REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Annual Report on negotiations undertaken by the Commission in the field of export credits, in the sense of Regulation (EU) No 1233/2011
Date: 2016-11-18
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: OECD, State aid, activity report, export credit, international negotiations, sectoral agreement, third country

EUROPEAN 
COMMISSION 

Brussels, 18.11.2016  
COM(2016) 718 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Annual Report on negotiations undertaken by the Commission in the field of export 
credits, in the sense of Regulation (EU) No 1233/2011 

EN 

   EN 

 
 
 
 
  
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Annual Report on negotiations undertaken by the Commission in the field of export 
credits, in the sense of Regulation (EU) No 1233/2011 

1. Introduction: 

Regulation  (EU)  No  1233/2011  of  the  European  Parliament  and  of  the  Council  of  16 
November  2011  on  the  application  of  certain  guidelines  in  the  field  of  officially  supported 
export credits and repealing Council Decisions 2001/76 EC and 2001/77/EC1 foresees in its 
Annex  I  that  the  European  Commission  "according  to  its  competencies  shall  provide  to  the 
European Parliament an annual report on negotiations undertaken, where the Commission has 
negotiating authorisation in the various forms of international cooperation, to establish global 
standards in the field of officially supported export credits." 

The present report covers the period July 2015 to August 2016.   

2. Major developments in export credits during the reporting period: 

Since  the  late  1970s,  the  Export  Credit  Committees  of  the  Organisation  for  Economic  Co-
operation  and  Development  (OECD)  have  been  the  main  fora  for  negotiating  specialised 
international  rules  on  export  credits.  Over  the  last  decades,  the  OECD  Arrangement  on 
Officially Supported Export Credits has effectively ensured a level playing field between 
the export credits programs of its 9 Participants2. In addition to general rules on export credit 
transactions,  the  Arrangement  also  contains  so-called  "Sector  Understandings"  covering 
special  financing  rules  for  specific  industrial  sectors  (Ships,  Nuclear  Power  Plants,  Civil 
Aircraft,  Renewable  Energy  :and  Climate  Change  Mitigation,  Rail  Infrastructure).  The 
Arrangement  also  contains  distinct  rules  for  specific  categories  of  transactions  (like  project 
finance) and addresses the complementarity between export credits and trade-related aid. 

As  already  mentioned  in  previous  reporting,  the  only  weakness  in  the  generally  very 
successful  history  of  the  OECD  Arrangement  is  that  it  has  not  been  possible  to  convince 
some of the big new players (notably China), which have emerged in the export credit field in 
recent years, of joining the Arrangement as well. 

For  this  reason,  the  International  Working  Group  on  Export  Credits  ("IWG")  was 
created  in  2012  following  a  high  level  political  initiative  by  the  US  and  China.  The  IWG 
process has 18 Members (including the 9 Participants to the OECD Arrangement as well as 
major new export credit providers like China, Brazil, India and the Russian Federation). The 
official objective of the IWG is to agree on a new set of international disciplines on export 
credits among a wider set of participants than the OECD Arrangement. 

1. OJ L 326, 8.12.2011, p. 45. 
2 The EU, the United States, Canada, Japan, Korea, Norway, Switzerland, New Zealand and Australia. 

2 

 
 
 
  
 
 
 
 
 
 
                                                 
Like  in  previous  years,  the  European  Commission  therefore  had  to  represent  the  European 
Union  in  international  export  credits  talks  at  two  different  levels.  While  the  IWG  process 
obviously has an immense strategic potential, it will still take time to achieve tangible results 
and in the meantime the relevance of the OECD based work on export credits remains very 
high. This has been illustrated in an impressive manner by the conclusion of the new Sector 
Understanding  on  Export  Credits  for  Coal-Fired  Electricity  Generation  Projects  in 
November 2015 (for details see below). The high level of technical expertise and institutional 
memory  on  export  credit  matters  developed  in  the  OECD  over  the  years  also  has  to  be 
considered a remarkable asset.    

3. The International Working Group on Export Credits: 

During the reporting period, the IWG has had the following official meetings: the 9th Official 
Meeting  in  October  2015  in  Washington,  the  10th  Official  Meeting  in  Beijing  in  February 
2016 and the 11th Official Meeting in July 2016 in Berlin. 

The  9th  Official  Meeting  in  Washington  (14  to  16  October  2015)  marked  the  start  of  the 
talks  on  horizontal,  general  rules  applicable  to  all  export  credit  transactions,  after  an  initial 
phase  of  more  exploratory  talks  limited  to  export  credits  in  two  specific  sectors  (medical 
equipment and ships). The talks on medical equipment (de facto considered already before as 
a preparation for the talks on horizontal rules) have been phased out since, while discussions 
on the ship sector continue. 

The talks on the horizontal rules – both in Washington and at the 10th Official Meeting (23 to 
25 February 2016 in Beijing) - have not been without difficulties, as there are considerable 
divergences  of  views  on  the  way  how  overall  provisions  on  the  "scope"  and  "purpose"  of  a 
future  set  of  horizontal  disciplines  could  best  be  defined.  Finding  perfect  theoretical 
definitions for these terms had not been possible in the OECD Arrangement either, but a good 
practical understanding has developed over the years among its Participants. At the level of 
the future IWG disciplines, it will also be important to develop a clear understanding which 
transactions and which financial institutions are to be covered, notably as the Participants to 
the  IWG  process  come  from  a  much  broader  range  of  diverse  institutional  traditions  and 
business cultures.  

Another  big  challenge  –  already  noticed  during  the  initial  phase  of  sectorial  talks,  but 
becoming even more relevant in the phase of the more sophisticated and complex horizontal 
talks – are the inconsistencies between official meetings which are caused by the permanent 
rotation  of  chairs:  While  the  US  when  hosting  the  Washington  Meeting  was  very  keen  on 
starting  talks  on  a  horizontal  text  immediately,  the  Chinese  Delegation  when  hosting  the 
following  meeting  focused  the  agenda  almost  entirely  on  presentations  on  what  they 
considered as cross-cutting issues of general interest.   

When hosting the 11th Official Meeting (6  to 8 July 2016 in Berlin),  the  EU  opted for an 
approach  based  on  "Building  Blocks"  for  horizontal  text,  deliberately  choosing  less 
controversial topics (e.g. maximum repayment terms, maximum official support, treatment of 
local  cost  and  repayment  profiles).  This  allowed  a  rather  constructive  re-launching  of  the 
discussions on horizontal text. Parallel discussions on the current export credit practices of the 
various IWG Members – on the basis of a case study – proved to be rather fruitful as well. It 
was  also  possible  to  complete  a  Transparency  Exercise,  in  which  information  on  the 

3 

 
 
 
 
 
 
 
 
respective  export  credit  systems  of  the  individual  IWG  Members  was  collected.  As  regards 
the  logistics  of  the  meeting,  the  European  Commission (who chaired it on the behalf of the 
European  Union)  had  accepted  the  generous  offer  of  the  German  authorities  to  hold  the 
meeting in Berlin, in the premises of the Federal Ministry for Economy. This new approach – 
all  EU  hosted  IWG  Meetings  so  far  took  place  in  Brussels  –  was  a  good  opportunity  to 
demonstrate the diversity of the European Union.  

As  regards  the  ship  sector,  the  IWG  has  had  quite  constructive  discussions  at  all  the  three 
meetings  in  question.  Good  progress  has  notably  been  made  in  agreeing  on  certain  sector-
specific aspects (categories of vessels to be subject to the new ship sector rules). It however 
also  has  to  be  kept  in  mind  that  only  a  part  of  the  IWG  Members  has  an  active  interest  in 
ships.  Besides,  as  regards  financial  conditions  in  the  proper  sense  of  the  word,  it  will 
obviously be more prudent to give priority to agreeing on them in the horizontal rules in the 
first place and then decide which derogations from the general rules would be appropriate for 
the Ship Sector3 

In  parallel  to  the  text  discussions,  there  have  been  considerable  efforts  over  the  last  year  to 
achieve an increase in the efficiency of the IWG's institutional structures: The EU, the US 
and  many  other  Delegations  have  for  a  long  time  felt  that  in  particular  the  nomination  of  a 
permanent  presiding  officer  (e.g.  a  Chairman  or  a  Secretary  General),  who  could  facilitate 
consensus-finding among the IWG Delegations and ensure the necessary technical coherence 
of  the  work  on  the  texts  plus  provide  continuity  of  activities  between  the  official  Meetings. 
China  initially  reacted  with  extreme  reluctance  to  such  a  proposal  and  argued  that  a 
permanent  venue  for  the  IWG  would  be  more  important.  At  the  time  of  writing  this  report, 
intense  discussions  were  ongoing  on  finding  a  compromise  acceptable  for  everyone  (most 
likely on the basis of a package solution addressing both elements). The objective remains to 
be in a position to agree on more efficient institutional structures for the IWG by the time of 
the 12th IWG Meeting in Brasilia in December 2016.    

Generally speaking, there has been some movement in the IWG during the reporting period. 
The  process  still  constantly  requires  initiatives  notably  form  the  US,  EU  and  other  OECD 
Participants, although other IWG Members are gradually getting more engaged. China is still 
often  showing  certain  reserves  and  progress  is  not  achieved  easily.  Regular  support  in  the 
form of raising the IWG issue in appropriate bilateral meetings and multilateral channels (G7, 
G20 etc) remains a must.  

4. Developments in the OECD during the reporting period: 

The most important achievement in the OECD Export Credit Committees during the reporting 
period  was  the  adoption  of  the  Sector  Understanding  on  Export  Credits  for  Coal-Fired 
Electricity  Generation  Projects  on  18  November  2015.  The  conclusion  of  this  Sector 
Understanding  –  accomplished  in  time  for  the  21st  Conference  of  the  Parties  of  the  UN 
Framework  Convention  on  Climate  Change  (Paris,  30  November  to  12  December  2015)  – 
marked  the  end  of  a  process  of  two  years  of  highly  complex  and  controversial  discussions, 

3  For  historical  reasons,  the  OECD  Ship  Sector  Understanding  is  in  its  substance  not  very  coherent  with  the 
general  OECD  Arrangement  –  an  example  which  should  not  be  followed  when  designing  the  relationship 
between general and sectorial rules in the future IWG disciplines.   

4 

 
 
 
 
 
 
 
 
                                                 
arguably  the  most  political  negotiation  that  took  place  in  the  OECD  Export  Credit 
Committees in recent years. 

Prior  to  the  entry  into  force  of  this  new  Sector  Understanding,  the  OECD  Arrangement  did 
not have a regime on the financing of coal-fired plants4. The Arrangement's general rules for 
the  financing  of  non-nuclear  power  plants  applied  to  them  as  well,  which  meant  in  practice 
that even the most polluting coal plant could benefit from better financing conditions than a 
standard export credit transaction.  

Under the new Sector Understanding, the situation has completely changed: Granting export 
credits for coal-fired power plants will now only be possible, if it is clearly demonstrated that 
no less carbon-intensive energy alternative can be used for the project in question and that it is 
compatible with the host country's national energy policy and climate mitigation policy and 
strategy.  As  a  general  rule,  only 
technology 
("ultrasupercritical")  may  be  financed.  The  support  of  plants  built  in  less  advanced 
technologies  will  only  be  possible  under  very  specific  circumstances  (mainly  in  the  case  of 
exports of smaller sized plants to IDA-eligible countries) and more rigid financing conditions 
apply. 

the  most  efficient 

the  export  of 

While this new regime clearly means a big step forward when compared to the previous status 
quo, it is regrettable that it is not as ambitious as the text proposed by the EU and attached to 
the  Commission's  proposal  for  a  Council  Decision  under  Article  218(9)  TFEU.  It  however 
also has to be taken into account that – due to the highly controversial nature of the topic – 
achieving  an  agreement  in  the  OECD  at  all  and  within  a  reasonable  period  of  time  must 
already in itself be considered a major success5.  

Besides, the new Sector Understanding (which enters into force on 1 January 2017), contains 
a strong and mandatory review clause. This will provide a platform for aiming for even more 
ambitious limits on the financing of coal plants in the near future. 

Among the other activities in the OECD during the reporting period, the negotiations on the 
rules for minimum premium to be charged for transactions in High Income Countries 
deserve to be mentioned in particular. This very complex and technical subject had been the 
topic  of  long  discussions  between  technical  experts  in  recent  years.  Although  a  final 
compromise  proposal  had  been  elaborated  for  the  OECD  meetings  of  November  2016,  it 
turned out – rather unexpectedly - that the US Treasury eventually could not accept it. While 
this  created  some  disappointment  among  delegates  in  the  first  place,  the  EU  -  after  a  long 
series  of  technical  exchanges  –  in  mid-May  2016  managed  to  bilaterally  agree  on  a 
compromise formula with the US Delegation. This compromise was presented to the OECD 
Participants  in  June  2016.  By  the  time  of  writing  this  report,  no  opposition  to  it  has  been 
expressed  by  any  Participant  and  will  form  the  basis  for  an  attempt  at  achieving  a  final 
agreement in the OECD in November 2016.  

The  Commission  will  keep  the  European  Parliament  and  the  Council  duly  informed  of  new 
developments.  

4  Leaving  aside  the  possibility  under  the  Climate  Change  Sector  Understanding  to  grant  a  special  maximum 

repayment term of 18 years for specific Carbon Capture and Storage projects. 

5 This also goes for the EU level, as Member States had very different positions on this topic. 

5