(FinFacts Ireland, Dublin, 14 September 2009) Although the sharp contraction in trade flows evident from the second half of 2008 was attributed primarily to a contraction in demand, tighter credit conditions were increasing the cost of trade finance. The response of the G-20 to “ensure availability of at least $250 billion over the next two years to support trade finance through our export credit and investment agencies and through multilateral development banks” was welcomed by WTO Members.

(New York Times, Geneva, 4 September 2009) A preliminary report by the World Trade Organization has found that Airbus received illegal subsidies for the $13 billion A380 superjumbo jet and several other airplanes, hurting Boeing in the battle for sales, American and European officials said Friday. [ECA Watch: While a substantial portion of Airbus and Boeing subsidies are for development costs, export credit support for commerial aircraft represented some 30% of all OECD ECA budgets in 2005, the last date for which the OECD ECG published figures about these taxpayer supported subsidies.]

(Reuters, Brussels, 15 September 2009) European Union competition authorities have cleared a German scheme aimed at unclogging the supply of export credit from crisis-hit banks. Under the scheme, the German public credit institution Kreditanstalt fuer Wiederaufbau would be allowed to buy existing export loans from banks. The lenders would use the cash to grant new export loans to purchasers outside the European Union. The EU competition watchdog, said the plan was in line with guidance provided last October on national measures to help banks hit by the crisis. It authorised the plan for six months. The EU executive has approved similar schemes for other countries in the 27-nation bloc.

(Caijing Magazine, Beijing, 21 September 2009) Almost overnight, the Export-Import Bank of China, the country’s international trade policy bank, was put under the spotlight as it was seen to move forward with a long speculated restructuring plan, after the central bank proposed a 200 billion yuan (US$29.3 bln) capital injection plan. In the wake of a drop in exports, a policy bank’s path is being re-drawn; clear strategies for allocating 200 bln yuan injection have yet to be determined.

(ECA Watch Europe, Brussels, 16 September 2009) Despite French President Sarkozy stating that companies and banks operating through tax havens and offshore financial centres should not receive public support or be part of government bailouts, France’s ECA is still permitted to back companies using tax havens. Other European governments have likewise failed to curb ECA backing for such companies. A new briefing by the European ECA Watch network documents this giant hole in government schemes to stem the leakage of money through tax havens.

(CarbonPositive, Sydney, 26 September 2009) Leaders of G20 nations meeting in Pittsburgh, hosted by US President Barack Obama, agreed to phase out oil and gas subsidies in the medium term but set no firm timetable to do so.

(New York Times, Washington, 22 September 2009) A federal bank that provides billions of dollars for overseas energy projects has drafted plans to integrate climate change into its financing decisions, but environmentalists say the emerging proposal is weak because it lacks commitments to curb overall emissions of greenhouse gases. The Ex-Im Bank’s move toward a carbon policy is part of a February settlement with Friends of the Earth, Greenpeace and cities that successfully sued the export-credit agency over its support for oil and gas, refining, and fossil-power projects

(ECA Watch, 17 September 2009) An ECA Watch memo to the OECD export credit working group focuses on the appropriateness of enhanced financing terms being negotiated by the Participants to the Arrangement on Officially Supported Export Credits in response to the challenge of climate change. Public financing from export credit agencies is a limited public commodity and should be specially designed for and restricted to public interest purposes.

(IPS, Washington, 15 September 2008) After funding a predictable boondoggle of a pipeline, the international lender hightails it out of an impoverished African nation. While this commentary focuses on the role of the World Bank, the U.S. Export Import Bank and French ECA Coface also supported this project despite NGO warnings that ” it would only exacerbate conflict in a country where corruption, poverty, illiteracy and ill health was at record levels.” ECA Watch would like to know if OECD ECAs have followed the example of the World Bank and foreclosed their loans and/or loan guarantees which were based on the conditions the World Bank now acknowledges have not been met.

(Business Standard, New Delhi, 23 September 2008) Indian companies will have to stagger their expansions as financial instutions have started tightening lending to cope with the liquidity crunch in the aftermath of the turmoil in financial markets. But what’s interesting is that funds from ECAs are significantly cheaper and are available for a longer tenure (10-13 years, including three years of construction). Typically, imports form 30-40% of project costs (large, industrial project) and corporate groups like JSW are using ECAs to fund the debt component (85%) of project imports.