October 28, 2012 4:56 pm
Amid subsidy battles between big economies, one front is usually relatively quiet: the export credits that states extend to foreign buyers to finance purchases from their own country.
For years the big trading powers have maintained a pact at the Organisation for Economic Co-operation and Development, the advanced economies club, constraining them from subsidising their exporters by giving credits at below-market rates. The EU and US have been suing each other at the World Trade Organisation over production subsidies for Airbus and Boeing for nearly a decade, yet they have managed to agree export credit rules for aircraft without recourse to litigation.
But the rise of trading powers such as China has disturbed the peace. Beijing has been accused of giving easy credit terms though agencies such as Export-Import Bank of China.
The EU has complained about Beijing’s export credits, and the countervailing duty case that the European Commission has attempted to bring against imports of Chinese telecoms equipment is believed to be largely based on the issue. China denies accusations of unfair subsidy – but it is not an OECD member and does not submit to the rules of the pact.
This year Beijing agreed to negotiate with Washington on rules to ensure transparency and level the playing field in export credit, aiming to conclude an agreement by 2014. Sceptics note that China agreed on bilateral talks back in 2011, which have produced little.
In one case the US decided that, if it could not beat China, it could join it. Last year Export-Import Bank of the US matched easier Chinese financing terms to help General Electric win a Pakistani order for 150 diesel-electric locomotives.
That has not been followed by a spate of similar cases – and the US consulted other OECD countries before extending the loan – but there is no doubt the advent of emerging market trading powers with big export credit operations has disturbed a calm.
“There is no epidemic of loosening export credit standards among OECD members,” says Steven Tvardek of the OECD, “but there is a debate about how to deal with de facto export credit subsidies from some of the big emerging markets.”
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