News Column

Ix-Im Bank: Small business lifeline or corporate welfare?

August 15, 2014

By Chris Hubbuch, La Crosse Tribune, Wis.

Aug. 15--SPARTA, Wis. -- These days, MacDonald and Owen ships kiln-dried and finished hardwoods to customers around the globe. But for years, foreign markets were too daunting for the small Sparta-based company.

"It's hard enough to know how you're going to get paid down the street, much less overseas," said owner David Twite. "Even in Canada it can be difficult. If you have a problem, you have to navigate a whole maze of legalities."

Several years ago Twite acquired a Pennsylvania company that had an international presence.

"We had to jump into the deep end of the pool," he said.

He turned to the Export-Import Bank, a little known but recently controversial government agency that supports U.S. exports through loans to foreign buyers, loan guarantees and insurance against deals gone bad.

Since 2009, Ex-Im has supported an estimated $4 billion worth of exports from Wisconsin, according to bank records.

According to bank records, dozens of area companies such as S&S Cycle, Inland Label and the bow manufacturer Mathews Inc. have benefited from Ex-Im programs. Some are customers of the bank; others sell to customers who use Ex-Im financing.

Larger companies like Trane and Chart have supplied products worth millions of dollars to other corporations, including Halliburton, for export deals supported by the bank.

With its Congressional authorization set to expire, the export credit agency has come under fire from some on the right.

Next week, U.S. Rep. Ron Kind, D-La Crosse, will host Ex-Im president Fred Hochberg in an effort to make the case for the bank and its role in supporting U.S. export markets.

"We are producing a lot of goods here in the La Crosse greater area that are being exported," Kind said. "I think there's a lot of misunderstanding of what Export-Import does for our economy."

Established in 1934, the Ex-Im, as it's known, is an independent agency that finances exports by U.S. companies primarily through loans to foreign buyers, loan guarantees and insurance against deals gone bad.

Though authorized by Congress, the bank has been self-sustaining since 2008. Last year it paid over $1 billion into the Treasury. Still, taxpayers are on the hook should things go south.

Supporters say it's a necessary resource to help companies reach markets where private sector financing might not be available. Opponents say that it usurps a private sector function and distorts markets.

While Kind, a Democrat, says he is sympathetic to those critiques, he feels the bank is necessary to keep the U.S. competitive with foreign nations that subsidize their own exports.

"I don't want us unilaterally disarming," he said.

Tony Kurtz, Kind's Republican opponent in the November election, said he would vote against reauthorization of the bank in its current form though he would support it if the mission "were narrowed and focused exclusively on small business transactions"

The majority -- about 80 percent -- of the funds in Ex-Im's loan portfolio benefit large corporations, though small businesses make up 90 percent of the bank's customer base.

But for many of them, it's the only way they can afford to access foreign markets.

When Mid-City Steel had a $25 million deal to manufacture a patented aluminum cladding for four towers in Riyadh, Saudi Arabia, Ex-Im bank guaranteed a loan to cover the project expenses.

The project fell apart for unrelated reasons, but Mid-City president Kurt Bear said Ex-Im was critical in helping enter a new market.

"It was our first rodeo," Bear said. "There's no way we could have done it without them."

With help from Ex-Im, which insures his export contracts, Twite has exported some $4.5 million worth of hardwood and now trades with partners in more than 15 nations, including China and Vietnam.

That foreign trade has taken up the slack in domestic markets, now accounting for about a fifth of his business. Last year MacDonald & Owen was named one of Inc. magazine's 5,000 fastest-growing companies.

Because of the high cost of private insurance, he wouldn't be in the export business without Ex-Im, Twite said. "This allows you to go out and do things you wouldn't do."


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Source: La Crosse Tribune (WI)

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