CONFIDENTIAL
ECGD Powers
11 HMG have recognised, however, that UK exporters are put at a commercial disadvantage if the United Kingdom is unable to respond to others' use of Credit Mixte and the ECGD Act of 1970 (widened in the Export Guarantees Amendment Act 1975) includes powers aimed at helping to remove this disadvantage. These powers have not been effective in practice.
12 There are two reasons for this:
(a) Ministerial statements during the passage of the ECGD
Act permit use of the powers only to match a competitive offer and then "only sparingly and in the national interest". Some information, often through commercial channels, about such competitive offers can usually be obtained but verification about terms and conditions from official government sources is rarely available (despite well-established international procedures for the exchange of information on credit offers) in time to enable ECGD to use its powers.
(b) There is no specific public expenditure allocation for
the cost of the concessionary or aid element in the financing of Credit Mixte. Unless there were to be an additional claim on public expenditure, the cost must be found from an existing Departmental expenditure programme, the obvious candidates being the ODM, DOI or DOT. No agreement at present exists on the source from which such costs should be met, and by the time
it is argued out the opportunity may well have been lost.
13 ECGD powers limit the form that support may take so that only repayment terms may be lengthened or interest rates lowered. These powers would not, for example, allow for matching a recent Dutch measure whereby the exporter receives a direct grant of a sum of money that enables the exported price of the goods to be reduced.
Possible Changes
(i) Adoption of general Credit Mixte
14 We have considered whether, having regard to the limited scope for matching action under the present LCGD powers, we should seek to adopt more positively a Credit Mixte scheme as a regular aid to exporters, on the lines operated by the French. This would enable us to compete on equal terms and could result in direct trade benefits, But objections to such a course, listed in para 10, are still strong. The adoption by the UK of Credit Mixte as a general policy instrument would require a statement in Parliament and thus be an overt change of policy. This could provoke an escalation of the credit race which it is our general policy to avoid and which our major competitors would be better placed to exploit. Potential beneficiaries in the developing countries would not be slow to press for cheapened credit by this means. It would involve substantial public expenditure. ODM would not regard such a general scheme as compatible with the developmental aims of the aid strategy. On balance the present policy of not adopting a French type general Credit Mixte scheme still seems to be the right one.
(ii) Limited use of Credit Mixte
15
Nevertheless we consider that in a limited number of cases it is
No comments yet.
Private notes are available after approval.