Knowing that the Export-Import Bank (Ex-Im) will reach its $100 billion lending cap in the near future has sent defenders of the corporate welfare institution into a tizzy. Yet, despite worries that trade and perhaps even capitalism will grind to a complete halt, trade has continued to flourish. The Washington Post reports that “American exports to China have increased by 468 percent since 2001, when the country joined the World Trade Organization, and are up by nearly 50 percent since 2008.”
Surely, these amazing numbers are the product of our government’s “lender of last resort” and the taxpayer backed dollars we loan to businesses that were unable to get private funding?
Sadly, for those who are pushing reauthorization, no.
China imported more soybeans from the U.S. because people’s living standard has improved and they need more nutritious food,” said Zheng Fengtian, a professor of agriculture and rural development at Beijing’s Renmin University. Importing soybeans “satisfies people’s needs for meat, eggs and milk,” he said.
The effects of China’s newfound wealth and tastes are showing up elsewhere in the food business, to the benefit of American exporters. For the first three quarters of 2011, the Agriculture Department saw increases in exports to China in four categories: snack foods, pork, dairy products, and beer and wine.
“You’re seeing the impact of the economic growth in China that has brought much of the population into that middle-income consuming status,” said Scott Sindelar, Agriculture Department consul at the U.S. Embassy in Beijing. “It’s the growing population of middle-income consumers who are changing their food preferences and moving more and more to a meat diet.”
Total U.S. exports in 2011 came to $2.1 trillion. During the same year, Ex-Im approved $32.7 billion in loans. Though these are both HUGE numbers, when you do the math, Ex-Im rates just over one and a half percent of those exports and its impact is negligible. What is making an impact, however, are free markets – simply people with more money with the ability to buy more new things. The markets could always be freer of course, but it’s hard to see how a government entity here is responsible for more consumers in another country.
NTU sent an open letter to Congress last week urging legislators not to reauthorize more wasteful spending on Ex-Im. And for more, excellent, information, I urge you to read Cato’s Sallie James on the Ex-Im Bank here.