Oh Look, the Ex-Im Bank Is Going to Extend Loans to Airbus

One of the arguments about the need for export subsidies provided by the Export-Import Bank to its No. 1 beneficiary, Boeing, is that it levels the playing field for the company in its competition with its biggest competitor — Airbus. Which is why I was at first confused by this Wall Street Journalarticle:

Airbus Group SE will open itself up to financing from an unlikely source when the first jet is delivered Monday from its new factory in Alabama: the U.S. Export-Import Bank.

The government-owned bank’s guarantees have helped finance hundreds of Boeing Co. jets over the years. Airbus has used similar European agencies to help its sales, but now building aircraft in the U.S. will allow some of the European plane maker’s customers to tap Ex-Im for the first time.

The first aircraft delivered from the new Airbus plant in Mobile are destined for JetBlue Airways Corp. and American Airlines Group Inc., which like other U.S. carriers are barred from receiving European export-credit support because of global trade rules.

But Airbus hasn’t ruled out using the factory to build planes for export, and those sales would be eligible for U.S. help.

So, Ex-Im is going to extend export subsidies to Boeing’s greatest competitor? I guess — leaving aside the fact that Ex-Im is a crony program that shouldn’t exist — that’s one way to level the playing field. As you may remember, many of us are calling Ex-Im “The Boeing Bank” to highlight the agency’s oversized affection for our country’s No. 1 exporter. I am pretty sure that the lobbyists at Boeing (and many of the lawmakers who fought tooth and nail to get the program reauthorized back in the fall) didn’t have this outcome in mind. As the Journal notes, “Boeing has led a lobbying battle to keep Ex-Im open, claiming it is at a competitive disadvantage to Airbus without access to comparable U.S. financing.”

Now, let me ask: Why should taxpayers back loans to Airbus — which is obviously rich enough to invest $600 million in a new factory in the U.S. after it opened another facility in China back in 2008? This is also a company with a market cap of $52 billion as of this month.

Well, I know the answer to this one: Because the Ex-Im Bank, when allowed to function at its fullest, is in “the big business” business. On the domestic side, 64 percent of Ex-Im financing benefits ten large corporations and, depending on the year, 30 to 40 percent benefits Boeing. Boeing’s market cap is $130 billion. Think about that. There is an agency whose entire reason for being appears to be to promote the specific welfare of a handful of very large corporations. On the foreign-buyer side, the top beneficiaries include a majority of state-owned companies such as Pemex, the Mexican oil-and-gas giant and Air Emirates, the airline of the wealthy United Arab Emirates.

Taxpayers have been backing loans for foreign companies for years even when these subsidized companies are unfairly competing with domestic companies. It was only a matter of time before Ex-Im started extending loans to Airbus when it comes to competing with Boeing in its own backyard. I guess I will file this one in the “what comes around, goes around” category.

A few things are worth noting:

First, as of now, and thanks to Senator Richard Shelby (R., Ala.), neither Boeing nor Airbus’s customers will be able to have access to U.S. taxpayer-backed loans since the bank is still unable to approve deals over $10 million. Note that for the most part, most of Boeing and GE’s propaganda about not being able to export without Ex-Im has ended.

Second, France and Germany recently joined Britain in suspending export subsidies for Airbus after a corruption probe found serious anomalies over the declaration of overseas agents. That’s not the only investigation that Airbus is facing. According to Reuters:

Europe’s largest aerospace group says it is co-operating with four existing criminal probes into suspected irregularities in defense or security markets, including a British investigation into a $3.3 billion communications deal with Saudi Arabia and a German probe into the sale of fighter jets to Austria.

There is a lot of fraud with Ex-Im in the U.S. too — so it is not surprising that the European agencies would suffer from it. Serious question: Why would U.S. lawmakers want to subject U.S. taxpayers to this additional source of fraud?

More importantly, if Airbus isn’t getting subsidies, then pro-crony Ex-Im lawmakers should relax about the “unlevel” playing field. As Reuters notes:

Unusually, it leaves the world’s two largest planemakers, Airbus and Boeing, both facing paralysis over government export financing as Congressional delays leave U.S. Export Import bank unable to support Airbus’s U.S. rival.

Now, no one is getting export subsidies and we should keep it this way.