Ex-Im and the U.S. Aerospace Sector: Myths Debunked
Reports from Capitol Hill suggest a resolution of the debate over reauthorization of the U.S. Export-Import Bank (Ex-Im) may be at hand. The U.S. Chamber and its broad membership — including companies both large and small — are continuing to work hard to make the case for Congress to reauthorize Ex-Im, as underscored in an ad in Roll Call on Tuesday.
Some of Ex-Im’s critics have focused on the U.S. aerospace sector. More than any other industry, U.S. aerospace firms have relied on Ex-Im to help them compete with foreign rivals, which often enjoy strong backing from their own national export credit agencies. The aerospace sector is America’s leading exporter, so this is hardly surprising.
But it’s worth taking a moment to review some of the facts:
- Aerospace is a vital part of American manufacturing. According to the Aerospace Industries Association, the aerospace industry directly employs 620,000 Americans. The Federal Aviation Administration further calculates that there are a total of 10 million high-quality American jobs across the civil aviation sector, which last year generated about $400 billion in earnings and contributed $1.3 trillion to U.S. GDP.
- Boeing is a case in point. More than 80% of Boeing’s planes are manufactured for export, but the firm employs 161,000 Americans — 94% of its total workforce — and supports an additional 1.3 million U.S. jobs across its nationwide network of 18,500 small and medium-sized suppliers.
- Over the next 20 years, global demand is estimated to reach a total of 34,000 new planes with a value of $4 trillion. This has the potential to generate one million new U.S. jobs in the aerospace sector and three million related service-sector jobs.
However, when other countries are providing their own exporters with an estimated $1 trillion in export finance — often on terms more generous than Ex-Im can provide — American exporters can’t always compete on their own. The EU, Canada, Brazil, and China are all growing their aerospace sectors, and their export credit agencies are playing a central role in their strategies.
Some have charged that Ex-Im gives a cost advantage to foreign carriers over their U.S. competitors. However, an international agreement called the Aircraft Sector Understanding was reached in 2011 by the U.S., EU, Canada, Brazil and Japan, and it nearly doubled the fees creditworthy airlines will have to pay for export financing.
The result is a level financial playing field. Foreign carriers that purchase aircraft using Ex-Im will have no cost advantage over U.S. airlines using commercial banks. In fact, for investment grade airlines purchasing wide-body aircraft, Ex-Im financing will be on average $2 million more expensive than commercial financing per aircraft.
Members of Congress who care about America’s national security recognize the need to maintain a strong defense industrial base. But without exports, America’s aerospace sector will face decline. And without Ex-Im, many export opportunities will slip away.
But we think the story has a happy ending. The Chamber is pleased that members of Congress on both sides of the aisle are hard at work today seeking a way forward for Ex-Im’s reauthorization. It won’t come a minute too soon.