Ex-Im: Welfare for Commodity Traders and China

By Michael Needham of RealClearPolitics.com. Excerpts:

"An obscure taxpayer-backed government bank funneled $113 million in aid to an even more obscure commodities trading company. This isn’t some insidious plot revealed in the opening scene of a John Grisham novel. Rather, it is the widely accepted practice of the U.S. Export-Import Bank.

At the heart of this story is, almost predictably, a Swiss company. Glencore claims to be “one of the world’s largest global diversified natural resource companies.” The company’s U.S. presence is “modest” according to Ken Silverstein, who wrote the book The Secret World of Oil; however, its Stamford, Connecticut office “helps run” the company’s massive oil and gas trading activities.

Why would those activities be eligible for export assistance from the Ex-Im Bank? It is hard to know for sure because publicly available information about the bank’s activities is sparse. According to Ex-Im’s website, the $113 million in assistance was simply for “banking and finance.”

So what exactly were Glencore’s 325 traders exporting? It “involves not the fabrication of products with a punch press and other shop equipment,” wrote the Greenwich Time, “but rather the movement of commodities across borders at the punch of a computer key.” That same year Glencore produced $233 billion in revenue, making it one of ten largest companies in the world.

Exporting American commodities isn’t Glencore’s entire business model, though.

Quoting a seasoned commodities trader, Silverstein explains China's manufacturing base "could not exist without Glencore, because it is dependent on raw material imports, many of which Glencore plays a major role in trading and producing.”
While that may be a bit of hyperbole, it is also ironic considering proponents of the Ex-Im Bank frequently invoke the specter of “China Inc.” to justify the continuation of taxpayer-backed export subsidies. Last October, bank chairman Fred Hochberg told the Financial Times “Even a large business cannot compete against the second-largest economic power in the world.”

But, if you need more evidence this isn’t really about combating China’s aggressive use of export subsidies, consider that America’s credit export agency actually subsidizes state-run Air China and even the Export-Import Bank of China. That’s right, our Ex-Im works with their Ex-Im to, supposedly, create jobs in America."