When market fundamentalism and industrial policy collide: the Tea Party and the US Export–Import Bank

Kristen Hopewell

doi:10.1080/09692290.2017.1316297

Abstract

ABSTRACTFor most major economies, state-backed export credit is a core element of industrial policy and their strategies to boost exports and economic growth. Surprisingly, however, at a time when its competitors are increasing their use of this policy tool, state-backed export credit has become the subject of a hotly contested political battle in the US. As a result of opposition from the Tea Party, the US Export–Import Bank was forced to halt its lending operations for five months in 2015 and subsequently limited to financing only the smallest transactions. In this article, I show that the disruption of export credit is undermining the competitiveness of key US industrial sectors and encouraging the movement of advanced, high-value-added manufacturing overseas. The case of export credit therefore presents an important puzzle: Why is the US moving in the opposite direction of other states and taking steps that undermine its economic interests? I argue that the internal US attack on export credit is fueled by the prevailing market fundamentalist ideology that has obscured the role of an active state in fostering the US's economic success. This article demonstrates how the rise of a powerful anti-state movement is hindering the ability of the US to conduct effective industrial policy and maintain its economic primacy in the face of growing global competitive pressures.

Highlights

The rise of new powers, such as China and India, and the implications for US hegemony have become a central preoccupation of international relations scholars and policy-makers alike
As one of the primary tools used by states to enhance the competitiveness of their exports, export credit has taken on renewed strategic importance in the wake of the 2008 global financial crisis, with states focused on expanding exports as a means to bolster economic growth and employment
A director of Acrow Corporation, an engineering company that makes prefabricated bridges exported to emerging economies, where customers cannot readily access private financing for large infrastructure projects without export credit agency (ECA) backing and its European and Chinese competitors are supported by their own ECAs, described eliminating Export–Import Bank (Exim) as follows: ‘For us to pull another arrow out of our quiver, it’s irrational, it’s terrifying and it’s inappropriate when one considers the reality of the global marketplace’ (Weisman 2015)

Summary

INTRODUCTION

The rise of new powers, such as China and India, and the implications for US hegemony have become a central preoccupation of international relations scholars and policy-makers alike. Many expect the Bank may not survive when its new charter expires in 2019, or that due to continued efforts to limit its scope and operations, it may become too encumbered to function effectively This prolonged uncertainty about the ability of US exporters to provide ECA-backed financing is itself highly damaging – it creates a disincentive to invest in US production facilities and, especially for long-term projects and investments, as one industry representative stated, it ‘could be fatal to US competitiveness’.24. A director of Acrow Corporation, an engineering company that makes prefabricated bridges exported to emerging economies, where customers cannot readily access private financing for large infrastructure projects without ECA backing and its European and Chinese competitors are supported by their own ECAs, described eliminating Exim as follows: ‘For us to pull another arrow out of our quiver, it’s irrational, it’s terrifying and it’s inappropriate when one considers the reality of the global marketplace’ (Weisman 2015).

CONCLUSION

Findings

NOTES ON CONTRIBUTOR