Improving the Role of Eximbanks/ECAs in the OIC Member States
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such as what occurred during the Global Financial Crisis of 2008-2009. This was
particularly the case during that period when commercial banks were unable to maintain
their trade credit lines with many emerging markets, creating significant unmet demand.
In situations like this, having a viable ECA entity as vital lifeline to be used immediately
to establish a new instrument and program is an important competitive advantage.
However, it is important to note that the issue of market disruption resulting from the
Global Financial Crisis is largely a Western phenomenon. Most OIC countries were not
directly affected by the crisis as they were less integrated in the global economy.
The evaluation of the existence of market failure – either gap or disruption – is far from
straightforward and easy. Markets, and accordingly failures, are very dynamic and
context-specific and so ECAs have a responsibility to stay abreast of the changes to the
private market’s appetite and capacity to serve the export sector. However, a market gap
may exist for a very good reason, namely that the risks involved are just too high and for,
even the ECA, it would be imprudent to address them.
1.4 ECA Competition and International Rules
ECAs do not compete among themselves; it is rather exporters that compete, each with the
backing of their own ECA. However, a subsidized financing package may facilitate a company to
lower its overall costs and help to be more competitive internationally. For this reason, the OECD
established a set of rules for ECAs providing support, to avoid the inevitable “race to the bottom”
of subsidized financing packages, so that exporters could compete on the basis of price and
quality of their products or service and not on the price of their financing.
While OECD countries and a number of other countries have adopted the OECD Arrangement
terms and conditions, other countries (e.g. China) have not, which can lead to an unlevelled
playing field in terms of the financing.
1.4.1 The WTO and the OECD Arrangement on Export Credits
For WTO members, government-backed financial assistance to national exports would, in most
cases, be considered illegal export subsidies. Other WTO members damaged by such subsidies
are entitled to take trade actions against the country found to be providing the subsidy.
WTO laws are created to promote free and fair trade. Yet ECAs, by their very nature, are created
for the purpose of benefitting national exports, and exporters, and hence would appear to be
fundamentally at odds with international laws created to avoid subsidy competition between
governments. So how do the ECAs of WTO member states conform to their trade obligations
while supporting national exports?
1.4.2 The OECD Arrangement and the “safe haven”
An annex to the WTO Agreement on Subsidies and Countervailing Measures deals with this
question in an “Illustrative List of Export Subsidies”. Specifically, item (k) of Annex 1 states:
The grant by governments (or special institutions controlled by and/or acting under the
authority of governments) of export credits at rates below those which they actually have
to pay for the funds so employed (or would have to pay if they borrowed on international
capital markets in order to obtain funds of the same maturity and other credit terms and