PHILADELPHIA (CBS) — Markets are still reeling and trading partners are threatening retaliation in response to tariffs that President Donald Trump has imposed on aluminum and steel imports as a way to address a half a trillion dollar trade deficit.
But there’s another way to improve the trade balance: Increasing exports.
For that, the U.S. created the Export-Import (EXIM bank) to compete with the 96 other countries that support exports with insurance and loan guarantees.
However, that option has been hamstrung, single-handedly, by Pennsylvania’s Republican U.S. Senator Pat Toomey.
Toomey has put a hold on Senate approval of President Trump’s nominees to EXIM’s board, preventing the Board from having a quorum, which is needed to approve transactions over $10 million. He is not budging, despite the fact that bank officials say the action could adversely impact more than 200 Pennsylvania businesses, employing thousands of Pennsylvania residents.
“With those transactions that we’re unable to approve, it means that jobs are not being supported here, domestically, and in many cases these jobs are going overseas because whatever we make here in the United States is also made somewhere else in the world,” says the bank’s acting first vice-president Scott Schloegel.
Toomey’s office declined numerous requests for an interview with the Senator but his spokesman sent an email with a link to a video, in which Toomey explains his opposition.
He calls the bank “corporate welfare,” that “picks winners and losers.” He also claims the bank will cost taxpayers $2 billion over the next ten years.
Schloegel rejects Toomey’s calculation and notes the bank has actually contributed more than $2 billion to the Treasury since 2009, paying for itself as exporters repay loans or pay insurance premiums. (He says the default rate is one-third of a percent.)
And Bassett’s ice cream president Michael Strange says he is proof the bank helps more than large corporations.
“We truly are a small, family-owned business and without EXIM bank, in all honesty, I don’t know that we’d be enjoying the success we’re having with our export sales,” says Strange, great-great-grandson of the company’s founder Louis Bassett.
Strange began exporting ice cream to China nearly ten years ago, thanks to insurance purchased from the bank. His Chinese customer, under normal trade terms, did not have to pay until he took delivery. Strange says he was reluctant to extend the customer credit since the container would be on the ocean for 45 days en route but the bank agreed to insure the credit.
“If we didn’t have the comfort of that insurance, for the dollar amounts that we’re shipping, I would not have extended that credit which I suspect would have prevented me from making the kinds of sales that we’re making,” he says.
“The good news for the U.S. government and the taxpayers is they’ve collected thousands of dollars in insurance premiums from me without us filing a claim,” he adds. “The good news for me is, I’m generating sales I would not otherwise have had if I did not have that export credit insurance in place.”
Of all of Toomey’s objections to the bank, the one that wrankles Schloegel the most is the charge that it picks winners and losers.
“The ones who are obstructing the bank from getting back to full functionality are the ones who are picking losers,” he says, “and they’re picking losers right there in Pennsylvania. And when they’re picking losers in the home state of Pennsylvania, the winners are Russia and China.”
Schloegel gave several examples of places where Toomey’s constituents could lose jobs, due to the hold on nominees.
Mack Truck, which assembles its vehicles in Macungie, could lose foreign sales to Volvo, he said; GE locomotives could lose out to CRRC in China.
“We’ve got applications from Westinghouse for nuclear (products),” said Schloegel. “They lose out on those sales and where do those sales go? Those sales go to China and Russia. Now you’re into a national security issue.”
Leonardo Helicopter employs 500 people in Northeast Philadelphia and credits the bank with aiding $100 million in sales. CFO Chris Slack says the inability of the bank to approve large transactions has impacted the company.
“It’s been more difficult or added inefficiency into our process,” he says. “From our perspective it’s important the bank get the quorum resolved so they can start processing larger transactions.”
Toomey’s position puts him at odds with many fellow Republicans, as he acknowledged during Banking Committee hearings on the EXIM board nominees.
“I know that I’m in the minority in the United States Senate with these views,” he said, “however, I do share interesting company. President Obama once said, and I quote, ‘the Ex-Im bank is little more than a fund for corporate welfare.’ Bernie Sanders, with whom I occasionally disagree, has opposed the reauthorization.”
Toomey’s view, though, is also aligned with libertarian conservatives, such as the politically active businessmen Peter Thiel and Charles and David Koch and the groups they fund such as Freedom Works, Americans for Prosperity, Heritage Action, and the Club for Growth, which Toomey once led and which is the largest contributor to his campaign fund.
“The opposition that he has, I think, is purely philosophical,” says Schloegel. “He doesn’t believe EXIM should be in the business of financing U.S. exports.”
But, says Schloegel, that’s a minority view.
“Each of those four Board member nominees who reached the Senate floor came out of the Senate Banking Committee with near unanimous support,” he says. “When we did our re-authorization a couple of years ago, more than two-thirds of the House and Senate supported EXIM. So this is a very vocal minority that is blocking billions of dollars of financing of exports, which translates into 240,000 jobs in the United States.”