During the 2016 presidential campaign, Democratic candidate Bernie Sanders said the following about the Export-Import Bank of the United States: “We should not be providing corporate welfare to multinational corporations.”
The problem with Sanders’s characterization is that EXIM’s transactions directly support American small businesses. According to EXIM, the bank has supported 1.4 million private-sector American jobs since 2008.
Such mischaracterization is not uncommon when it comes to our country’s trade policy and agreements. The truth is, political rhetoric often does not match economic reality. This can be harmful because policies derived from rhetoric can have a negative impact on American companies and the economy.
EXIM is now open after being shut down for almost a year. This transience has caused some hesitation on the part of importers/exporters and banks to engage EXIM. Lack of confidence in EXIM depresses finance of overseas sales through EXIM’s guarantee programs. Also, board vacancies due to political wrangling prevent EXIM from authorizing deals above $10 million. This has led to lost opportunities for American businesses overseas.
Across the Rochester region and throughout many parts of the U.S., small and midsized manufacturing companies are examining incremental opportunities to grow internationally. Exporting is one path to increase sales and business growth. EXIM and other government agencies facilitate such trade. Restricted access to these agencies and the services they provide makes it more difficult for American manufacturing companies to compete globally.
Cost of doing business
At the writing of this article, the Trans-Pacific Partnership is pressing forward in negotiations without the U.S., NAFTA is being renegotiated amid much uncertainty, and tariffs against China are being weighed by the current administration.
NAFTA is a 1994 free trade agreement that removes tariffs and other quantitative restrictions from trade between the U.S., Canada and Mexico. Today, NAFTA has become a political football. Political debate aside, the outcome of NAFTA renegotiations are of major importance to North American companies.
For American companies dipping their toe in the export business, Canada and Mexico are often starter markets. This is true for many manufacturing businesses in the Rochester region. Therefore, any renegotiated agreement that adversely affects the ability to trade freely among these countries could adversely affect a company’s ability to enter the import-export market.
Also, if the cost of importing goods is made more expensive through a renegotiated trade agreement, the cost of manufacturing goods will increase. The result: diminished profits or increased cost to consumers.
As for the TPP, the goal was to encourage collaboration to foster growth in all participating economies, as well as address China’s growing regional influence. Independent, albeit disputed, studies concluded TPP would increase imports and exports but not create jobs. The U.S. ultimately withdrew due to concerns of job and wage loss for American workers. Despite this legitimate concern, higher tariffs due to adverse trade actions directed at China, or any other TPP country, could result in higher operating costs for Rochester businesses.
The impact of trade agreements
There is no consensus around the impact renegotiated trade agreements will have on American businesses and the economy. Nevertheless, the goal of trade agreements should be to help American businesses compete globally—to the benefit of the American worker. This is the focus of President Trump’s foreign trade agenda. Agencies like the United States Small Business Association, EXIM, Department of Commerce and many others can facilitate this by helping businesses leverage trade opportunities for growth. When businesses grow, workers and stakeholders benefit. The outcome is a stronger economy, stronger communities and more opportunities for people to engage in meaningful work.
Bottom line: business leaders should look past the headlines to find opportunities to grow through trade. EXIM and other U.S agencies can assist.
James Barger is president of KeyBank’s Rochester Market. He may be reached by phone at (585) 238-4121 or email at firstname.lastname@example.org.
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