The Berne Union , also known as The International Union of Credit & Investment Insurers , is an international non-profit association and community for the global export credit and investment insurance industry.
55-502: The association provides a forum for professional exchange among members, as well as promoting constructive engagement in collaborative projects with external stakeholders from across the wider trade finance industry, including banks and financiers, regulators and policy setters, traders, academics and other associations. Its mission is to actively facilitate cross-border trade by supporting international acceptance of sound principles in export credit and foreign investment. As of January 2023,
110-829: A Management Committee, with each elected position held for a term of two years. The Management Committee are supported by a permanent Secretariat, led by the Secretary General and based in London, in the United Kingdom. The Current President is Ms Maëlia Dufour, Director of International Relations, Business Development, Rating, Environment and Climate BPIFRANCE - France's Export Credit Agency. Current Vice President, Mr Benjamin Mugisha, Chief Underwriting Officer of Multilateral Insurer African Trade Insurance. Both were elected in November 2022, for
165-469: A combination of the two. ECAs currently finance or underwrite about US$ 430 billion of business activity abroad – about US$ 55 billion of which goes towards project finance in developing countries – and provide US$ 14 billion of insurance for new foreign direct investment, dwarfing all other official sources combined (such as the World Bank and Regional Development Banks, bilateral and multilateral aid, etc.). As
220-523: A different name. As such, the activities of ECAs are considered by some to be a type of corporate welfare . Others argue that ECAs create debt in poor countries motivated not by development goals but to support rich countries' industry. In addition, ECAs may soak up aid money as debt relief programs predominantly relieve poor countries from debt owed to donor countries' ECAs. ECAs are also criticised for insuring companies against political actions that aim to protect workers' rights , other human rights , or
275-607: A discrepancy between what the OECD calls de jure and de facto rates of tying, i.e. what the donors report and what they do. A major review of the Paris Declaration targets found that, in 2009, 51% (by value) of contracts was spent in the country of the donor, even though donors were reporting only 14% of their aid as tied. The report pointed out that most DAC members failed to use a public bulletin board to advertise contract tenders. The OECD's 2020 report on tied aid found this failure
330-495: A few other countries. In 2018, 87% of all DAC ODA to these countries was reported as being untied. While 19 of the 30 DAC members claimed to have untied more than 90% of their ODA to these countries, the average was dragged down mainly by the United States, which reported only 64% untied aid to these recipients. (The United States, however, was one of the few DAC countries that systematically posted open tenders for its untied aid on
385-651: A grant for the whole amount, yet cost less to the donor if some of the repayments have been made. Recognizing that ODA does not capture all the expenditures that promote development, the International TOSSD Task Force started establishing a wider statistical framework called TOSSD (Total Official Support for Sustainable Development) that would count spending on "international public goods". The TOSSD data for 2020 shows more than US$ 355 billion disbursed to support for sustainable development, from almost 100 provider countries and institutions. In March 2022, TOSSD
440-457: A level playing field (whereby competition is based on the price and quality of the exported goods and not the financial terms provided) and working to eliminate subsidies and trade distortions related to officially supported export credits. Since 1999, country risk categories have been harmonized by the Arrangement and minimum premium rates have been allocated to the various risk categories. This
495-418: A minimum degree of "softness". "Softness" is measured by a formula that compares the present value of the credit with the present value of the same amount at standardized "commercial" terms. This difference is expressed as a percentage of the credit and called "concessionality level". Thus a grant has a concessionality level of 100%, a commercial credit scores zero per cent. The higher the concessionality level,
550-571: A pool administered by some intermediate organisation, so that the delivered aid is no longer attributable to a particular original state donor. In 2019, 28% of all ODA was multilateral. The main organizations for multilateral ODA were the European Union, the IDA (the concessional lending branch of the World Bank), regional development banks and UN agencies. The breakdown given by OECD of sectors in which ODA
605-452: A public bulletin board.) ODA is widely acknowledged to be an untidy and somewhat arbitrary category of aid, its definition having been agreed by the DAC members only with difficulty and awkward compromises. Arbitrariness is seen in the fixing of the qualifying rates of loan concessionality and the applied discount rates. While in the past these rates were set at 25% and 10% respectively, as of 2021
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#1732851776177660-595: A recalcitrant borrower. These arguments for and against export credits are not new and have been studied at length in academic literature. For a good general discussion, see Baron, David P. The Export-Import Bank: An Economic Analysis. Academic Press. 1983.; or Eaton, Jonathan. "Credit Policy and International Competition." Strategic Trade Policy and the New International Economics, ed. Paul Krugman. MIT Press, Cambridge Mass. 1988. Official development assistance Official development assistance ( ODA )
715-412: A result of the claims against developing countries that have resulted from ECA transactions, ECAs hold over 25% of these developing countries' US$ 2.2 trillion debt. Export credit agencies use three methods to provide funds to an importing entity: Credits may be short term (up to two years), medium term (two to five years) or long term (five to ten years). They are usually supplier's credits, extended to
770-887: A term of two years. Mr Paul Heaney was appointed Secretary General of the Berne Union in May 2023. Members of the Berne Union meet twice per year for the Spring General Meeting (in April/May) and the Annual General Meeting (in October / November). Throughout the year a further 5-6 meetings take place on specialist topics such as: claims and recoveries, country risk, project finance, reinsurance, data reporting etc. Export Credit Agencies An export credit agency (known in trade finance as an ECA ) or investment insurance agency
825-532: Is a category used by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) to measure foreign aid . The DAC first adopted the concept in 1969. It is widely used as an indicator of international aid flow. It refers to material resources given by the governments of richer countries to promote the economic development of poorer countries and
880-603: Is a private or quasi-governmental institution that acts as an intermediary between national governments and exporters to issue export insurance solutions and guarantees for financing. The financing can take the form of credits (financial support) or credit insurance and guarantees (pure cover) or both, depending on the mandate the ECA has been given by its government. ECAs can also offer credit or cover on their own account. This does not differ from normal banking activities. Some agencies are government-sponsored, others private, and others
935-786: Is bound by WTO members' commitments with respect to subsidised agricultural exports (see the WTO Appellate Body decision on the Brazil-US cotton case as it relates to the General Sales Manager (GSM) 102 and 103 programs and other US agricultural export credits, summarized here ). At the EU level, the European Commission, in particular the Directorate General for Trade , plays a role in the harmonization of Export Credit Agencies and
990-470: Is intended to ensure that competition takes place via pricing and the quality of the goods exported, and not in terms of how much support a state provides for its exporters. The Arrangement does not extend to exports of agricultural commodities or military equipment. A recent decision at the World Trade Organization (WTO) indicates that the use of officially supported export credits in agriculture
1045-470: Is the best known international aid target. It was formalised on 24 October 1970, when the UN General Assembly adopted a resolution which included the goal that "Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7% of its gross national product at market prices by
1100-535: The Sustainable Development Goals (to be achieved by 2030 at a global level) include ODA in their targets and indicators . This applies to SDG 17 which is to "Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development". Its second target is worded as "Developed countries to implement fully their official development assistance commitments, including
1155-528: The Berne Union represents 86 member companies from 67 countries worldwide. These include government-backed official export credit agencies , private credit and political risk insurers and multilateral institutions. In 2021, Berne Union members collectively provided payment risk protection to banks, exporters and investors amounting to US$ 2.7 trillion. This total business volume represents cover of approximately 13% of total world cross border trade for goods and services, as recorded by WTO figures. The Berne Union
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#17328517761771210-482: The DAC decided to record the "grant equivalent" of loans as ODA in the year the loan was agreed. This involves complex estimation: the exact methodology took years to finalize and was only first implemented in 2019. Even then, there was no agreement in the DAC on how to treat debt relief. When this agreement was reached, in 2020, it was criticized by commentators as producing a situation in which risky loans, subsequently defaulted, could count for as much ODA as simply giving
1265-417: The DAC needs its members to have agreed clear criteria for what is counted as aid. The precise type of aid to be counted was given the name of official development assistance (ODA) (where "official" indicates that the aid is public and from governments). The full definition of ODA is: Flows of official financing administered with the promotion of the economic development and welfare of developing countries as
1320-633: The OECD arrangement in providing export credit is mandatory in EU countries under Art. 1 of Regulation (EU) No. 1233/2011. The Berne Union , or officially, the International Union of Credit & Investment Insurers, is an international organisation for the export credit and investment insurance industry. The Berne Union and Prague Club combined have more than 70 member companies spanning the globe. Its membership includes both commercial and state-sponsored insurers. Some observers view state-sponsored export credits as nothing more than export subsidies by
1375-411: The OECD made in 2014, 28 countries with an aggregate population of around 2 billion people will cease to be ODA eligible by 2030. They include emerging markets such as China, Brazil, Mexico, Argentina, Malaysia, Thailand and Turkey. Most ODA is bilateral, meaning that its state donor is identifiable at the point of delivery to intended beneficiaries. Multilateral ODA, on the other hand, is aid given into
1430-443: The OECD's arrangement on official export credits. The Arrangement is a "Gentlemen's Agreement" amongst its Participants who represent most OECD Member Governments. The Arrangement sets forth the most generous export credit terms and conditions that may be supported by its Participants. The main purpose of Arrangement is to provide a framework for the orderly use of officially supported export credits. In practice, this means providing for
1485-483: The UK, Japan and France. See chart on the right. The top 10 donors of ODA (by absolute amount transferred) in 2019 were: United States, Germany, United Kingdom, France, Japan, Turkey, Netherlands, Sweden, Canada and Italy. See pie chart below. Of these, Turkey is the only non-member of the DAC. Turkey's large ODA contribution is associated with the great numbers of Syrian refugees in the country. The OECD also lists countries by
1540-470: The aid modernization agenda: the counting of aid provided through private sector instruments (PSIs), and the construction of a system for measuring broader contributions to global public goods in support of the 2030 Agenda for Sustainable Development. The latter type of aid is expected to be recorded as Total Official Support for Sustainable Development (TOSSD), and will be a separate category from ODA. The target of spending 0.7% of gross national income on ODA
1595-497: The amount of ODA disbursed every year rose approximately four-fold in real terms during the 60 years from 1960. The level was rather stagnant up to 1973 (although inflation meant that it grew in nominal terms). It generally rose from 1973 to 1992, then declined to 1997, then increased again. The proportion of their combined gross national income (GNI) spent by DAC donors on ODA decreased from over 0.5% in 1961 to less than 0.3% in 1973. After that, while donors' incomes continued to grow,
1650-761: The amount of ODA they give as a percentage of their gross national income . In 2019 six countries met the longstanding UN target for an ODA/GNI ratio of 0.7%. The ratios of the five most generous donors in this sense, and the five highest-volume donors, are shown in the chart below. In 2021, the UK reduced its annual aid budget from 0.7% of gross national income to 0.5%. In 2019, Syria was the focus of more ODA than any other country, at $ 10.3 billion. Next were Ethiopia ($ 4.8 billion), Bangladesh ($ 4.5 billion), Yemen ($ 4.4 billion) and Afghanistan ($ 4.3 billion). China, Indonesia and Thailand were negative recipients: their repayments of past ODA loans were higher than their new receipts. See choropleth map below. According to estimates that
1705-427: The co-ordination of policy statements and negotiation positions. This is based on council decisions 73/391/EEC and 76/641/EEC. These decisions provide for prior consultations among member states on long term export credits. Member states may ask each other if they are considering to finance a specific transaction with official export credit support. EU members may not subsidize intra-EU export credits. The application of
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1760-451: The commitment by many developed countries to achieve the target of 0.7 per cent of gross national income for official development assistance (ODA/GNI) to developing countries and 0.15 to 0.20 per cent of ODA/GNI to least developed countries ; ODA providers are encouraged to consider setting a target to provide at least 0.20 per cent of ODA/GNI to least developed countries." SDG 10 (Reduce inequality within and among countries) also includes
1815-439: The donor country) had been debated periodically in the DAC. In 1992 the DAC adopted rules for ODA restricting tied aid to lower-income countries and less "commercially viable" projects: restrictions that had been pushed by the U.S. to reduce protectionism in the world trading system. The DAC made a further recommendation on untying in 2001. In 2012 the DAC began a process of modernizing its statistical system and reforming some of
1870-535: The donor country, subsistence of refugees inside donor countries, and "development awareness" programmes in donor countries. The counting of loans in ODA is problematic. Until 2018, loan disbursements were counted in full as aid in the year they were given, and repayments were negative aid in the year they were returned. Some DAC members considered this method "did not reflect actual efforts by donor countries" (perhaps particularly when looking at an individual year). So in 2014
1925-480: The effort to define aid that had been made in the DAC's 1962 "Directives for reporting aid and resource flows to developing countries". The establishment of ODA provided a basis for most DAC members to commit to the target, set by the United Nations General Assembly in 1970, that economically advanced countries should devote 0.7% of their national incomes to international aid. The definition of ODA
1980-588: The exporter, but they may be buyer's credits, extended to the importer. The risk on these credits, as well as on guarantees and insurance, is borne by the sponsoring government. ECAs limit this risk by being "closed" on risky countries, meaning that they do not accept any risk on these countries. In addition, a committee of government and ECA officials will review large and otherwise riskier than normal transactions. Officially supported export credit may be connected to official development assistance (ODA) in two ways. First, they may be mixed with ODA, while still financing
2035-451: The inclusion of humanitarian aid within ODA can seem an interference. Seen as a measure of donor countries' contribution to a common effort or to altruistic purposes, ODA is criticized for including expenditures that may mostly benefit the donor country or that are already included in that country's international legal obligations. Such types of spending include tied aid, administrative costs, imputed costs of education for foreign students in
2090-456: The level of ODA remained around 0.3 - 0.35%, except when it dipped below that level in the late 1990s and early 2000s. The USA - the donor with the largest economy - spent more than 0.5% of its GNI on ODA prior to 1966, but this proportion gradually dropped, reaching a low point of 0.1% in the late 1990s, and standing at 0.15% in 2019. Since 1960 the five largest donors of ODA have been: the US, Germany,
2145-443: The main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries ("bilateral ODA") and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions. In other words, ODA needs to contain
2200-504: The middle of the Decade [by 1975]." Sweden and the Netherlands were the first countries to meet the target, in 1974, but it has been met by few other countries since. In 2019, the annual amount of state donor aid counted as ODA was US$ 168 billion, of which US$ 152 billion came from DAC donors. In the decade 2010–2019, average annual ODA was US$ 151.5 billion (in 2018 prices). Historically,
2255-471: The modern Berne Union is structured around four committees, representing these two export credit groups ( short term and medium/long term ) along with an investment insurance committee and the so-called Prague Club Committee (PC), which was formally integrated in May 2016, having been a legally separate, but closely associated entity prior to this. The Berne Union is led by the President, Vice President and
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2310-463: The more the tied aid credit looks like ODA, the lower, the more it looks like an export credit. Partially untied credits consist of a tied and an untied part. The latter is usually intended to finance "local cost", investment cost to be made in the importing country. This part may also be in a local currency. Partially untied aid is treated as tied aid. Both officially supported export credits and tied aid credit and grants are extended on terms bound by
2365-406: The natural environment in the countries in which the investment is being made. Advocates of ECAs assert that export credits allow impoverished importers to purchase needed goods that would otherwise be unaffordable; export credits are components of a broader strategy of trade policies; and government involvement can achieve results that the private sector cannot, such as applying greater pressure on
2420-523: The rates are different for different kinds of recipient but may still be regarded as in some ways arbitrary. The criterion that ODA must primarily serve "economic development and welfare" leads to dissatisfaction because these two things are often seen as different priorities, and there are differing views about what actions are effective in leading toward development. For example, some stakeholders are particularly interested in progress toward economic convergence of rich and poor countries, and for this purpose
2475-457: The reported proportion of tied aid dropped from about 50% in 1979 to less than 10% in 2003, but rose again, and fluctuated between 15 and 20% between 2007 and 2019 (see chart on the right). This was despite agreement by the donors in the 2005 Paris Declaration to further reduce their tying of aid. While the last paragraph refers to the proportion of tied aid in overall ODA, the DAC "Recommendation" on untying applies only to Low-Income Countries and
2530-451: The same project (mixed credit). As the export credit is tied to purchases in the issuing country, the whole package qualifies as a tied aid credit, even if the ODA part is untied aid. Second, tied aid credits are not very different from export credits, except in interest, grace period (the time when there is no repayment of the principal) and terms of repayment. Such credits are separated from export credit by an OECD requirement that they have
2585-617: The three elements: This definition is used to exclude development aid from the two other categories of aid from DAC members: For example: The concept of ODA was adopted by the OECD DAC in 1969, creating a standard of international aid based on "promoting the economic and social development of developing countries" in a way that was "intended to be concessional in character". This clarified previous conceptions of aid or development assistance; some grants and loans were now differently categorized as "other official flows (OOF)". It marked an advance on
2640-493: The ways in which ODA is counted. In 2014 the DAC donors agreed that ODA should measure the "grant equivalent" of loans estimated at the time of the loan, rather than loan inflows and outflows as they occurred. It took five years, however, before this was implemented. Between 2016 and 2018 the rules were clarified for counting incidental developmental contributions by foreign military forces when deployed in underdeveloped countries for peace and security purposes. In this period there
2695-475: The welfare of their people. The donor government agency may disburse such resources to the government of the recipient country or through other organizations. Most ODA is in the form of grants , but some is measured as the concessional value in soft (low-interest) loans . In 2019, the annual amount of state donor aid counted as ODA was US$ 168 billion, of which US$ 152 billion came from DAC donors. In order to co-ordinate and measure international aid effectively,
2750-526: Was adopted as a data source for indicator 17.3.1 of the SDGs global indicator framework to measure development support. The Commitment to Development Index is an alternative measure that ranks the largest donors on a broad range of their "development friendly" policies, including: the quality of aid (for instance by giving countries fewer points for tied aid ), and considering country policies on issues such as trade, migration and international security. Several of
2805-409: Was also clarification of the criteria for counting some in-donor refugee costs as humanitarian assistance ODA. In 2019, the DAC switched its main reporting of ODA loans to the grant equivalent basis. But this approach creates problems for the accounting of debt relief within ODA, and donors only reached consensus on how to treat this in 2020. As of 2020, two major items remained as works in progress in
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#17328517761772860-530: Was founded in 1934 by private and state export credit insurers from France, Italy, Spain and the UK. These insurers sought to exchange trade information in order to collectively reduce commercial risks. The first meeting was held in Berne , Switzerland – which is where the name Berne Union comes from. While Berne is still the legal domicile of the Union, it has not met there since 1939. Notable milestones include: As of 2017,
2915-404: Was made firmer in 1972, specifying that qualifying loans should have a grant element of at least 25%. At the same time, donors (except Italy) adopted a target that at least 84% of their overall ODA should be grant, or count as grant element, rather than commercially repayable loan. This proportion was increased to 86% in 1978. The legitimacy of "tied aid" (aid dependent on the use of exports from
2970-461: Was still widespread. Hence the official statistics on tied ODA must be treated with caution. In 2019 five DAC members declared giving more than half of their ODA in the form of tied aid (Greece 100%, Hungary 78%, Poland 75%, Slovenia 74%, Austria 55%). The largest donor, the US, gave almost 40% of its ODA as tied aid, amounting to US$ 11.0 billion. Overall, DAC donors in 2019 reported US$ 22.1 billion – about 20% – of their ODA as tied aid. Historically,
3025-541: Was used in 2019 is shown in the chart below. Tied aid is aid given on condition that the money is used to buy things from the donor country or a severely limited group of countries. The legitimacy of tied ODA has long been a point of contention within the DAC. Targets have been set to reduce tying: for example in the 2005 Paris Declaration and the DAC's "Recommendation" on untying, first agreed in 1998 and subsequently maintained in revised forms. Official monitoring of performance against these targets is, however, undermined by
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