Bridges Weekly Trade News Digest • Volume 12 • Number 40 • 26th November 2008
OECD Accord Pledges Support for Export Credit
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The world’s major economies released a statement Monday affirming their resolve to support export credit to ensure liquidity in international trade as the global economy reels from the ongoing financial crisis.
The announcement came under the auspices of the Organisation for Economic Cooperation and Development (OECD), the club of rich-country governments headquartered in Paris.
“OECD Member and Non-Member governments are determined to maintain their export credit support and ensure that sufficient capacity is available with the aim of supporting international trade flows,” the statement said.
The global financial crisis has put pressure on the system of trade credit that underpins world trade, making exporters and importers pay far higher prices for the loans that allow them to transport goods globally. Important players like banks either lack funds or are too risk-averse to extend export credit in times of economic uncertainty (see Bridges Weekly, 19 November 2008, http://ictsd.net/i/news/bridgesweekly/33962/).
And the drop in export credit has real effects on trade flows, especially in poor and less-creditworthy countries that already struggle to qualify for loans.
But officials hope that the sanctioned export credit support will fill the gap created by temporarily limited market capacities.
The secretary general of the OECD, Angel Gurria, said that guaranteed export credit was “absolutely critical” to “oil the wheels” of global finance, reported The Financial Times.
“You can’t have a growth scenario if you do not have the bank doing what they’re supposed to do, which is lending, and even less so if they’re very busy collecting in order to accommodate their lower capital,” he said.
The recent pledge is consistent with point seven of the declaration outlining strategies to address the global financial crisis released by the G-20 group of major economies in Washington on 15 November. More specifically, it meets the ambition to “help emerging and developing economies gain access to finance in current difficult financial conditions, including through liquidity facilities and program support.”
The OECD agreement includes its member countries as well as non-members Brazil, Estonia, Israel, Romania, Russia and Slovenia, and the participants in its arrangement of officially supported export credits - Australia, Canada, the EU, Japan, Korea, New Zealand, Norway, Switzerland and the US.
ICTSD reporting; “OECD accord pledges export credit support - FT,” REUTERS, 24 November 2008; “OECD backs export credit support,” THE FINANCIAL TIMES, 24 November 2008.
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OECD’s Working Party on Export Credits and Credit Guarantees has come out with a strong statement:
“… pledge ongoing credit support for developing country imports”
In a WTO News item covering the “AGRICULTURE COMMITTEE 14 NOVEMBER 2000 MEETING” we find the following background text:
Quote
Export credits: implementation, negotiations and the OECD back to top
Background: Government-supported export credits are seen as a way of circumventing export subsidy commitments because interest rates and repayment terms can be easier than under normal commercial conditions. In addition to discussions in the Agriculture Committee, the question is also part of broader discussions on “implementation” in the General Council.
Article 10.2 of the Agriculture Agreement says “Members undertake to work toward the development of internationally agreed disciplines to govern the provision of export credits, export credit guarantees or insurance programmes and, after agreement on such disciplines, to provide export credits, export credit guarantees or insurance programmes only in conformity therewith.”
Negotiations on an OECD understanding on agricultural export credits, which includes Argentina as well as OECD members, were taking place in Paris at the same time as the WTO Agriculture Committee’s meeting. The current deadline in the OECD for agreement is by the end of this year. …
unquote
Export subsidies are among the few non-disputed issues earmarked for elimination within the present Doha Round talks.
OECD certainly explores a fine borderline between the call for economic stimulus and the call for export subsidies in disguise.
It appears that a trade negotiation battle assumed to be over might well be on its way for a comeback.
Best, HJN, http://www.tradepolicy.ch