Explanatory Memorandum to COM(2016)779 - EU position in the Working Party to the OECD Arrangement on Officially Supported Export Credits with regard to Market Benchmark Pricing Rules

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier COM(2016)779 - EU position in the Working Party to the OECD Arrangement on Officially Supported Export Credits with regard to Market ...
source COM(2016)779 EN
date 08-12-2016


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

The OECD Arrangement on Officially Supported Export Credits (the 'Arrangement') is a Gentlemen's Agreement between Australia, Canada, the European Union, Japan, Korea (Republic of), New Zealand, Norway, Switzerland and the United States. Brazil, although not an OECD member, is a Participant to the Arrangement's Sector Understanding on Export Credits for Civil Aircraft.

The main purpose of the Arrangement is to provide a framework for the orderly use of officially supported export credits. In practice, this means providing for a level playing field, whereby competition is based on the price and the quality of the exported goods and not the financial terms provided. Furthermore, it aims to eliminate subsidies and trade distortions related to officially supported export credits.

The Arrangement came into existence in 1978, building on the export credit 'Consensus' agreed among a number of OECD countries in 1976. Prior to this time, the lack of rules set the stage for competition amongst governments to provide the most attractive financial terms in support of exporters competing for trade contracts resulting in the emergence of financial subsidies and potential trade distortions. The Arrangement places limitations on the terms and conditions of officially supported export credits and the provision of tied aid. The Arrangement is updated regularly taking into account inter alia, policy developments and the evolving global financial markets.

The guidelines on market benchmark pricing provide guiding in setting premium in transactions involving obligors in Category 0 countries, high-income OECD countries and high-income euro area countries. The current guidelines on market benchmark pricing in the Arrangement were put in place as part of the Malzkuhn-Drysdale Package that entered into force on September 2011. While the current guidelines provide a framework for not undercutting the private market pricing, the scope for interpretation and the emergence of different practices among participants of the Arrangement is still significant. The proposal put forward by the OECD secretariat, Chairman's Revised Proposal for Market Benchmark Pricing Rules, will give clearer guidelines and thereby improve the level playing field within the OECD.

• Consistency with existing policy provisions in the policy area

The proposal, if approved, will replace the current guidelines on market benchmark pricing in the Arrangement, while complying with the current structure of the Arrangement.

The decision of approval will be taken by the Working Party of the Participants to the Arrangement on Officially Supported Export Credits. The position of the European Union will be expressed by the Commission.

The OECD Participants to the Arrangement is likely to agree on the Chairman's Revised Proposal for Market Benchmark Pricing Rules at their regular meeting in mid-November 2016 or through a written procedure in close connection to the meeting and to adopt the necessary modifications to the OECD Arrangement with the goal to implement the new rules by 1 February 2017. As negotiations have successfully been completed and the Chairman's Revised Proposal for Market Benchmark Pricing Rules has been tabled for decision, it is crucial the European Union is enabled to formalise its approval of the current proposal on Market Benchmark Pricing and the modifications to the OECD Arrangement.

The new version of the Arrangement will be incorporated in EU acquis by a delegated act. The OECD Arrangement including its Annexes and its modifications has legal effects in the Union by virtue of Regulation (EU) No 1233/2011 of the European Parliament and of the Council. Article 2 of Regulation (EU) No 1233/2011 states that "[t]he Commission shall adopt delegated acts in accordance with Article 3 to amend Annex II as a result of amendments to the guidelines agreed upon by the Participants to the Arrangement".

• Consistency with other Union policies

Not applicable.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

Legal basis

The OECD Arrangement is a gentlemen's agreement between the EU and the eight other Participants (United States, Canada, Japan, Korea, Norway, Switzerland, New Zealand and Australia). The Arrangement including its Annexes and its successive modifications is incorporated into EU law by virtue of Articles 1 and 2 of 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/EC. The Arrangement including its Annexes and its amendments thus has legal effects for the purposes of Article 218(9) TFEU (see Judgment of the Court of 7 October 2014 in case C-399/12 - Germany v Council (OIV), paragraph 63). On substance, as set out in its paragraph 1, the Arrangement aims at providing a framework for the orderly use of officially supported export credits, and seeks to foster a level playing field and fair competition between exporters at a global scale; hence to facilitate and regulate international trade, and in particular export policy, within the meaning of Article 207 TFEU. For this reason, a Council decision based on Articles 207 TFEU and Article 218(9) TFEU is required to establish the position to be adopted, on behalf of the European Union, in the OECD Participants to the Arrangement on Officially Supported Export Credits.

• Subsidiarity (for non-exclusive competence)

The OECD Arrangement form part of Member States' trade policy, which is the exclusive competence of the European Union. 

• Proportionality

Not applicable.

• Choice of the instrument

Not applicable.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluation/fitness checks of existing legislation

No impact assessment with regard to the present proposal was carried out as the proposed modifications are a continuation of a long-standing EU policy on export credits, implemented after every yearly modification of the Arrangement into EU law by delegated Act. The content of the proposal was endorsed by the Council Working Group on Export Credits at its meeting on 31/05/2016.

• Stakeholder consultations

Not applicable.

• Collection and use of expertise

Not applicable.

• Impact assessment

Not applicable.

• Regulatory fitness and simplification

Not applicable.

• Fundamental rights

Not applicable.

4. BUDGETARY IMPLICATIONS

Budgetary implications are limited to administrative expenditure.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

Not applicable.

• Explanatory documents (for directives)

Not applicable.

• Detailed explanation of the specific provisions of the proposal - Summary of proposed modifications to the OECD arrangement and recommended position of the European Union

Proposal

The proposal is annexed to the Council Decision.

Recommended Position: 

Support for the proposal.