export financing to other sectors. He also contends that the provisions of export credit
insurance and guarantee programs are economically justified due to non-payment risks
associated with importing countries and if importing countries face imperfect capital
markets. From financial strategy, not many private financial institutions from foreign
countries would be willing to lend or buy government bonds of those countries face
political turmoil or reschedule their heavy debt with the Paris Club5. As mentioned
above, during debt crisis in the 1980s most foreign commercial banks and private lending
institutions were reluctant to lend to least-developed and developing countries.
The principle guidelines on the use of export credits for manufactured goods
resulted from a gradual and long series of negotiations of the member countries of the
OECD (known as Arrangement) from 1978 to 1997. It is beyond the scope of this paper
to provide historical negotiations and consensus agreements of the Arrangement6. Thus,
the remainder of this section will only highlight the benchmarks of the Arrangement,
which were consensually agreed to prevent export credit races in export ofe manufactured
goods and which are relevant to the current negotiation for agricultural exports.
The benchmarks included credit terms and conditions of export credits. The
credit terms refer to interest rates, length of the repayment terms, down payments, and
risk premium rates. The conditions of export credits refer to the financial
5 The Paris Club is an informal group of creditor governments that meet on a regular basis in Paris to
reschedule bilateral debts. Creditors meet with a debtor country in order to reschedule its debts as part of
international support provided to a country that is experiencing debt-servicing difficulties and is pursuing
an adjustment program supported by the IMF (Ross and Harmsen, 2001).
6 OECD (1998) summarizes historical events of negotiations and consensually agreed principle guidelines
reached by the Arrangement from 1978 to 1997.