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Outlook


Don’t Shackle US Exporters


Already, 130 days into what Politico has described as “Te Sequester’s Slow Burn,” mandatory budget cuts are definitely impacting our nation’s defense and the companies that make America strong by selling products abroad. In mid-July, the Pentagon began


furloughing 650,000 civilian employees. Defense readiness has already been af- fected, with reductions in Army training, Navy ship deployments and Air Force flying time. Currently 13 air squadrons sit idle. And as the Defense Department implements the sequestration budget cuts that are on top of the $487 billion in defense reductions required by the Budget Control Act of 2011, reduced spending on equipment purchases and research and development for new sys- tems is being felt throughout the defense industrial supply chain. In June, the Aerospace Industries


Association surveyed small and mid- sized aerospace and defense supplier companies and found that 88% of them have been affected by budget cuts during the past two years. Sixty-two percent of the companies told us that the budget cuts have led to reduced production levels, 60% saw contract postponements and cancellations, and 49% had to institute hiring freezes with 45% forced to lay off employees. Many of these companies have


responded to budget cuts by doing their best to diversify their business away from defense contract work to the commercial market, where there is more stability and earnings potential. In this regard, civil aviation and space exports may serve as a vital lifeline for the 30,000 companies that make up the


defense supply chain and the thousands of workers who depend on this vital industry. At this critical time, with the painful effects of the sequester being felt across the country it is imperative we keep the Export-Import Bank of the United States open for business. Ex-Im, as it’s known, does what’s rare in govern- ment. It plays a vital role in helping American companies compete on a level playing field in the global marketplace, having supported 3400 companies—big, medium and small—last year. And for aerospace companies already feeling the effects of the sequester, financing from Ex-Im can mean the difference between growth or layoffs.


Ex-Im helps level the playing field for America’s aerospace manufacturers.


Te US Senate is expected to vote


soon on the renomination of Fred Hochberg for a second four-year term as President and Chairman of the Ex-Im Bank. Under Chairman Hochberg’s leadership, the Bank has supported nearly one million jobs over the past four years. If the nomination is derailed by opponents of the Bank, the Bank’s Board of Directors would be denied the quorum it needs to approve new loan guarantees and support American jobs. America’s commercial aerospace in-


dustry relies heavily on the Ex-Im Bank to fill gaps in private export financing at no cost to the taxpayer. In fact, the Bank makes money, contributing $1.6 billion to the Treasury over the past five years. Ex-Im Bank export credit sup- port has helped US companies compete


Marion C. Blakey President and CEO


Aerospace Industries Association Arlington, VA


successfully for major foreign sales of US civilian aircraſt and commercial satellites in recent years. And the biggest beneficiaries of these sales are small and mid-sized companies that supply major manufacturers with parts, systems and equipment. Tey benefit both from the initial sale to the Original Equipment Manufacturer (OEM) and even more so with aſtermarket sales for maintenance, repair, and overhaul (MRO). In the current sequestration environ-


ment, commercial export opportunities represent critical revenue diversification that many aerospace suppliers will need to survive. If they do not, the implica- tions for America’s technological edge on the battlefield would be ominous. While Ex-Im is prohibited from fi-


nancing military equipment, it provides vital financing to many commercial ex- ports. Te Bank helps level the playing field for America’s aerospace manufac- turers, who are competing with foreign companies backed by the low interest rates and deep coffers of other nations. Tese companies are a key part of our national and economic security. Fiſty- nine other countries do not hesitate to aggressively use institutions similar to the Ex-Im Bank to compete in the global marketplace, and Ex-Im Bank support is the only way many US aerospace manu- facturers have a fair fight. If the Senate does not want to unilaterally disarm America’s exporters, it should act now to ensure the Bank continues to function with a quorum for reviewing and ap- proving projects. Mr. Hochberg and his colleagues at the Ex-Im Bank have an important job to do, and we must ensure they are allowed to do it. ✈


Aerospace & Defense Manufacturing 2013 43


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