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Title: A study of officially supported export insurance and finance systems
Author: Mulligan, R. M.
Awarding Body: University of Bradford
Current Institution: University of Bradford
Date of Award: 1982
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The main objectives of this study were to determine: the features of export insurance and finance, together with the historical perspective on fixed-rate finance and insurance, with a view to providing answers leading to the present-day situation; the make-up of each country's system in mobilisat:i.on methodology and growth trends with a view to finding if one system has definite advantages over another; the nature, effects and efficiency of subsidisation in the support of fixed-rate exports to developing countries; country attitudes to the development and relevance of international control of interest rates and maturities including the prospects and consequences of change. Official support for fixed-rate finance and insurance methods developed after World War 2 as markets developed from being "supplier" to "buyer" oriented and the competition.for the exports of capital goods between exporter countries increased. Official organisational arrangements and methodology of operation which developed to meet these requirements are all different for all the countries .studied, but there appears to be no specific advantage in this execpt that operating costs for the Japanese are lower because the Japanese trading companies (the Sogoshasha) take a lot of the cost element away from EID/MITI. Main programme comparisons show that in terms of depth of programmes available, the UK stands out well. We have the most comprehensive programme in the short-term being.the only country to offer concessionary (though not fixed-rate) financing. For medium and long-term programmes, however, the differences are less pronounced. France has the most comprehensive medium and long-term supplier credit programme, and in the buyer credit field (where most of the growth has occured) only West Germany does not provide unconditional financial guarantees. From the results point of view, however, and considering that fixed-rate finance and insurance developed to promote the export of capital goods and industrial projects, the effects of the UK system in the past appear to have been mis-directed. Indeed, in terms of total business covered the proportion of medium and long-term business written over the past decade has been, on an annual average basis, two to three times greater in each of the other four countries. To a certain extent this is a reflection of the direction of trade,for the ECGD conducts about 60% of its business in developed countries, whereas for the other countries most of the business is written in developing and centrally planned countries, which are really the nations for which fixed-rate financing developed. However, whereas all the other four countries appear to have reached maturity in their proportion of medium and long-term business to total business written, that proportion for the UK is growing and is being re-directed toward LDCs: this growth can be maintained by the introductic of exchange risk insurance and low-rate Yen financing to the special facility programme. Over a 15 year period to 1980, apparent price subsidies to overseas buyerr have moved from a mainly negative position (no subsidy) to a total positive position (subsidy), ie in 1965 only the UK experienced a positivE subsidy to overseas buyers. Thus on the face of it, the transfer of resources to buyer countries has taken place at less than market value. From 1980, for estimated deals over the medium and long-term, this situation is expected to be maintained for all classes of buyer countriesmovement in common fixed-rates set to Consensus Guidelines. Estimates on the subsidy cost to the five governments show that France has the greatest subsidy element - in US dollars - with the UK second. The position of the USA is forecast to deteriorate to a subsidy element of US~.260m by 1983, so long as US Government borrowing rates remain high. This fact is a prime reason why the USA is lobbying for continued and substantial increases in the Consensus Guidelines fixed-rates. Methods used in the control of subsidies have centred mainly on the exchange of information through the Berne Union and, since July 1976, at government level through a series of "Gentlemen's Agreements" known as the Consensus Guidelines: the GATT is not involved. Upward movements in the fixed Consensus rates have occured, though not as fast as the continual upward movement in government borrowing rates in some countries in recent years, notably the USA; this has given rise to the subsidy simplifications. This semi-inflexible nature has led governments to lower fixed-rates and increase maturities through the use of mixedcredits (the Consensus allows a great element of up to 25% for the financed portion) and local cost support. The continual use of mixed credits and other methods outside the Consensus framework, plus the increasing use of sight Letters of Credit for short-term business, are the prime reasons why, for all countries, the proportion of total business covered to exports, has been falling over the past decade. These factors have given rise to suggestions for the Consensus' abolition. This is unlikely to arise as it would lead to a trade war in longer maturities and lower fixed-rates, thus increasing the subsidy elements for exporter governments, ie the opposite effect to what the USA is trying to achieve. More flexibility, however, is likely to be built into the Consensus in the future
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Management & business studies Management