A note to clarify the statement made by EGCI in its response to the ECGD consultation:

  Despite major steps forward in recent years towards harmonisation within the OECD, there are still several significant areas where UK exporters are at a competitive disadvantage:

1.  PREMIUM RATES

  At the beginning of this year, all OECD ECAs agreed a common system of calculating premium, and all agreed not to undercut the OECD-calculated minimum rates. Whereas the vast majority of ECAs simply adopted the OECD system of calculating premium, so that the OECD minimum rates became their standard rates, ECGD continue to do their own risk analysis. As a result, on a handful of countries where ECGD is more pessimistic than OECD, the ECGD premium rate is higher than the OECD rate. Conversely, where ECGD is more optimistic than OECD, they are blocked from charging a lower premium rate by the OECD minimum rate agreement: UK exporters therefore lose on the swings but are not allowed to gain on the roundabouts.

2.  COVER AVAILABILITY

  It is often the case that either ECGD cover is not available for markets which other ECAs are prepared to cover, or else the volume of cover is severely restricted. Iran and Brazil are current examples of lack of cover, whilst Turkey is an example of constant restrictions of cover over the years. Main contractors and project promoters keep a constant watch on which ECAs have availability for which markets: if a particular ECA is perceived as "difficult" for a particular market, then suppliers from that ECA's country will not even be approached when it comes to the initial formation of bidding consortia and sourcing plans. It is therefore not possible for us to quantify the potential loss of business to the UK, though some measure may be gained by looking at the actual volumes of business in such countries reported by other ECAs.

3.  TIED-AID MIXED CREDITS

  The previous UK government unilaterally restricted the availability of mixed credits to poor countries only, whilst the current government has abolished them altogether. Unfortunately for the UK, other countries have continued to make tied-aid mixed credits available to intermediate-income nations. This is quite legal under OECD rules, as the credits have gone to "non-commercial" projects such as water treatment plants, railways etc. In those sectors and those countries where these mixed credits are still available, UK exporters are effectively frozen out. An example is attached of a Spanish protocol to Turkey: ECGD will be able to cite many others that will have been notified to it.

18 November 1999