How ExImBank Harms Small Business in USA & Overseas

In my book I talk about the export sales agent, a person with a strong background in a narrow field, a sort of semi-retired (as in from corporate America) position matching buyers and sellers. It is not for everyone.  Here is a company that seems to fit that mold.

This one comes to my attention because of the monster relentless tax-payer funded PR campaign, ImExBank is using him as localized fodder to gin up support for itself.  

The press release/article says in part

Skelley founded the company after years of traveling to hospitals throughout the world as a consultant to learn about their medical equipment and repair needs. About 15 years ago, he left that work to found Skelley Medical with the goal of reducing health care costs and increasing access to affordable health care around the globe.

A side observation is how readily media will accept an email from the ExImBank, slap a byline on it and call it news.

Anyway, two claims in the article I challenge:

1. Skelley’s used medical equipment export business idea is something new.  Nonsense.  In China in the 70s I met people trading in such, and in the 80s there was a show in Shanghai specializing in it.  In the hundreds of seminars I have done, often there is someone desiring to go into this business.

2. Used Medical equipment export sales is helped by ExImBank loan guarantees.  Nonsense.  Export business is funded by the buyer overseas by means of letters of credit.  Everyone else in the business is doing fine without ExImBank funding.  How come Skelley gets it?  How come now?

ExImbank funding is unnecessary, and demonstrably causes several problems at once:

A. There are countless other USA citizens selling used medical equipment overseas from USA to wherever. Let’s call them Free Market MedEx.  How come Free Market MedEx does not get support too?  How come only this ex-GE employee?  

B. By preferring Skelley to the others, ExIMBank offers Skelley the opportunity to give better terms over other USA exporters already in the business like Free Market MedEx. Why is a government agency picking winners and losers?  Why is a government agency burning through money to pay for a infrastructure that just moves business around from one business to another?

C. ExImBank’s preferences for Skelley pose a problem to Free Market MedEx’s established customers overseas, who we will call Buyer X. Buyer X can buy from their established supplier of used medical equipment in the USA, Free Market MedEx, or buy from Skelley. Skelley has a government-backed advantage over the people who built a business without government backing, Free Market MedEx.  With Skelley, financing is easier, looser by virtue of ImExBank backing.  That is attractive to Buyer X. Nonetheless, since Skelley is new, Buyer X will probably stick with their regular supplier in USA, Free Market MedEx.

D. If in fact Buyer X sticks with Free Market MedEx, then the overseas competitors of Buyer X will set up with Skelley and compete with an unfair advantage against the established business of Free Market MedEx and Buyer X. By these means, less capable companies overseas, ones not creditworthy, get an advantage over more capable businesses, the creditworthy, compliments of the US taxpayer. 

One way or another, ExImBank not only harms businesses in USA, it harms businesses overseas as well.

Prediction:  there will be a wave of losses that the taxpayer will have to pick up when the current crop of PR-motivated fundings and wild expansion in loans backed comes crashing down. Give it about 2 years.

How come Skelley?  Could it be that GE, a bailed out company whose CEO advises Obama on economic recovery, and has a massive amount of used medical equipment in USA, would like to have one if its execs backed by the government to move this equip overseas?  Could it be that by getting ExIMBank backing, Skelley’s past employer will see GE used equipment advantaged in the market? And the more shipped out of USA, the less there is, and the higher the prices on what new and used remains in USA.

Skelley has been awarded 2012 New Hampshire Small Business Exporter of the Year and New England’s Exporter of the Year by the Small Business Administration.  If you harm other businesses by taking taxpayer backing, you'll get government awards. Nice!

***John Spiers will be offering an all-day seminar on small business international trade start up at Orange Coast College, Los Angeles Area, June 29, 2013.  Full info here...***

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