The Corner

Economy & Business

The Ex-Im Bank, Iran, and Boeing

In response to Rfk Jr. (Again)

As Andrew McCarthy noted this morning, Iran could soon be buying planes from Boeing. The New York Times reports:

Iran has reached an agreement with the Boeing Company for the acquisition of new passenger planes to help modernize its outdated fleet, state-run Iranian news media reported on Tuesday.

Such an agreement, if completed, would potentially be worth many billions of dollars to Boeing and amount to the most prominent commercial transaction between an American company and Iran since sanctions linked to Iran’s nuclear program were lifted six months ago….

Boeing’s most important foreign competitor, Airbus, announced a deal worth roughly $27 billion in January to sell Iran 118 aircraft. There has been speculation that Boeing has been negotiating a similar transaction involving roughly 100 planes. …

As the article notes, the sale is far from a done deal. (General Electric is also looking into business opportunities in Iran.) But considering the size of the Iranian market, it may make sense from a business perspective. However, it has some worried that these Iranian purchases would end up being subsidized by the United States through the Ex-Im Bank.

Financial Services Committee chairman Jeb Hensarling (R., Texas) put out the following statement in response to the news:

This announcement is a perfect example of why taxpayers should not be forced to back the Export-Import Bank. Even as Boeing was lobbying last year for more Export-Import Bank subsidies, it was also pushing the Obama Administration for a carve-out to sell more planes to Iran. Sadly, the administration was eager to help on both fronts, and Tehran could not be happier. For the sake of our national security, we should ensure that U.S. taxpayer dollars are in no way used to subsidize aircraft for the Iranians. As for non-U.S. institutions that may be tempted to finance the ayatollahs’ Boeing wish list, they should ask whether it is in their long-term interests to profit from doing business with the world’s foremost state sponsor of terrorism. It’s not American jobs that are on the line, but potentially American lives.

Boeing is the number one beneficiary of Ex-Im activities by far, and GE is a big recipient too.

Ex-Im supporters claim Hensarling’s fears are unfounded because the Foreign Assistance Act​ makes it illegal for the bank to do business with state sponsors of terrorism. But that raises several questions. First, would a President Clinton or Trump want to change this restriction? After all, Clinton bragged about being a huge supporter of the crony agency and a booster of Boeing sales abroad when she was at the State Department.

I can think of a million reasons Clinton and co. could try to use in attempt to change the rule. Here’s one: Europe isn’t as picky about who it supports with its subsidies. For example, the Wall Street Journal reported back in April:

That stance differs from that in Europe. An official for Britain’s export-credit agency in January said the organization was “open for business” in Iran, echoing a sentiment at other European government lending institutions.

I can easily imagine Boeing making the case that it is unfair for Airbus to get subsidized when they sell to Iran, but Boeing doesn’t. And I can even more easily imagine that there would be plenty of lawmakers willing to lift the restriction for them — never mind that these subsidies may be good for Airbus and Boeing but are a net negative for the overall economy.

Boeing could also make the case that the only way this deal with Iran — which, let’s face it, is first and foremost good for Boeing’s bottom line — would only happen if the restriction is lifted. But how many lawmakers would rush to make Boeing and its lobbying powerhouse happy? Plenty, I bet.

Also worth remembering is that when Representative Ed Royce (R., Calif.) offered an amendment last year that would have prohibited the Export-Import Bank from doing any business with country on the State Department’s list of state sponsors of terrorism, 63 Republicans joined with almost all Democrats to defeat the amendment.

Then there is also the fact that even if the restriction on subsidizing deals with Iran isn’t lifted, we wouldn’t be able to verify that the bank is actually following the law. That’s because the data made available by Ex-Im to the public and to lawmakers is incredibly bad. Many of the foreign buyers’ countries aren’t listed except as “multiple countries,” a third of the foreign buyers are labeled “unnamed” and many of the U.S. beneficiaries aren’t listed either.

It’s hard to trust and verify, when you can’t actually verify.

There is a way out of this, however: If Congress killed the Ex-Im Bank, all these concerns would immediately go away. One can always dream.

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