The Corner

Economy & Business

Without Ex-Im, Boeing Still Managed to Sell 300 Planes to China

Lachlan Markay points us to this news: 

#BREAKING Boeing announces Chinese order of 300 planes worth $38 bn

That order, by the way, is the largest ever order by a single country. Way to go, Boeing! ​But as Markay notes, “This can’t be right. There’s no Ex-Im bank around to finance the deal,” and we know that according to Boeing and GE, without Ex-Im the export world is going to hell in a hand basket. 

Not to worry, though — the pro-Ex-Im crowd has found a way to explain why this purchase from China is all about the bank’s expiring after all. You see, at the same time as the sale was announced, it was also made public that Boeing would be building its first assembly line in China. From now on, Boeing will be making some of its planes in China, and not just in Washington State. As such, and right on cue, pro-Ex-Im advocate Loren Thompson tells us that “it appears the uncertain fate of the U.S. Export-Import Bank figured in the decision to establish offshore production.” ​

Good try, Loren, but we are not buying. From what I have read in the last few days, the move is mostly the product of China’s fast growth, its emerging middle class, and a rise in air-travel in the country.

In fact, Boeing is following the steps of its European competitor, Airbus, which, in spite of not having lost its credit agency, built an assembly line in China in 2008 and expanded it in 2014

From the New York Times:

China accounted for roughly a quarter of Boeing’s single-aisle jet deliveries this year and is expected to claim a large share of future orders. But the company has lost ground in recent years to Airbus, which delivered the first of its rival A320 jets from an assembly plant in Tianjin in 2009.

Here is the Yahoo story:

The state-owned Commercial Aircraft Corporation of China (COMAC) also reached an agreement with Boeing to set up a “completion centre” in China for its narrow-body 737 airliners, Xinhua said. It represents a step-up in Boeing’s competition in China with European rival Airbus, which already has a manufacturing presence there.

Please, reporters, take note that Boeing has announced that it won’t hurt U.S. employment:

The assembly plant would be Boeing’s first in China and signals its attempt to match its European rival Airbus’s Chinese presence as the two rivals step up their efforts to win more business in the country’s lucrative aircraft market. Boeing said the Chinese facility won’t reduce employment levels at its plants in Washington state.

According to U.S.A Today, there will be plenty more orders in the future:

Boeing has projected it could sell China 6,330 planes worth $950 billion during the next 20 years. Nearly three-quarters of the planes will be single-aisle with about 700 wide bodies. Passenger traffic is projected to grow 6.6% per year during that time and air cargo 7%.

Can one say with a straight face that if Ex-Im were still around, Boeing would not be opening this factory in China? Of course one can’t. The market forces and competitive pressures in that industry would have required some presence in China for Boeing to remain competitive, with or without Ex-Im. This is why the still-heavily-subsidized Airbus made the move East a few years ago. Boeing was bound to follow sooner or later, whether U.S. unions like it or not.

But while I will defend Boeing’s right to move its operations abroad for the sake of its bottom line, I will condemn any attempts to use such a move as a means to get more subsidies and to renew the Ex-Im Bank. 

This piece, which I co-wrote with the Heritage Foundation’s Diane Katz in The Hill, debunks the claim that Boeing lost a satellite sale because and only because Ex-Im was shut down down on June 30th. A tidbit:

The more plausible explanation for the looming layoffs involves fewer satellite and other defense-related orders from the government. The Tauri Group, which compiles an annual report on the satellite industry, noted slower growth in 2014 “due to a smaller number of expensive commercial GEO and government satellites.” 

The satellite manufacturing industry posted a measly 1 percent growth globally between 2013 and 2014, and U.S. satellite manufacturing revenues (as measured by 2014 launches) dropped 9 percent in the same period. Job losses exceeded 10,000. 

The timing of the ABS order cancelation is also worth noting. ABS announced the satellite order—its third from Boeing—on June 12, 2015. That was just 18 days before the Ex-Im charter was set to expire. It is hard to imagine that the two companies did not recognize the likelihood that Ex-Im financing was in jeopardy. Yet they went public with the deal nonetheless. That would seem to indicate a certain confidence that financing was not a deal-breaker. 

Another June event was likely significant—the explosion of a Falcon 9 satellite launcher on June 28. Following the explosion, SpaceX, the owner of the rocket, informed customers booked to fly on upcoming launches to expect months-long delays. These delays will further extend the time it would take for ABS to begin generating revenue from a new satellite. Because the new satellite was to feature all-electric propulsion—rather than conventional rocket propulsion—the time to reach proper orbit would also take weeks longer.

I also have a piece over at Creators debunking GE’s claims that it is forced to “move” jobs to France because, and only because of the loss of Ex-Im.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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