This article originally appeared in Townhall.com on November 25, 2013
Gina Rinehart, the richest person in Australia, and her company, Roy Hill, just received preliminary approval for $694 million in financing from the Export-Import Bank of the United States (Ex-Im Bank). The Ex-Im Bank is a federal lending agency, which focuses on financing and insuring foreign purchases of American goods. In this particular instance, Ex-Im is financing a contract that will allow Roy Hill, an iron ore mining company, to purchase heavy mining equipment from Caterpillar. And while these two parties will certainly find this deal beneficial, a number of American companies will face serious and adverse effects if the transaction is completed. The Export-Import Bank’s lending practices oftentimes result in foreign companies receiving favorable loan rates that give them a competitive advantage over their American counterparts. In this case, Roy Hill’s primary competitor is Cleveland-based Cliffs Natural Resources Inc. Cliffs is naturally incensed over the fact that Roy Hill, a company already worth billions, will receive a key competitive edge at the hands of its own government. Crain’s Chicago Business reports that “Cliffs [has] argued that the new mine in Australia would create a glut of iron ore and reduce raw material costs for Asian steelmakers, allowing them to ship low-priced steel to the U.S. and create more harm in lost sales and lower iron ore prices than any benefits for Cat.” According to Cliffs, the deal would displace almost $600 million of U.S. iron ore exports and would lead to a loss of about $1.2 billion in domestic sales.
