ECAs and Sustainable Development

Export Credit Agencies and Sustainable Development: Challenges and Opportunities

Antonio TricaricoCoordinator CRBM, Italyatricarico@crbm.orgBrussels, June 20th, 2006

ECAs and Sustainable Development

A European challenge ECAs and sustainable development: typical

example of difficulty to achieve policy coherence at EU level

EU advanced on environmental priorities at int’l level (climate), social and labour issues, human rights

Offensive stand on int’l trade, despite strong internal market, failure to “export” home best practices abroad

European ECAs in average still lagging far behind in implementing best practices

ECAs and Sustainable Development

Challenges for the Sustainable Development agenda Key int’l Conventions and their Protocols in

force (climate, biodiversity), still side-lined in financial and trade decision-making

Limited attempts to mainstream in practice sustainable development issues in the trade and finance agenda (i.e. SIA on trade), marginalisation of right-based approach to sustainable development

Lack of resources to implement actions, failure of Johannesburg plan of action and PPP paradigm

ECAs and Sustainable Development

Challenges for ECAs OECD-based ECAs’ business under stress

due to non-OECD-based ECA competition and lower interest rates of private lenders

Political risk increases due to global instability and premiums higher (only big companies can afford)

Difficulties in break-even, need to use secondary financial markets, risks of creating losses for governments

ECAs and Sustainable Development

The failure in European policy coherence EU member states resisted improvements

to Common Approaches proposal in 2001-2003

Despite OECD is “easier” multilateral context than WTO, EU did not take advantage

Discretionary implementation of Common Approaches within EU, and ad hoc approach by each Member State

European ECAs far from being regarded as a sustainable development best practice in global trade

ECAs and Sustainable Development

Re-thinking the WTO carve-out Need to conceive differently the exemption

from the WTO system, while facing more critique from non-OECD countries

Exemption to be allowed if compliance with int’l environmental and social commitments - that cannot be mainstreamed in WTO system

Southern ECAs to negotiate and abide to the new “carve-out” as well; mechanism to foster sustainable South-South trade

ECAs and Sustainable Development

ECAs’ structural limitations in promoting sustainable development Small local content, limited technology

transfer Sovereign counter-garantees produce debt;

often full coverage of political risk Commercial confidentiality: sustainable

development requires broad participation as pre-condition

Lack of in-house capacity and cultural limitation in approaching sustainable development issues (private sector driven)

ECAs and Sustainable Development

The development dilemma for ECAs Despite efforts to identify a positive role for ECAs – i.e.

renewables, carbon trading – structural limitations do not allow significant progress

New discourse at the OECD on ECAs and development objectives – limited business in poorer countries

Any international agency (including ECAs) is a “development actor”, however not necessarily inspired by a pro-active strategy to reach international agreed development objectives (as in the case of ECAs)

International trade brings clearly significant environmental and social impacts, need for policy coherence

Not needed a development mandate for ECAs, but crucial to minimise as much as possible their negative impacts through a coherent “do no harm” approach at different levels

Not necessarily MDB approach fit to ECA logic: ECAs can’t improve much a project by simply financing it, as MDBs claim to do

ECAs and Sustainable Development

A strict “do no harm” approach for ECAs New approach to transparency (i.e. Aarhus), to reduce

defaults and new debt Transparency on existing debt and its restructuring at

the Paris Club Stop accounting of ECA debt cancellation as ODA (real

additionality) Limited use of full coverage on political risk “Institutional coherence” at national level: international

negotiations, outsourcing for environmental and social services

New participation approach: advisory boards including trade unions and civil society, not only private sector

Sectoral policies including international commitments (portfolio targets)

“No-go” policies (environment, human rights)

ECAs and Sustainable Development

From Common Approaches to Shared Responsibilities Upcoming revision of Common approaches by the end

of 2006 Need for a more progressive European position for

achieving policy coherence First step for defining a clear-cut “do no harm”

approach Strategy to covenant all environmental, social and

human rights clauses in loan/guarantee agreements Mandatory approach under EU law – as a first step

toward conceiving a new European ECA-type mechanism delinked by national interests and focused on common EU priorities on sustainable development

ECAs and Sustainable Development

Thank you for your attention!atricarico@crbm.org