Export Credit Availability and Global Trade
| Author | Andreas Klasen |
| DOI | http://doi.org/10.1111/1758-5899.12025 |
| Date | 01 February 2013 |
| Published date | 01 February 2013 |
Export Credit Availability and Global Trade
Andreas Klasen
Head of Economics and Policy, PricewaterhouseCoopers, Hamburg
Global trade plays an important role in strengthening the
economy, and generating growth through trade has
been a central pillar in the policy strategy of many coun-
tries. As several authors have observed, international
trade played a substantial role in strengthening eco-
nomic recovery during the 2008–09 recession and the
euro debt crisis as a non-debt-creating source of growth.
Government instruments such as export credit agencies
(ECAs) have successfully supported trade flows during
these crises. ECAs play a crucial role in the promotion of
exports in both highly industrialised and developing
economies. They facilitate exports and secure jobs in the
national economy. Furthermore, they give importers in
emerging markets access to finance in situations and on
terms not available in private markets. Governments and
international financial institutions thus step in to fill the
financing gap left by private markets.
Exporters frequently require export credits and insur-
ance cover for risks linked to export transactions. Typi-
cally, these risks arise from nonpayment for political or
commercial reasons. Political causes of loss can be the
lack of hard currency in the buyer’s country or, for exam-
ple, wars, civil unrest or a payment moratorium imposed
by a government. Commercial risks include payment
defaults by the customer or insolvency leading to tempo-
rarily uncollectible receivables or full write-offs. The arti-
cle by Coleman lays out the need for export credit and
export credit insurance. Because the export credit cover-
age available from private insurance companies is some-
times restricted, export transactions can often be realised
only on the basis of governmental support. This includes,
for example, manufacturing risk insurance, short-term
cover for nonmarketable risks and credit insurance for
medium- and long-term export business.
Coleman’s article regarding the necessity of export
credit and export credit insurance is followed by a discus-
sion of the role of ECAs in a BRIC economy by Muralidhar.
As official or quasi-official branches of their governments
and an integral part of national governments’industry
and trade-promotion strategies, ECAs are highly relevant
for fast-growing economies such as Brazil, Russia, India
and China. These countries pursue their aims by provid-
ing an increasing amount of export credit insurance facili-
ties for export transactions through direct lending or pure
cover support. Collectively, ECAs account for the world’s
largest source of government financing for private-sector
industries: together with investment and private credit
insurers, they covered more than £1.2 trillion of global
trade in goods and services in 2011, comprising more
than 10 per cent of international trade –a record amount.
Muralidhar shows how the Indian ECA (ECGC) plays an
important role in, for example, supporting banks that
extend export finance.
Export credit availability and the importance of ECA
support are discussed in detail by Luketa. He gives evi-
dence of why ECAs have to act countercyclically and
prove their capability as an effective instrument against
market failure. As discussed by several other authors,
ECAs have to provide sufficient insurance facilities in the
future in order to foster growth through trade. They
have to confirm their strong commitment to remaining
reliable partners for exporters and financing banks
where the private market fails to supply sufficient
financing and insurance. Therefore, governments will
continue to be important players for world trade flows
because of the continued shortage and high costs of
export finance. Furthermore, it is of crucial importance
that in the future ECAs are reliable, focus on new or
amended products, and develop cover and country poli-
cies further. In this context, the article by Carricßo high-
lights the challenges and opportunities for export
financing in Brazil. The author points out that, following
years of economic stability and sound policy, the ECA
offer is necessary to assist export growth in a more
competitive world.
In conclusion, all of the authors show that ECAs are
important instruments to support growth through trade.
However, it should also be mentioned that ECAs have to
liberalise rules governing the eligibility of nondomestic
content because of changing supply chains and increas-
ing globalisation. They should include aspects of foreign,
developmental or structural policy. In addition, common
rules for ECAs have to be developed further without
excess regulation endangering growth through trade.
This includes an integration of both the BRIC economies
and other developing countries to implement global
standards and create a level playing field for exporters
around the world.
Following the 2008–09 recession and the financial and
sovereign debt crisis in Europe, the footprint of govern-
©2013 University of Durham and John Wiley & Sons, Ltd. Global Policy (2013) 4:1 doi: 10.1111/1758-5899.12025
Global Policy Volume 4 . Issue 1 . February 2013
108
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