The U.S. Export-Import (Exim) Bank regularly extends about $100 billion in subsi

Question

The U.S. Export-Import (Exim) Bank regularly extends about $100 billion in subsidized loans to foreign buyers of U.S.-manufactured products, including aircraft, hair-care products, and construction equipment. The Exim Bank’s extensions of taxpayer-subsidized credit to companies in other nations gives these foreign firms incentives to buy U.S. exports. Airlines based in the United States are not enthused about aircraft-loan subsidies to competitors based in other nations, however. The U.S. airlines argue that the Exim Bank’s low-interest loans to foreign carriers provide a cost advantage that enables the foreign airlines to compete at lower expense in the international air transportation market. Thus, from the U.S. airlines’ point of view, U.S. taxpayers are subsidizing their foreign competitors. Why do you suppose that some U.S. makers of hair-care products and certain U.S. construction contractors that bid for work in other nations have lodged complaints similar to those of the U.S. airlines?

Explanation / Answer

There are three possible reasons for lodging a complaint as mentioned in the question. The   first reason is the duties applied by the foreign countries that makes products of US companies to be costly in comparison to the local players. The second reason is the advantage offered to local players by the Exim bank of the USA in the form of subsidy. The third reason is the protection offered to them by their native countries. All these three reasons give cost competitiveness as a strategic advantage to the local companies and they pose a serious challenge for USA companies. Thus, they can go and lodge a complaint.

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