agencies, since they are structurally far more in need of them than the US (more manufacturing and exports to finance). That ExIm is so heavily reliant on Boeing tells us more about the state of US manufacturing than anything else, I guess.

    • Subsidised agricultural produce, airliners and weapons are about the only things produced in the US that show worthwhile foreign demand.

    • As admitted by Delta in their letter, this is what they are doing for the RJ from Embraer and Canada. and of course this is not a problem …:)

  3. That’s a little harsh I think. Heavy machinery (eg. Caterpillar), Electronic systems/computer technology (eg. Apple/Windows), Drugs and Bio technology (eg. Pharma, Medtronics) are other major areas of US export strengths.

    The world is neither US, Chinese or Euro centric. It is all inter connected nowadays…

    • I think those Apple products are manufactured in (and exported from) somewhere on the other side of the Pacific.

  4. How much of Caterpillar’s equipment that is used in e.g. the EU is actually from the US? How much of Apple’s stuff is? Agree on medtronics, but I doubt it’s a similar volume to Boeing, and most of it will go to public clients who don’t need ExIm finance is my guess.

    • Having worked 25 years for Caterpillar in Europe, I can assure you that many of Caterpillar machines sold in Europe are made ​​in the USA. Indeed CAT has factories all over the world, but the Large Machines are exclusively made ​​in the USA, specifically in CAT plants in Peoria, Illinois. The Large Machines are not by definition the most number of units sold, but in terms of turnover it is a lot of money.
      In the 90s, CAT was the second user of the ExIm Bank, behind Boeing …
      CAT had its own lobbying office in Washington, there were there fifty employees whose main activity was oriented to the ExIm Bank and the World Bank.

      • Thanks! Just actually went to check the numbers. So about 90bn USD of direct support for Boeing (in WA and IL) out of about 1.55trn in total support 2007-13. Not that much after all out of the total pie for Boeing. [Scurries back to studying more about US manufacturing 🙂 ]

  5. In principle the EU and the US are adopting new, more stringent, rules on aircraft financing, drafted through the OECD. This is in the context of a much greater call on government financing since the 2008 credit crunch; that Japan and Canada are outside the current arrangement but are developing new airplanes; and the fact that the original understanding was informal and vague. However, both sides are claiming grandfather arrangements and it looks like it will be years before the new regime kicks in, if at all. Russia and China had observer status at the talks. So it is a question of who, when, how and how much.

    http://www.flightglobal.com/news/articles/focus-the-export-credit-debate-explained-352173/

  6. Uwe :
    Subsidised agricultural produce, airliners and weapons are about the only things produced in the US that show worthwhile foreign demand.

    Other than that vast majority of the world’s software?

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