ABSTRACT
Thus, ECAs are somewhat unique in these debates concerning the benefits of trade openness because, since ECAs provide financing support for the export of domestically manufactured goods, their trade and export activities would be supported by domestic workers and firms.1 Export credits are provided for short-term financing (up to two years) for consumer goods and raw materials; medium-term financing for capital goods; and longer-term financing for investment and infrastructure related projects (Kuhn, Horvath and Jarvis 1995: 5, 14). Most ECA credit activity has been for medium and longer-term business because commercial banks covering the risks for these types of projects would charge much higher interest rates than ECAs, so export industries prefer ECA insurance (Gianturco 2001: 2). Commercial banks often do not want to assume the risk period involved in insuring projects of a longer-term nature such as large infrastructure and capital goods projects, investments of sunk capital in which losses would be difficult to recover (Moran 1999; 2006). An additional reason that commercial banks are reluctant to cover medium and longer-term financing is that these longer-term debt obligations are subject to rescheduling in Paris Club debt rescheduling
agreements (Cline 2005: 20). Thus, exporters turn to ECAs when private sector insurance is either too expensive or not available (Kuhn et al. 1995: 12, 14).2 The following sections explain the differences between the two primary institutions involved in export credit activity: the Berne Union and the Organization for Economic Cooperation and Development (OECD).3
