trade policy brief
E xport Credits Work at the OECD: Co-operating on Smart Rules for Fair Trade
January 2019
he OECD is the key multilateral negociating forum where international disciplines for officially T supported export credits are agreed, implemented and monitored. These disciplines establish a level playing field for exporters while minimising financial subsidies.
Governments provide officially supported export credits through Export Credit Agencies (ECAs) in support of national exporters competing for overseas sales. Such support can take the form either of “official financing support”, such as direct credits to foreign buyers, refinancing or interest-rate support, or of “pure cover support”, such as export credits insurance or guarantee cover for credits provided by private financial institutions. ECAs can be government institutions or private companies operating on behalf of governments.
The role of the OECD in export credits The OECD has a long tradition of rulemaking in the area of officially-supported export credits, dating back to 1963. It is the key multilateral negotiating forum where international disciplines for officially supported export credits are agreed, implemented and monitored. These disciplines enable governments, which are both partners and competitors, to co-operate in establishing a level playing field for exporters while at the same time minimising financial subsidies. They also facilitate transparency and the sharing of information on export credits policies and practices among ECAs and governments.
How does the work get done? Two Committees are responsible for undertaking work on export credits: the Working Party on Export Credits and Credit Guarantees (also known as the Export Credit Group or ECG), which was created in 1963, and the Participants to the Arrangement on Officially Supported Export Credits (the “Participants), which came into being in 1978.
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The ECG is a formal OECD Body which operates under the OECD rules and procedures as a subsidiary body of the OECD Trade Committee. The ECG primarily addresses “good governance” issues relating to export credits with the overall objective of promoting coherence between national export credits policies, broader policies on environmental and social due diligence processes, antibribery measures, and sustainable lending policies, and other government-wide objectives. In addition, the ECG is responsible for collecting and maintaining statistical and empirical information on official export credits. The ECG also serves as a forum for exchanging views on export credits policies and practices. All OECD members except Chile and Iceland are ECG Members, and Brazil is an Invited Participant. The ECG has one informal sub-group (the ECG Practitioners) which is made up of those experts from ECAs who are responsible for undertaking the environmental and social due diligence of projects for which support is being provided. The Participants is not a formal OECD Body; however, it operates within the context of the OECD and according to its rules and procedures, since the Arrangement on Officially Supported Export Credits (the “Arrangement”) was originally agreed under the auspices of the OECD amongst OECD Member countries. There are at present ten Participants (Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Turkey and the United States). The Arrangement establishes a series of general and sectoral financial disciplines that must be observed when Participants provide official support for export credits.
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Export Credits Work at the OECD: Co-operating on Smart Rules for Fair Trade The Export Credit Committees and their Working Groups
The text of the Arrangement, including its Sector Understandings, is regularly reviewed with a view to meeting Participants’ needs and taking account of market developments. The Sector Understandings stipulate specific terms and conditions for exports in certain sectors, such as ships, nuclear power plants, and civil aircraft. The Participants have a number of sub-groups that deal with technical issues (e.g. interest rates, premium rates, etc.), country risk and tied aid consultations. There is also a separate group for the Sector Understanding on Export Credits for Civil Aircraft (ASU) to which Brazil is also a Participant.
Flexible co-operation between governments Both the ECG and the Participants provide flexibility when considering implementation of their disciplines and adherence to these groups. A government can become an ECG member if it (1) operates an official export credit programme and (2) has been invited to join by the ECG. Such invitations are considered once the interested government has signalled that it would be prepared to apply the disciplines applied by all ECG Members (i.e. the obligations laid out in the different Recommendations concerning export credits and good-governance issues) and to abide by all the reporting obligations.
Participant to the Arrangement and/or the Aircraft Sector Understanding or the Ship Sector Understanding whose memberships do not carry-over automatically by being a Participant to the Arrangement.
Further reading • OECD (2011), Smart Rules for Fair Trade: 50 years of Export Credits, OECD Publishing, Paris, https:// doi.org/10.1787/9789264111745-en. • OECD (2008), The Export Credit Arrangement: Achievements and Challenges 1978-2008, OECD Publishing, Paris. • OECD (1998), The Export Credit Arrangement: Achievements and Challenges 1978/1998, OECD Publishing, Paris, https://doi. org/10.1787/9789264163867-en.
Similarly, a government may wish to become a Participant to either the Arrangement or one of its Sector Understandings if it commits to apply the disciplines of the agreement. Interested governments have a variety of options when approaching the Participants’ work, including: observing the work of the Participants at their plenary meetings; observing part of the work carried out by sectoral or expert groups; taking part in the review of an existing Sector Understanding or the negotitation of a new understanding; and eventually, becoming a full
www.oecd.org/trade
tad.contact@oecd.org
@OECDtrade