Rare News Desk
Gina Rinehart, Australia’s richest woman, must have been bursting at the seams with joy during the recent holiday season. The U.S. taxpayer gave Rinehart quite the Christmas present, you see.
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The Export-Import Bank of the United States (Ex-Im Bank) recently announced that Rinehart’s company, Roy Hill, an Australian based iron ore mining company, will receive $694 million worth of financing so that it can purchase mining and rail equipment.
This is superb news for Roy Hill, but it is turning out to be quite the opposite for American-based competitors and taxpayers.
The transaction has left U.S.-based mining companies mystified as to how a federal agency levering taxpayer resources could give such a huge financial advantage to its foreign competitors. The financial package, which is backed by the full faith and credit of the U.S. taxpayers, is at a discounted rate in comparison to those packages available in the private marketplace.
Because of rules enumerated in Ex-Im’s charter, the Bank has traditionally only given the loans and/or financial guarantees to foreign companies purchasing American goods. This means that domestic companies wishing to buy an American product often face an inherent competitive disadvantage.
In this specific case, the unlucky industry happens to be the American iron ore exporters. According to a letter from U.S. Senators Amy Klobuchar (D-Minn.), Al Franken (D-Minn.), Carl Levin (D0Mich.) and Debbie Stabenow (D-Mich.) “it is estimated that, over the life of the financing, Roy Hill’s output would displace nearly $600 million of U.S. iron ore exports and would cause a reduction of approximately $1.2 billion in U.S. domestic sales, for a total loss to the U.S. iron ore industry of $1.8 billion.”
These numbers incontrovertibly show that the Export-Import Bank and in turn the federal government is undermining an entire American industry.
Ex-Im’s staunchest supporters argue that this lost revenue will be offset by gains from Caterpillar, who will be selling their equipment to Roy Hill. These supporters are extremely presumptuous in that they assume that the government will be able to accurately predict the sweeping economic consequences of this massive loan.
The reality is that the government doesn’t hold a crystal ball and history shows its economic projections are wrong more often than correct. These loans represent a massive government intrusion into the free market, whereby bureaucrats are put in charge of picking winners and losers.
These deals that force the government to take a side, such as Roy Hill, are exactly what Ex-Im is supposed to be avoiding. In fact, the Bank’s charter explicitly contains provisions barring it from funding the competitors of American businesses.
The charter states that “[t]he Bank may not extend any direct credit or financial guarantee for establishing or expanding production of any commodity for export by any country if the Bank determines that the resulting production capacity is expected to compete with U.S. production of the same, similar or competing commodity.”
The language could not be clearer, which is why the Bank has a legal and moral obligation to definitively terminate the Roy Hill deal. Going further, the Bank is supposed to take into account the economic impact its actions will have on domestic employers, yet it has time and again refused to seriously implement this critically important step. Roy Hill is just another example, of which, there are many.
Sadly, the Roy Hill giveaway is neither the first Ex-Im transaction that has inflicted irrevocable damage onto American companies, nor will it be the last. For years, the Ex-Im Bank has been enriching foreign companies and in the process hurting American employers.
Take for instance a recent $55.6 million loan that sent aircraft and agricultural machinery to farmers in China. This loan was granted despite the fact that American farmers’ exports will surely be displaced in part by the Chinese farmers’ newfound agricultural capacity.
The most widely reported story has been Ex-Im’s financing of foreign airlines, which cumulatively receive billions of dollars each year to purchase Boeing airplanes. Americans for Tax Reform noted that “this type of activity has cost domestic airlines as much as 7,500 jobs and $684 million.”
And these are only a few of the many instances of Ex-Im’s misguided and economically disastrous actions.
At this critical economic juncture, our government should be striving to help American companies, not hurt them using American tax dollars. The Ex-Im Bank should not be giving away competitive advantages to foreign companies, especially at the expense of American jobs and growth.
Simply stated, Congress should revoke the Bank’s charter and allow the marketplace to determine which deals stand up to scrutiny and deserve financing, otherwise it will continue to jeopardize the health of our economy costing our nation jobs and risking millions in taxpayer dollars when we can least afford it.
David Williams is the president of the Taxpayers Protection Alliance.
