When the US based company General Electric announced Monday its plans to move a manufacturing gas engine plant from the state of Wisconsin up to Canada, it was more than an issue of cost.
At the centre of the move was a political debate at the heart of the US economy – the renewal of the Export-Import Bank and what it would mean for the United States’ role in international trading. 350 jobs in Canada were created with this move.
— CBC News (@CBCNews) September 28, 2015
The decision was made as the Export-Import Bank’s charter had not been renewed by Congress. Speculation continues as elections begin for a new Speaker of the House of Representatives, as the incumbent John Boehner announced his plans to step down at the end of October.
One of the representatives running for the seat, Republican Kevin McCarthy of California, has spoken against its renewal in the past.
The Export-Import Bank was founded in 1934 during the presidency of Franklin Delano Roosevelt. Its current charter expired in July. Republicans currently hold a majority in both chambers of Congress.
‘Expense of American jobs’
In a statement, John Rice, the vice-chairman of GE, said Congress needs to re-authorise the bank’s charter.
“We continue to urge Congress to re-authorise the ExIm Bank for all American companies,” Rice said. “However, we must prepare for the worst case and arrange export finance outside the US. Unfortunately, this will come at the expense of American jobs. In a slow growth and volatile world, we must go where the markets are and compete in over 170 countries.”
Rice added that while GE believed in American manufacturing, the issue came to competition and the need for Export Credit Agency financing, and that GE did not want to walk away from its customers.
“We know these announcements will have regrettable impact not only on our employees but on the hundreds of US suppliers we work with that cannot move their facilities, but we cannot walk away from our customers,” Rice said.
Congress’ next move
Meghan Thurlow, a spokeswoman for GE, in a telephone interview, said the company has spoken to members of Congress about the issue and access to exports. While Thurlow did not say whether the company planned to move more jobs outside the United States because of the issue, Thurlow said the company was still committed to American manufacturing.
“We are committed to US manufacturing and we continue to add jobs in the US,” Thurlow said. We still believe that it can be strong, but we can’t walk away from these projects.”
Thurlow noted that GE is a member of the Exporters for ExIm, a coalition that is in favour of the charter renewal.
A White House spokesperson did not respond to Kettle’s request for comment on GE’s move for this story. President Barack Obama has previously spoken in favour of renewing the bank’s charter.
A spokesperson for McCarthy did not respond to Kettle’s email request for comment on if legislation would be brought to the House floor in light of the move. A spokeswoman at the office of Republican Senator Mitch McConnell of Kentucky, the Senate’s Majority Leader, said by telephone that she was not aware of any plans for McConnell to bring any legislation or discussion on the matter to the Senate floor.
Indeed, beyond the implications economically, there could also be potential political implications as the charter’s renewal is debated.
Matilde Bombardini, an Associate Professor at the Vancouver School of Economics at the University of British Columbia in Canada, in a telephone interview, said even though the amount of American jobs lost are low, there will be pressure on Congress to decide to renew the bank’s charter.
“This is just a threat to move,” Bombardini said. “If many firms start doing this, they [Congress] may get their act together and fund the agency.”
There would also likely be added political pressure ahead of elections in the US next year, as Democratic and Republican candidates make their case to be their respective party’s candidate for The White House.
As news surrounding economic events emerge, so does an opportunity for candidates to politicise the issue and promote their views on trade and the economy, likely to be a dominant issue when Americans go to the polls.
For now, as Bombardini says, the ball is in Congress’ court.
What do you think? Should the Export-Import Bank charter be renewed? Have your say in the comments section below.