Regional versus global discipline
Export credit insurance in the European Union1
Monika Sie Dhian HoandKlaas Werkhorst
Owing to the importance of exports to the balance of payments and employment in domestic industries, governments have tried to maintain these at a high level by mobilizing large amounts of public funds for export promotion. Export credits are among the more powerful instruments used to support exports. 2 The granting of export credits by exporters, their banks or other financial institutions facilitates trade because foreign buyers are allowed to spread payments over time, instead of paying in cash. Governments support these export credits by subsidizing export credit interest rates (financing support) and by providing export credit insurance. In the years of rising market interest rates, the costs of interest subsidies escalated and, since the 1982 debt crisis, cumulative deficits on official export credit insurance schemes have mounted up to billions of dollars. As an often decisive, but more and more costly weapon in the competition for export orders, preferential credit and insurance have become a trade issue, discussed at the global and regional levels.
At the global level governments seem to have come to the understanding that some reduction of the level of these subsidies would be beneficial to all exporting countries, providing they can still retain this instrument of national trade policy. With respect to financing support these efforts resulted in the ‘Gentlemen’s Agreement’ of 1976 (later called the Consensus) between all OECD countries except Turkey and Iceland, which is binding for member-states of the EU. In contrast with financing support, which has been one of the main trade issues dealt with by the OECD over the past twenty years (Blair 1993:7), subsidies in export credit insurance were not brought up in the OECD until the early 1990s.
The public export credit insurance issue has been extensively debated on the regional EU level. In addition to the cost escalation since the debt crisis, factors such as market integration, competition policy and the common commercial policy of the EU have forced policy-makers to examine export credit insurance. Regional efforts to discipline state aids to exports have been slowed, however, by fears of EU member-states that they might disadvantage