Mark Drajem, Bloomberg News / greenwichtime
Published 09:46 p.m., Monday, May 9, 2011
General Electric Co. and Boeing Co. want leeway to use more foreign-made parts in exports financed by the U.S. government, a move unions say would subsidize sending jobs abroad.
Republicans in Congress may support easing a requirement that 85 percent of goods financed by the U.S. Export-Import Bank be made domestically to qualify for maximum backing, according to Rep. Gary Miller, (R-Calif.), chairman of the House Financial Services subcommittee that oversees the bank.
The change would help industrial manufacturers such as GE and technology companies such as Cisco Systems Inc. that depend on parts made overseas. Easing the rule will lead to more U.S. exports, according to executives for GE and Boeing.
“We have to be able as a U.S. business to be as competitive as possible,” said Karan Bhatia, vice president for international law and policy for Fairfield-based GE.
The current rules “just ignore contemporary commercial realities,” Bhatia said.
Union representatives for manufacturing workers say the requirement for American-made parts shouldn’t be relaxed while the unemployment rate hovers at 9 percent and wages stagnate.
“It’s just common sense that the higher domestic content there is, the more jobs will be created and maintained at home,” said Owen Herrnstadt, director of trade and globalization at the International Association of Machinists and Aerospace Workers. “I would hate to see Congress give GE and Boeing greater incentive to move jobs overseas.”
The fight over domestic content may be waged over legislation needed to keep the Export-Import Bank functioning.
The government-backed bank based in Washington is playing an expanded role as President Barack Obama pushes to double exports by 2015. Manufacturers became increasingly dependent on the bank for loans, insurance or credit guarantees for their overseas sales after commercial banks pulled back in the recession.
\ly dependent on the bank for loans, insurance or credit guarantees for their overseas sales after commercial banks pulled back in the recession.
The lender provided a record $24.5 billion in financing in the fiscal year ended Sept. 30 and may exceed that this year, according to Fred Hochberg, the bank’s president. It would be the fourth straight year of record financing.
The Export-Import Bank helps exporters get credit for foreign sales by providing direct loans or guarantees to banks that they will be repaid. Chicago-based Boeing is the largest recipient of financing from the bank, with more than $5.5 billion last year.
Under current rules, the Export-Import Bank will back 85 percent of an overseas sale or the share of the final product that is American-made, whichever is less.
No other developed nation has a requirement that stiff, with the average in the Organization for Economic Cooperation and Development at less than 50 percent, according to John Hardy, president of the Coalition for Employment Through Exports, which represents exporters such as GE, Boeing, Caterpillar Inc. and Oracle Corp.
Companies say they would like to qualify for Export-Import Bank financing for 85 percent of a sale even if as little as 70 percent of the content is U.S.-made.
“We believe that we could “We believe we could probably live with a number in the 70 percent range,” Scott Scherer, senior vice president of Boeing, testified to Congress on March 10. About 70 percent of the new 787 Dreamliner is being made in the U.S., according to Boeing, the world’s biggest aerospace company.
Rep. Miller told the bank’s annual conference on April 1 that the current rules “might appear to be unreasonable.” Draft legislation Miller prepared directs the lender to set new “clear and comprehensive” rules on domestic content, without specifying what changes it should make, according to a copy of the text.
Rep. Carolyn McCarthy (D-N.Y.), the top Democrat on that subcommittee, hasn’t decided if the requirement should be changed, said Shams Tarek, a spokesman.
Rep. Thaddeus McCotter, (R-Mich.), said changing the content requirement may simply “make it easier to seek outside components from offshore.” “It could be viewed that we’re rewarding the initial decision to outsource the jobs,” McCotter told Bhatia and Scherer at a hearing on March 10.
GE, the world’s biggest maker of medical-imaging devices and power-generation equipment, is facing competition from manufacturers in Asia and Europe helped by more flexible government-backed financing than the U.S. bank provides, Bhatia said.
“When we’re competing with the Chinese, when we’re competing with the Brazilians, when we’re competing around the world to try and create U.S. exports and U.S. jobs, it’s simply not a viable tool,” he said.
Newsessentials Blog 
Posted on May 10, 2011
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