General Electric has reignited a political debate over America’s global competitiveness and the future of its Export-Import Bank by announcing it is shifting 500 manufacturing jobs out of the US to countries that provide export finance.
US business has been fighting for more than a year to save the ExIm Bank, the government-backed trade finance agency, which lost its ability to extend new loans on July 1 amid opposition from conservative Republicans.
Top chief executives including Jeffrey Immelt of GE have argued that the bank is critical to their ability to compete globally in the face of growing government support for exporters in China and other US rivals.
The jobs to be lost are at plants manufacturing gas turbines for power generation. Most of the operations will be relocated to France, in a coup for the country’s socialist president, François Hollande.
GE said it had secured backing from Coface, the French export credit agency, to support its bid for contracts in Indonesia and other countries.
“In a competitive world, we are left with no choice but to invest in non-US manufacturing and move production to countries that support high-tech exporters,” said John Rice, a GE vice-chairman.
Boeing also said on Tuesday it planned to cut hundreds of jobs from its satellite manufacturing business in California, in part because of the failure to renew ExIm.
Boeing was the largest beneficiary of the bank in 2013 and GE the second-largest in terms of the value of loans and loan guarantees provided, according to the Mercatus Center at George Mason University, a free-market think-tank.
The positions going from GE’s US operations will be lost from plants in Texas, South Carolina, Maine and New York. About 400 will move to France, with the rest going to Hungary and China.
GE said the jobs being moved to France will be in addition to the 1,000 new manufacturing and engineering jobs that it has promised to create there following its $14bn acquisition of Alstom’s energy business.
The jobs shift is a vindication for France’s socialist government, which has adopted a more business-friendly agenda over the past year in a bid to attract more inward investment.
Ministers have promised to award €41bn worth of corporate tax breaks and reform France’s onerous labour code, and have also sought to better promote France abroad. French economy minister Emmanuel Macron undertook a tour of the US in June to encourage foreign investment and is also set to visit the UK next week.
Large US manufacturers have become increasingly frustrated about how the ExIm Bank has languished since its backers in business and Congress struggled to get its mandate reauthorised before the legislature’s August recess.
Republican critics of the ExIm Bank say it perpetuates crony capitalism, providing the bulk of its benefits to a small number of large politically well-connected companies, at the expense of consumers and smaller businesses.
A note on the bank’s website says: “Due to a lapse in ExIm Bank’s authority, as of July 1, 2015, the Bank is unable to process applications or engage in new business or other prohibited activities.”
Now Congress is back in session, lawmakers are having trouble finding legislation that could have re-authorisation attached to it.
That has resulted in a renewed push by the business community to apply pressure on Congress to end the stalemate over what they see as a vital tool to back US exports.
“Since its authority lapsed in July, Congress’ failure to reauthorise ExIm Bank has already resulted in US companies losing international sales and puts hundreds of thousands of US jobs at risk,” wrote Tom Linebarger, the chairman and chief executive of engine maker Cummins, in a letter to congressional leaders on Monday on behalf of the Business Roundtable, which represents American CEOs.
He argued there were 85 foreign export credit agencies and it was “critical for Congress to restore a level playing field for US companies and workers”.
The National Association of Manufacturers, another influential business group, over the summer said it would stop holding fundraisers for all political candidates until the ExIm Bank was reauthorised.*
GE has been leading the fight. Mr Immelt suggested in June the company would refuse to invest in parts of the US where local politicians opposed ExIm.
“If you are against trade and exporters, you are against our employees and suppliers: we will not invest in your state,” Mr Immelt had said.
Over the summer GE reportedly decided to drop Dallas as a potential location for its new global business headquarters, citing the opposition to ExIm of Texan politicians such as Jeb Hensarling, chairman of the House Financial Services Committee, and senator Ted Cruz, who is running for president. Both are leading opponents of the bank.
Both Boeing and GE have cut off donations to members of Congress who oppose the re-authorisation of ExIm, according to Politico, a news service.
Mr Hensarling, the chairman of the House Financial Services Committee, accused GE of hypocrisy on Tuesday. “It’s troubling that the head of President Obama’s Jobs Council (Mr Immelt) is announcing GE is leaving Connecticut because the state’s taxes are too high and is choosing to send jobs overseas because US taxpayer-provided subsidies are too low.”
Maxine Waters, a California congresswoman who has been leading the push by Democrats to secure reauthorisation, accused Republicans of sacrificing American jobs to ideology.
“GE’s announcement today reflects the human costs of continued Republican obstruction to any efforts to renew the charter of Export-Import Bank over the long-term,” she said. “It’s time for Republicans in leadership to stop handing victories to our foreign competitors and the far-right members of their party and bring Ex-Im up for a vote before this brinkmanship further damages our economy and our ability to compete in the global marketplace.”
*This story has been amended to clarify that The National Association of Manufacturers has ceased fundraising for all candidates, not just Republicans.
Get alerts on General Electric Co when a new story is published