Taxpayers subsidizing Chinese communists

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Measured in terms of dollar values, more than half of the taxpayer-funded Export-Import Bank’s loans and long-term loan guarantees over the last two years have gone to just one corporation – Boeing. Many of these loans and loan guarantees have been used to subsidize transactions between Boeing and the government of the People’s Republic of China.

In the last two fiscal years, the Export-Import Bank has subsidized more than 50 Boeing sales, with loans and long-term loan guarantees totaling $8.9 billion in value.

The Export-Import Bank is a taxpayer-subsidized federal agency that facilitates exports by direct loans to foreign buyers and by insuring or guaranteeing private bank loans. In fiscal years 1999 and 2000, 59 percent of the bank’s loans and long-term guarantees were for Boeing sales. (Short-term loan guarantees, not included in this figure, represent an additional, but very minimal, part of the Export-Import Bank’s activities. Some of these short-term guarantees were also used to benefit Boeing.)

Not surprisingly, Boeing executives are now lobbying hard on Capitol Hill to increase Export-Import Bank funding for fiscal year 2002 over the $633 million proposed by President Bush. Last year, President Clinton and the Republican Congress gave the bank $863 million.

In requesting re-authorization and more money this year, Ex-Im has stressed its aid to small businesses. In a choice of words worthy of a Clinton appointee, outgoing Ex-Im Chairman and President James A. Harmon told a congressional committee on May 2 that in fiscal year 2000, “86 percent of Ex-Im Bank’s transactions directly benefited small businesses.” (Emphasis added.) Ian Vasquez of the Cato Institute testified a few days later, however, that, in terms of total dollars, 85.9 percent of Ex-Im’s loans and long-term guarantees went to just ten large companies, most with revenues in the billions.

Boeing topped the list in fiscal 2000, receiving 42 percent of Export-Import Bank loans and long-term loan guarantees. In fiscal 1999, the company received a whopping 68 percent of the bank’s loans and long-term guarantees.

Bechtel, a huge San Francisco-based engineering firm that is helping China build nuclear power plants with the aid of Ex-Im loans, is the second largest recipient of Export-Import Bank subsidies. Also in the top ten are Vice President Dick Cheney’s former employer, Halliburton, and General Electric, which is moving jobs from Indiana to a new facility in Mexico built with aid from the bank.

Boeing spokesman Cheryl Russell justified the large percentage of Ex-Im financing used by Boeing by noting that Boeing is the No. 1 U.S. exporter of manufactured goods. However, the airplane giant is 10 times more likely to get Export-Import Bank financing than the typical U.S. exporter. Ex-Im President Harmon testified that the bank finances 2 percent of all U.S. exports. But Russell told Human Events that 20 percent of Boeing’s overseas sales get Ex-Im backing.

This, she says, is because “we don’t sell products that you can go out and buy for $100,000. We sell big-ticket items. Some of these sales will be the largest purchase that our overseas customers have ever made.” Accordingly, she says, Boeing sales couldn’t happen without Ex-Im backing.

But, then, why is Boeing getting taxpayer funding through the Export-Import Bank to make sales to some the world’s wealthiest regimes and biggest national economies?

The Kingdom of Saudi Arabia and the People’s Republic of China, for example, are two principal recipients of Export-Import Bank subsidies for the purchase of Boeing aircraft. In 1999, a Saudi state-owned airline bought a fleet of Boeing jets. The sale was financed with two loans worth a combined $1.9 billion that were guaranteed by U.S. taxpayers through the Export-Import Bank. Ex-Im considered this a good risk to take on behalf of taxpayers in order to boost Boeing’s business.

But it means that people who are now paying exorbitant prices for gasoline here in the United States, in part because the OPEC cartel to which Saudi Arabia belongs is artificially suppressing the world supply of petroleum, must also subsidize jumbo jets sold to the Saudi royal family.

Additionally, parts of those Boeing jets are actually made in China – creating jobs there, not in the United States.

China, moreover, benefited directly from over $1.3 billion in Export-Import Bank loan guarantees for its own Boeing purchases.

Considering all outstanding loans, guarantees and credit insurance agreements, U.S. taxpayers now have a liability of $6.2 billion in the Chinese regime thanks to the Export-Import Bank. Moreover, in the case of Boeing sales, Ex-Im-guaranteed loans are usually made by a Chinese-government-owned bank to a Chinese-government-owned airline. That means that if a Chinese-government-owned airline defaults, U.S. taxpayers would be forced to pay cash to the Chinese treasury on behalf of another agency of the Chinese government.

This is the kind of “free trade” Boeing favors with Beijing, and that, some argue, will help inspire freedom and free enterprise in China.

While Boeing has formed joint ventures and partnerships with the communist government in Beijing to build aircraft parts and major elements of its jets in China, all Ex-Im/Boeing/China transactions over the last two years have involved the sale of Boeing jets. In 1998, every action the Export-Import Bank took involving China was a subsidy of Boeing aircraft sales. Given that elements of these aircraft are actually built in China by Chinese-government-owned firms that have formed partnerships with Boeing, the Export-Import Bank was, in part, subsidizing the government of China to buy goods produced by the government of China at the expense of U.S. taxpayers.

Russell told Human Events that in the “last 10 years,” Ex-Im has not had to cover a single default on an airline sale.

But this also means that the Export-Import Bank has an interest in the survival of the communist regime in Beijing – a regime that, according to the State Department’s latest “Country Report on Human Rights in China,” routinely violates every human right recognized by our Constitution.

Boeing and Ex-Im spokesmen say that Boeing and the Chinese government are not the only ones who benefit from these taxpayer-backed loans. First, they say, the sales create jobs at Boeing. Second, they say, Boeing relies on other U.S. companies, as subcontractors, to build parts of the plane. Boeing’s Russell says 60 percent of every Boeing airplane is made by non-Boeing employees in the U.S.

Ex-Im requires that a majority of the parts being exported be made domestically, but that means that up to 49 percent of a Boeing jet could be made in China and China would still qualify for a U.S. Export-Import Bank loan to buy the plane.

In 1995, Boeing’s machinists union went on strike, protesting the company’s deal with the PRC because it required that a portion of the jets sold to China be made with Chinese labor.

Bill Johnson, president of Machinists Local 751 said at the time: “This export of technology and jobs is why we’re on strike today. Boeing used to make tail sections for the 737 in Wichita, but they moved the work to a military factory in Xian, China. Is this Boeing’s definition of free trade, to have American workers compete with Chinese labor making $50 a month under military discipline?”

Lawrence Clarkson of Boeing told the Seattle Times that the company’s strategy was to “do whatever it takes to remain the preferred supplier” of jet aircraft for China.

Besides exporting jobs to the Chinese government, Boeing has been a major lobbyist pushing for Normal Trade Relations status and World Trade Organization membership for the Chinese communists. This is understandable, considering that throughout the 1990s, China regularly accounted for 10 percent of Boeing’s annual sales. Boeing reportedly has contracts worth more than $6 billion there.

“The Boeing Co. has invested several hundred million dollars in infrastructure development [in China] since 1993,” the company says on its website. “From 1993 to 2000, Boeing has instructed over 11,000 Chinese aviation professionals, half of whom are pilots, maintenance and flight operations people.”

Xinhua, the official news agency of the Chinese government, reports: “[T]he company has also cooperated with the Civil Aviation Administration of China [CAAC] in pilot and crew training, improvement of China’s air traffic control systems, and has established a plane parts supply center in Beijing’s capital airport and field service bases in 16 Chinese cities.”

Boeing gave $1,565,644 to candidates for federal office in the last election cycle, approximately 60 percent going to Republicans. Looking toward the 2002 elections, Boeing has already given over $100,000 in soft money, mostly to Republicans.

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