Most people don’t know what export credit agencies are, but virtually every country has one. Using public revenues, these state agencies finance, insure, and otherwise subsidize the exports and foreign investments of their country’s favoured and well-connected firms—all in the name of international trade.
Probe International wants to shut them down.
ECAs are modern mercantilist organizations that distort markets, give life support to smokestack industries, destroy environments, finance dictators against their people, turn private sector risk into public sector debt, and promote cronyism. And they do all of that, while lacking a legitimate public policy purpose or economic function.
As Eugene Lawson, a former acting chairman and president of the U.S. Export-Import Bank, once explained, export aid is a “lousy and costly way to do business.”
The evidence of boondoggles made possible by ECA support—the Three Gorges dam in China, the Norwegian shipping deal to Ecuador, the Manantali dam in the Senegal River basin, the Bataan nuclear power station in the Philippines, pulp and paper mills in Indonesia, the Ok Tedi Mine in Papua New Guinea, military exports to Iraq—is extensive and well documented. ECAs back projects that are too risky and in markets that are too “dodgy” for the private sector. Their feasibility studies are prepared by equipment suppliers, their products marked up by as much as 100%. They operate in secret, without effective public oversight. Their business environment—state-to-state deals in the absence of sunshine laws—makes their operations a hothouse for corruption. Because they insist on sovereign guarantees and counter-guarantees from Third World governments, should purely private deals sour, they convert private corporate risk into public risk.
Take Canada, for example: Five decades of politically motivated export credit – in the form of government loans and guarantees channelled to Canadian companies and their Third World partners through Export Development Canada – has promoted patronage, international pork barrel and cronyism, corruption, odious debts, and environmental harm.
In the absence of any legitimate public policy benefit, and in the presence of overwhelming evidence of harm done by ECAs, Probe International argues for the orderly termination of all ECA operations.