50 years of OECD. Export credit agencies: Any role left?
This year, the Organisation for Economic Cooperation and Development (OECD) is celebrating its 50th anniversary. On this occasion it published a book focusing on 50 years of export credits. Wiert Wiertsema (Both ENDS) writing on behalf of ECA Watch, however, thinks that this is a momentum that asks for reforms, rather than hurrays.
Encouraging business abroad
In 1961, the OECD was formed aiming to build strong economies in its member countries and to promote free trade and worldwide economic development on a worldwide scope. Shortly after, within the OECD, the Working Party on Export Credits and Credit Guarantees (ECG) was established to deal with evaluation and problems concerning export credit agencies (ECAs). These agencies were originally set up to strengthen domestic corporations doing business abroad. In recent years some sustainability issues have been incorporated, although many issues are not addressed and implementation remains difficult.
In the publication Smart Rules for Fair Trade: 50 years of Export Credits, Wiert Wiertsema discerns several systematic shortcomings of ECA policy. ECAs are far too often responsible for supporting credits for transactions in developing countries that are unaligned to local development strategies, detrimental to sustainable development and mainly beneficial to local and foreign elites, he stresses. For example export credit support for unproductive transactions often results in defaults in the loans supported by ECAs, thus contributing to debt problems in developing countries. If these countries fail to repay, the cancellation of debts may be reported as Official Development Assistance (ODA). In that way, developing countries are forced to pay for the failure of ECA policies.
Another problem is the failure of the ECG to deal with the growing role of ECAs and governments of non-OECD countries, like Brazil, China, India and South-Africa. The global significance of emerging market economies, with their own ECAs and own regulations, has grown dramatically. The ECG is under a lot of pressure from OECD based corporations to lower social and environmental standards in response to the competition of companies receiving support from non-OECD ECAs.
To avoid losing its leading position, Wiertsema believes that 'the OECD should not restart export subsidy wars, but raise its own competitive edge'. The ECG has to focus on effectively advancing economically sustainable development and conduct a much more open and reciprocal dialogue with other parties, he recommends. More transparency is necessary to start up a meaningful dialogue with non-OECD ECAs in negotiations on a global regulatory regime for export credits. To ensure that social, environmental and human rights impacts are considered, the OECD should insist on the participation of civil society and the recipient host countries of ECA-supported transactions. Wiertsema: 'The 50th anniversary of the OECD would be an excellent occasion for the ECG to make a fresh beginning.'
The book Smart Rules for Fair Trade: 50 years of Export Credits is available online.
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