The U.S. debate that Canada should be having

[unhappycamper]

http://www.macleans.ca/economy/money-economy/the-u-s-debate-canadians-should-be-having-to-scrap-edc-or-not/



Export credit agencies around the world, including Canada’s EDC, are locked in a corporate welfare arms race. Why don’t we talk about that?

The U.S. debate that Canada should be having
Jason Kirby
July 1, 2014

If Americans were shocked when House Majority Leader Eric Cantor lost his seat earlier this month in a Tea Party upset, the debate that’s ensued over whether to scrap the U.S. Export-Import Bank caught corporate America completely off-guard. Ex-Im, as it’s more widely known, is a state-owned agency that provides financing and insurance at below-market rates to assist foreign companies in buying American exports. By the end of September, Congress must vote on whether to re-authorize Ex-Im and renew its lending powers.

But a rift has emerged in the Republican party over Ex-Im’s benefits and evils. While Cantor supported the bank, Kevin McCarthy, the new House Leader, opposes Ex-Im on the grounds that government should get out of the banking business. Many other Republicans agree. Rep. Jeb Hensarling, who chairs the House Financial Services Committee, says Ex-Im is engaged in “crony capitalism” and wants it scrapped. The debate is even drawing defenders for Ex-Im from the ranks of Democrats—not the types to typically favour handouts to big biz. While running for president in 2008, Barack Obama called it “little more than a fund for corporate welfare.” In fact, in the ’80s and ’90s, killing Ex-Im was a “lefty cause célèbre.”

It’s a muddled, deeply partisan showdown, the kind only a dysfunctional Washington can provide. But at least Americans are having the debate. Here in Canada, our own export credit agency, Export Development Canada, is dramatically expanding its lending role into private banking territory and signing financing deals with foreign companies, even when there’s no guarantee a Canadian company will benefit. Yet, aside from the occasional think tank report, there’s no push to rethink EDC’s role in the Canadian economy—even though EDC is far larger than its American counterpart on a relative basis. As I pointed out in a column a couple of months ago, in 2012, Canadians extended the equivalent of $2,534 per capita in export support to businesses through EDC, compared to Ex-Im’s $114 in the U.S.

One thing that should raise red flags is the emergence of financing deals where EDC appears to be piling on loans to foreign businesses, such as India’s Reliance Industries, which have already borrowed many billions of dollars from eager export credit agencies in other countries, including Britain, Japan, Korea and America. Indeed, some in the U.S. argue Ex-Im is needed precisely because export agencies, from Europe to Asia, are doling out so many loans to boost their own country’s exports. It has all the makings of a taxpayer-backed, export credit agency-fuelled trade war. As Stephen Myrow, a former chief of staff at the Ex-Im Bank told Bloomberg, export credits are the “nuclear missiles” of global trade. “You have them because other countries have them, and the thought of unilateral disarmament is not realistic.”