ECAs and Sustainable Development Export Credit Agencies and Sustainable Development: Challenges and Opportunities Antonio Tricarico Coordinator CRBM, Italy Brussels, 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  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!