Much like how an import tariff on sugar benefits some domestic beet and cane processors while harming confectioneries, beverage manufacturers, and other sugar‐using producers, an Ex‐Im‐financed transaction benefits the exporter in question, while harming U.S. firms that consuming the export in question — even more so if the foreign customer is a direct competitor.
Using Export‐Import Bank transaction data and input‐output tables from the Bureau of Economic Analysis, the Cato Institute worked to estimate the downstream costs for each of 236 U.S. manufacturing sub‐industries. The “net benefits” of Ex‐Im were then calculated as the aggregated export finance subsidies received by each industry minus the downstream costs imposed on each industry.
The results indicate that, out of $50 billion in Ex‐Im subsidies granted to non‐aircraft U.S. manufacturers between 2007 and 2013, $40 billion shows up downstream, as costs imposed on other businesses.
The average company, in four out of every five manufacturing industries, incurs negative net benefits, meaning it is a “victim” of the Export‐Import Bank. 189 out of 236 manufacturing sub‐industries — as defined by the 6‐digit specification of the North American Industry Classification System (NAICS), which encompasses 21 broad manufacturing industries — incurred costs in excess of benefits, to the tune of an aggregate $2.8 billion per year.
The five broad industries incurring the greatest net ExIm‐related costs are producers of electrical equipment, appliances and components; furniture; food; non‐metallic mineral products; and chemicals.
Manufacturing firms in every U.S. state can also be counted among Ex-Im’s victims. The most important or second most important manufacturing industries in 47 states — in terms of added value to the economy — are among Ex-Im’s ten largest victims. Of those 47 states, Ex‐Im has the most significant negative impact on North Carolina, Delaware, New Jersey, Virginia, Nebraska, West Virginia, and Maryland.
However, not all industries are Ex‐Im victims. 47 out of 236 sub‐industries, across 13 of 21 industry categories can be counted as Ex-Im’s “winners,” realizing $4.2 billion in annual net benefits. Viewed holistically, Ex‐Im policies represent a net annual tax liability of $2.8 billion per year levied against 189 sub‐industries, or $15 million per industry, and a net wealth transfer of $4.2 billion per year to 47 specific sub‐industries. One would be hard‐pressed to find a better example of a policy that “picks winners and losers.”
Policymakers should be wary of claims of Ex-Im’s costless benefits. They should know that the Bank’s policies reward a few companies while hurting many more. Appreciating the hidden costs is essential to any informed judgments about the future of the Export‐Import Bank.