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Member States’ export credit agencies

EU Member States’ export credit agencies (ECAs) play a vital role in fostering the domestic export industry by filling gaps in trade finance for non-marketable risks. ECAs provide government-backed medium and long-term export credits, guarantees and insurance. These cover trade transactions with, and large-scale industrial or infrastructure projects in, developing countries or emerging market economies, which bear significant commercial and/or political risks which the more risk-averse private sector is unlikely to insure. ECAs may also complement private-sector coverage for short, medium and long-term marketable risks, provided they comply with EU state aid rules.

Types and relevance of ECAs

Money hanging on the line

© Andi.es / Fotolia

ECAs are mostly government or quasi-governmental agencies, but may also be private companies empowered to operate as public “insurers of last resort” on behalf of governments. Their organisational set up and business model vary markedly across the EU. Major ECAs in the EU are France’s COFACE, Germany’s Euler Hermes, the Netherlands’ Atradius, and the UK Export Credits Guarantee Depart­ment (ECGD). The scale of ECAs’ activities worldwide, spurred by the liquidity shortages of the 2008 financial crisis, is reflected in the statistics of the Berne Union, an international association of ECAs. These reveal that in 2012 its 49 (including non-EU) member companies (private and public) had an overall exposure of US$1.9 trillion, an all-time high in members’ commitments, corresponding to well over 10% of global trade and investment.

International regulation of ECAs

With a view to creating a level playing field for the provision of export credits by ECAs, in 1978 OECD members adopted an Arrangement on Officially Supported Export Credits. This was intended to prevent trade distortion and minimise export subsidies. The Arrangement contains a comprehensive set of guidelines governing the most favourable financial terms and conditions that ECAs may offer. These include minimum fixed-interest rates, maxi­mum repayment terms and risk-based mini­mum premium rates. Export credits granted in line with the Arrangement are deemed permissible, as they fall under a “safe haven” clause set out in item (k) of the “Illustrative List of Export Subsidies” in Annex I of the 1995 WTO Agreement on Subsidies and Counter­vailing Measures.

EU regulation of ECAs

The 2005 version of the Arrangement was incorporated into EU law by Regulation 1233/2011, with the EP co-legislator under Article 207(2) TFEU. Based on the EP’s first reading amendments, the Regulation imposes additional transparency and reporting require­ments on Member States, including through annual activity reports to the Commission. These reports must disclose inter alia financial information on ECAs’ exposure.

Civil society criticism

ECAs have attracted strong criticism for their involvement in highly controversial projects which have had harmful social or environ­mental effects or had adverse impacts on human rights and climate change objectives. It has been argued that transactions supported by ECAs have often increased the debt burden of developing countries instead of fostering their sustainable development.

Parliament’s position

ECAs are an important instrument for enhancing trade, according to the report of the International Trade Committee (rapporteur Yannick Jadot, Greens/EFA, France). This covers the Commission’s first report on ECAs’ activities, for 2011. It also stresses that Member States’ annual reports, and the Commission’s eval­uation of them, do not yet allow Parliament to assess whether their export credit activities comply with EU foreign policy goals, or with the rules in force for the treatment of environmental risks in calculating ECA premi­ums. The EP welcomes the ongoing outreach to major emerging economies aimed at defining common rules on export finance.

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