September 29, 2014

Corker, Hatch Seek Update from Obama Administration on WTO Compliance for Foreign Export-Import Banks

WASHINGTON – In a letter to United States Trade Representative Michael Froman, U.S. Senators Bob Corker (R-Tenn.) and Orrin Hatch (R-Utah) asked the Obama administration to update Congress on efforts to ensure that foreign export-import banks are in compliance with World Trade Organization (WTO) rules. Recent growth in the size and scope of some foreign entities has raised questions about their adherence to the WTO Agreement on Subsidies and Countervailing Measures and standards set by the Organisation for Economic Co-operation and Development.

“We respectfully ask for an update on your investigative efforts and analysis as to whether foreign competitors are operating their ECAs in a manner consistent with their obligations under the SCM Agreement, and what actions, including at the World Trade Organization, are being considered or taken to respond to any failure to conform to such obligations,” wrote the senators to Froman. 

Complete text of the senators’ letter is included below and in the attached document.

September 29, 2014

The Honorable Michael Froman
United States Trade Representative
Office of the United States Trade Representative
600 17th Street, N.W.
Washington, D.C.  20508

Dear Ambassador Froman, 

We are writing to express our deep concerns about foreign export credit agencies (ECAs) practices that may be in violation of the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM Agreement).

As you know, Annex I(k) of the SCM Agreement recognizes that export credits provided by government-authorized institutions at below-market rates are prohibited subsidies.  The SCM agreement, however, also provides a safe harbor for ECAs that are in compliance with the terms of the Organization of Economic Co-operation and Development (OECD) Arrangement on Officially Supported Export Credits (OECD Arrangement).  The OECD Arrangement, for example, requires ECAs to charge certain minimum interest rates for export credits financing.

Because of the growth in ECAs since the SCM Agreement entered into force in 1995, particularly in non-OECD countries, only about one-third of officially supported export credit comes under the OECD Arrangement.  We are concerned that some of our trading partners may be increasingly using their ECAs in a manner inconsistent with the SCM Agreement and the practices established under the OECD Arrangement, potentially setting off an export credit arms race.

Recent legislation directed the Secretary of the Treasury to pursue negotiations to substantially reduce, and ultimately eliminate export subsidies.  We support these efforts, but to date, the negotiations have not borne fruit.

While the negotiations proceed, it is important that the Office of the United States Trade Representative remain vigilant with respect to enforcement of the terms the SCM Agreement, including its safe harbor provisions, so as to prevent unfair market distortions.  We respectfully ask for an update on your investigative efforts and analysis as to whether foreign competitors are operating their ECAs in a manner consistent with their obligations under the SCM Agreement, and what actions, including at the World Trade Organization, are being considered or taken to respond to any failure to conform to such obligations. 

Sincerely,

Senator Bob Corker                                        Senator Orrin G. Hatch                      
Ranking Member                                            Ranking Member                  
Committee on Foreign Relations                      Committee on Finance          

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