OECD Arrangement on officially supported export credits
A 1978 agreement among member countries that governs officially supported export credits, through minimum premiums, maximum tenors and a mandatory down payment, so that states do not wage a subsidy war.
The Arrangement on officially supported export credits is an agreement concluded in 1978 within the OECD, not a treaty but a gentlemen's agreement to which the European Union has given binding force for its members. Its purpose is to stop states from competing through subsidized financing terms to help their exporters win. It sets several common rules: a minimum down payment by the buyer, in principle 15 percent of the contract; maximum repayment terms by country category; minimum interest rates for fixed-rate credits; and above all minimum risk premiums, computed according to the country risk category, the buyer's quality and the tenor. Sector understandings adapt these rules for aircraft, shipbuilding, nuclear power and climate-related projects. For the private credit and political risk underwriter, the arrangement sets a public price floor below which public agencies cannot go, and so determines the boundary between what the state insures and what the market can compete for.
Textbook case: for a 100 million euro contract, the buyer must pay at least 15 million as a down payment; the 85 million credit, guaranteed by a public agency, may not exceed the maximum term set for the country category, and its premium may not fall below the minimum schedule for that category and tenor.
OECD Arrangement, Arrangement on Officially Supported Export Credits, OECD Consensus
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