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Financing capital equipment exports through the export development corporation Schram, Douglas Charles 1976

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Oy, j  FINANCING C A P I T A L  EQUIPMENT  THROUGH THE EXPORT DEVELOPMENT  EXPORTS  CORPORATION  by  DOUGLAS CHARLES  A T H E S I S SUBMITTED  IN P A R T I A L  T H E REQUIREMENTS MASTER  OF S C I E N C E  in  accept t h i s  required  F U L F I L L M E N T OF  FOR T H E DEGREE OF  (BUSINESS ADMINISTRATION)  the D i v i s i o n  INTERNATIONAL  WG  SCHRAM  thesis  of  BUSINESS  as  STUDIES  conforming to  standard.  THE U N I V E R S I T Y OF B R I T I S H April  1976.  COLUMBIA  the  In  presenting  this  an a d v a n c e d  degree  the  shall  I  Library  further  for by  agree  scholarly his  thesis at  the U n i v e r s i t y  make  that  in p a r t i a l  it  freely  permission  purposes  may  representatives.  is  of  of  Columbia,  British  available for  for  extensive  be g r a n t e d  It  fulfilment  by  the  understood  the  requirements I  agree  r e f e r e n c e and copying  Head  that  of  of  or  this  thesis  this  thesis  written  Faculty  of  Commerce  of  gain  University  Vancouver,  and B u s i n e s s  International  2075 Westbrook  V6T  financial  shall  be a l l o w e d  of  British  Administration  Business  Studies  Columbia  Place  Canada  IW5  Apri I  not  permission.  Division  The  for  30,  1976.  i i  or  publication  •  of  that  study.  my D e p a r t m e n t  copying  for  without  my  ABSTRACT  The of  objective  the E x p o r t  granting This  Development  agency,  objective  Corporation's of  of  of  the  the  of  economy  facilitating  in  the  to  control  chapter  concerns balance three  itself the  with study  exports.  government The which  of  the  II to  purpose the  Chapter Bank  field  of  of  and  developing  importance  examined. in  of  The  capital there  export  examining  of  assessment  capital  evolution  equipment are  no  is  This  the  of  role  concentrates  on  is  with  of  trade  the  examination exports,  which the  to  performance capital  goods.  equipment  exports  to  importance  outlined.  The  export  credit  the  of  credit  analysis  international  introductory  examining  of  in  and  effective  credit.  an  credit  equipment.  equipment  against  facilitating  export  examination  capital  standards  effectiveness  capital  credit,  an  the  the  in  an  export  Canadian  international  national  trade  tasks,  the  agreements  chapter  also  insurance.  field  of  export  The credit  nations. Chapter  British  Canada's  four  of  evaluate  and  is  field  the  to  EDC  I  trade  in  shows t h a t  the  of  in  is  financing  into  purchasers  some  Chapter  in  against  the  thesis  and  be d i v i d e d  Corporation  the w o r l d ' s  in  promoting  performance  In  this  Corporation,  activities  development  measure  in  can  the markets  the  of  United  concerned  promote  and  of  review  is  of  EDC  this  performance III  examining  examines  States  to  finance  the  the  British  to  and  be used  finance  system  capital  develop  can  programs  promote  the  some  used  by  the  equipment  basic  measures  measured. by  the  American  Export-Import capital  equipment for  such  exports. exports.  being  supported  trade  pattern  activities establish than by  a sub-set  total  certain of  export which  type  credit.  of  the  volume  financed exporters  goods and  attempts  to  trade  this  to  the  the  financing from  its  its  future. presented  will  in  this  Chapter  of  The  of  of  in  a  is  order  to  more  supported  comparative  supported  by  a standard  of  against  the  foreign  itself  activity. are  with  substantial financing  the  market.  of  theories  the  The of  cash  activity  of  the  concluding  iv  chapter  to  Corporation flows  in  t h e EDC  this  also  sector.  suggests  capital  the  international  how t h e  study  of  the  Canadian  chapter  of  of  phases  importance  The  analyzing  all  support,  manufacturing  amounts  the  for  structure  The C o r p o r a t i o n ' s  analyzed.  activities  includes  eligible  supported,  economy,  the  financing  that near  is  also  study.  is  resulting  the  chapter. VI  Bank's  nothing  if  provide  analysis  product  being  the  the  Canadian  activity  A new method  analyzes  part  require  basic  being  products  also  advantage  of  determine  the  comparative  V concerns  financing  Corporation  the  levels  type  Canadian  specific  Chapter  and  goods  structure  relate  to  same  really  market  exports  presented  are  the  the World  commodities  to  operations  Corporation.  eligible  to  analyzed  is  the  the  of  of  activities.  facility—the of  The  if  have  A review  credit  be a p p l i e d  structure  determine  finance  finance.  outlines  Development  finance  dollar  IV  the  facility  export  are  can  to  exports.  of  financing  the EDC's  Chapter  used  development  types  theory  examines  finance  The E x i m B a n k ' s  to measure  the E x p o r t  of  development  of  is  American  field  the Exim B a n k ' s  advantage  also  The a n a l y s i s  the  that  chapter  by E x i m B a n k ' s  as  in  The  the  It  initially  used The used  by t h e  outlines  then  goal. of  case  export the  the  aircraft  The the  facilities  equipment.  It  promote  to  are  shows in  that  industry  certain  receives  activity.  of  capital  in  achieving  t h e EDC  that  its  a great fact  is  both Canada  is  of  also  government's  far  the  least  goals. and t h e  sectors.  deal  mechanisms  their by  systems  equipment.  policy  industrial  This  the  how e f f e c t i v e t h e  achieving  demonstrates  support  d i f f e r e n c e s of  exports  countries  three agencies also  and  on d e t e r m i n i n g  comparison  financing  bui I d i n g  to  three  study  credit  Exim B a n k ' s ship  the  This  The use  focuses  by e a c h o f  effective  similarities  three nations  chapter  policy  the  In  support true  U.S.A.  the from  for  American the  Canada's  industry. study  then  offers  a series  o f f e r e d by C a n a d a  in  is  export  suggested  that  be made more e f f i c i e n t t h r o u g h  the  of  support  recommendations of  credit  exports  facilities  i n t r o d u c t i o n of  v  of  these  to  improve  capital in Canada new  can  measures.  TABLE  OF  CONTENTS  PAGE ABSTRACT  iii  CHAPTER I.  CAPITAL  EQUIPMENT EXPORTS  I. II. Ml.  . . . .  I  Introduction D e f i n i t i ons Attempts i) i i) iii) i v)  Export  V.  Banks  to  Develop  G r o w t h of The Berne GATT OECD  v) IV.  IN THE WORLD ECONOMY  Uniform C r e d i t International Un i on  European Economic Credit  Policies  Competition  Community  Insurance  and E x p o r t  Credit  CHAPTER II.  THE EXPORT  CREDITS  GUARANTEE DEPARTMENT  I.  F l e x i b i Ii t y  ||.  Interest  III.  O t h e r Forms  IV.  Conclusions  of  Rate  System for  of  .  Export  Export  Credit  Credit  CHAPTER III.  T H E EXPORT  I.  IMPORT BANK OF T H E UNITED STATES  Purpose  and  Governing  vi  Authority  of  53  the Exim  Bank  II.  Services  Provided  i)  Participation  i i)  Direct  iii) iv) III.  The World  Financing  Lending Corporation  Bank Transportation E l e c t r i c Power Industrial Projects  iv)  Telecommunications  Commodities  V.  Bank  D i s c o u n t Loan Program P r i v a t e Export Funding  i) i i) iii)  IV.  by E x i m  Supported  by  Equipment  the Exim B a n k ' s  Programs  Conclusions  CHAPTER IV.  EXPORT  DEVELOPMENT  I.  Export  II.  Foreign  III.  Export  IV.  Analysis  CORPORATION  Credit  Insurance  Investment  Insurance  F i nance of  Long Term F i n a n c i n g  Contracts  CHAPTER V.  FINANCING T H E - C A P I T A L NEEDS OF THE EXPORT CORPORATION  DEVELOPMENT  CHAPTER VI.  CONCLUSIONS  I.  Policy  Goals  of  Export  vii  Credit  Granting  Agencies  PAGE  II.  Effectiveness  of  III.  Recommendations  IV.  Export  Credit  the Three Systems  in the World  Environment  BIBLIOGRAPHY  166  APPENDIX  I  172  APPENDIX  II  173  viii  CHAPTER  I  C A P I T A L EQUIPMENT EXPORTS  I.  INTRODUCTION  In trade in has  has  the  the  thirty  increased  year  nearly  tripled  above  average  world  trade  can  pay  liquid  dramatically  from  recorded  an  annual  to  his  pay  institution  he may  arrange  arrange  long  of  assets  generally  in  the  case  consumer  of  capital  of  of  goods,  or  the  has  of  as  uniform  agricultural nature  of  purchaser  778  billion  in  trade  1970. at  an  seventies  been w e l l  documented  purchases  of  imported may  with  a  provided  be  goods  sufficiently  local  financial  by  special  term accorded  various  throughout  the w o r l d .  short  transaction.  usually  1  9%.  commodities the  world  increased  three methods—he term c r e d i t  II  world  troubled  purchaser  financing  I  alone,  how t h e  term f i n a n c i n g The  the  rate  War  $ U.S.  also  the  about  The  short  regarded  durables because  for.  one  of  trade  paid  he may  arranged  in  World  recorded  has  growth  are  types  usually  years  trade  institutions.  is  trade  been w r i t t e n  by any  I970's  b i 11 i o n  world four  end o f  exceeding  the  has  financial  of  In  increase  of  case  level  compound  types  the  the  little  purchase  is  a  1974.  first  dramatic  cash,  or  to  terms,  the  this  since  the $ u.S.282.I  in r e a l  from t h i s  for  31,  In  literature,  resulting  period  rate.  While the  year  ended December  Measured  in  IN THE WORLD ECONOMY  tries  term  credit  However,  to match  In  the  2  expected funds  economic  raised  assets.  exports  For  issuing  goods  be p r o v i d e d  for  The Capital  part in  in  the  term debt of  of  credit in  capital  However,  pay  for  such  either  the  in  London market  was  LDCs  limited  large  had  number  of  newly  short  emerging  War  of  one  to  purchase  consists  of  capital  some  or  27.4$  of  of  long  long  total  and  world  The  term  the lived  goods  equipment.  type  export  trade  and  have  do  speed  not  have  relatively have  Iittlc  facing  the world to  is  countries  is up  sale  of  financing  rate to  access  purchaser  somewhat  access  new.  difficulty  the  the  often  In  most  required  of  the LDCs  to m a i n t a i n  funds  direct  to  grants  pay  to arranging  in  the  different. of  the  used  for  this these  balance  addition, in which  states.  of  the to  were  On  development  funds  needed  closely  tied  100% r e s e r v e capital  from t h e i r  international  to  a  for  the  access  period  nation  II  of  defaults,  inconvertibility. relatively  of  necessary  by way  securities  have  that  term i . e .  be u s e d  billion  situation  sought  they  and were  The L D C s „ o b t a i n e d  issuing  hand,  to World  centers  purchases  a similar  to  assets.  Prior colonial  of  transportation  in  the  are  goods  other  trade  markets  one  on t h e  will  industrialized  (LDCs)  while  and  a debt  purchaser.  efficient  capital  world  requires  I e s s ' d e v e I oped n a t i o n s hand  with  1973, $ 1 4 3 . 9  turn  purchasers  term c r e d i t .  asset  machinery  concept  goods  relatively  of  the  long  example,  consisted  capital  long  of  A substantial  services.  such  by  life  purpose. capital payments  investing evaluate  Since markets  the  parent  markets.  or  because  has  of  and  only  by  The  the m i d - 1 9 4 0 ' s  difficulties, public  requirement.  equipment  colonial  capital  to  the  the currency  had  credit-worthiness  a of  the  3  Capital importers. while  for  the  position factor Japan  For  in  in  however,  the  the  world  sale  busy  the  LDCs  developed  the  were  equipment  industrialized  capital nations  capital  rebuilding  successful  companies  activities  beyond  would  the  finance  served  as  world both  a source  trade.  The  banks  provide  the  credit  transactions. payments market  and  Banks  of  the  foreign  transfer  have  the  always of  place  was  a  step.  liabilities,  a relatively  one  logical of  liquid  intermediate After the  specified  a  providing  ice.  asset term  World  use  of  1-3  year  be p r o v i d e d  did  match  short  and  term  demand  to  as  and  big  and 1955,  change  nations their  a  as  the  the  trade  and  investment  the  funds  provided  the  the  financing handle  required  to  themselves into  banks  documents,  facilitate  trade  with  and  trade  international  traditionally The  requires  they  have  international  the  only.  deposits  Hence,  of  the  have  credit  world  needed  have  viewed  nature  that  of  they  have  been r e l u c t a n t  to  credit.  War  II  most  maximum by  However,  As  throughout  activities  portfolio.  bilateral  course,  the  time  concerned  these  has  exchange,  funds  not  their  countries.  sector  for  was  early  expanded  a channel  maintain  sectors.  that  banks  to  credit  began  and  industrialization,  nations  markets  own  to  the European  successful  their  exporters  necessary  the  private  extension  their  not  that  the  as  export  both  key  I940's  industrial  the  and  role  through  and  late  to  the  are  because  Commercial  provide  their  grant  the  trade.  the  be t h o s e  borders  Traditionally, to  their  is  exports  goods  realized  important  equipment  In  affecting  statesl  are  the  economy.  of  factors  exports  the  general  exports  payment  commercial of  capital  agreements.  repayment  theory  of  period. banks.  finance,  Such Such  This in  g o o d s were agreements  loans  short  that  financed  the  usually  could,  of  repayment cost  of  period  the  4  assets  was  debtors the  not  soon  to  banking  order  evolved  over  unable  to m a i n t a i n  rescheduling de  facto  system r e l u c t a n t  to  provide  of  redesigned these  objectives  the  national  agencies export  economic  t o meet  the  a normal  of  to  provide  credit  a  effect,  With  create  short  the  world  the new  agencies  t h e much n e e d e d e x p o r t  granting  institutions  and  were  nominal  credit,  began to  result,  schedule  exports,  s u c h medium t e r m  countries  As  repayment  flow In  life.  medium t e r m c r e d i t .  industrialized  existing  its  agreements.  into  governments  of  in  apportioned  themselves  negotiate  term c r e d i t  All  found  creditors,  forced  or  being  have  credit.  similar  including:  1)  the p r o m o t i o n of e x p o r t s from t h e i r r e l a t i v e c o u n t r i e s . T h e a g e n c i e s v i e w t h e i r r o l e as b e i n g one o f s u p p o r t i n g normal commercial a c t i v i t i e s . They a r e not o v e r l y concerned w i t h the problem of development f i n a n c e . E f f o r t s t o d e v e l o p t h e i n d u s t r i a l s e c t o r o f t h e LDCs a r e of s e c o n d a r y i m p o r t a n c e t o t h e e x p o r t granting i n s t i t u t i ons  2)  the  insulation  changing  needs is  of  of  the  domestic  cost  credit  of  export  3)  t h e i m p l e m e n t a t i o n o f more f l e x i b l e c o m m e r c i a l t r a n s a c t i o n s may c o m p e t e t r a n s a c t i ons.  The  development  the  dependent  I)  3)  exporters  of  has  credit  taken  finance  from  conditions  granting  different  terms in o r d e r t h a t against tied aid  agencies  forms  in  in m e e t i n g the  various  countries  upon:  the  structure  of  the  nature  existing  the  state  of of  the  financial  system  institutional  development  of  the  arrangements  insurance  industry.  changing and  5  The tutional by  United  financing  the F o r e i g n  while  other  heavy  reliance  United make  of  indirect Bank). Bank, of  loans Under  while  the  bank.  are  foreign  tutions  is  more  than  rate  of  pay  for  added  amount the  of  of  a net  U. S. to  the  the  the  funds known  structured  borrowing  pay  The  example,  in  as  $80.5 m i l l i o n  Treasury  as  a dividend  Import  Bank,  in  the  does  not  direct  Import  and  Bank (Exim  directly  by  the  financing,  such  (EDC)  as  a  has,  direct  from  specialized  exports  participation  Corporation  of  involves  advanced  jointly  have moved  facility,  institution  loans  Exim  some  commercial until to  the  goods. of  all  such  credit  be m a r g i n a l l y by  for  and  and  to  year  the  On J u n e 3 0 ,  balance  1975,  this  expenses,  an  on any  of  a  annual  outstanding  ended J u n e  w h i c h $20 m i l l i o n  high  accumulate  include  interest  fiscal  of  a sufficiently  borrowing as  instiThey  administrative  capital  well  granting  profitable.  charging  their  of  the  of  account.  financing  insti-  provided  Canada  by t h e E x p o r t  costs as  is  activation  system  needed  income  reserve  of  specialized  Export  rediscount  costs  the  stockholders for  to  direct to  and  on p r o v i d i n g  capital  loans  the  the  are  financial  Development  reserves.  firm's  of  importer  plan  by a  their  to  system  characteristic  on t h e i r  cost  The  the  Canadian  of  mechanism  exclusively  are  The Exim Bank,  recorded the  the  to  of  all  interest  dividend debt.  almost  Kingdom  from which  and  The A m e r i c a n  plan,  Export  they  cover  to  latter  principal  that  reasonable  to  the  purchasers The  made  moved  insurance,  United  exception  provided  relied  the  funds.  has  Association  credit.  former  The C a n a d i a n  recently,  to  public  the  as  the  being  towards  insurance  export  under  funds  such  with  any  America  Insurance  on t h e  for  of  exports  Credit  Kingdom,  use  of  nations  arrangements  States  was  30,  1975,  transferred  $60.5 m i l l i o n  reserve  account  was had  6  a balance  of  $1623.5  The more  is  purchase use  various  efficient  market  of  it  is  of  the  virtually  both  the  quality.  the  Now,  function  In  of  respond  parts  increased nations,  the  technology developed  one  market  as  the  share.  a result  of  realization  intensive  and  the that the  to  may  situated have  the  export  risks  were  key  exporter  changes  for have  price,  world  of  for  markets  finance  heightened growth  special  in  in  areas  financing  this the  to  potential  reduce  markets,  greatly are  as  gaining  have result, or  has  the major  products  problems  inter-  sales  sales  among  involve  a  of  in  now a  nations  and  and flexibility  effort,  export  competition  government  price  sales  exporting  of  The  increased  export  involved  world  exporter.  The major  factors  the  knowledge  evaluate  r e p u t a t i o n , marketing  world  to  exclusive  acquire  a function  competition  promoting efficient  around  insurance  by t h e  basically  role  the  credit  faced  and  better  an  the  adequate  to  in  opportunity  have  able  credit.  The  firms  of  equal  are  quality  the  an  departments  competition  of  have  products.  service,  and  requirements  participant  with  to market  to  interested  his  increased  addition  become  maintaining  the  trading  which  are  less  nations. The  the  to  also  of  political  the  the  must  purchasers  exports  are  exporter  provide  intensified has  the  necessary,  past,  of  for all  availability,  changeability  dealing  various  and  of  one  help  with  ability  importance.  credit  if  No  therefore,  commercial In  In  of  their  They,  and w i l l ,  greatly  state  One  participants  information.  through  risk  the  market  impossible  financial  agencies  markets.  information.  knowledge.  and  all  relevant  agencies,  government  domestic  that  such  million.  following  rapid  growth  statistics.  of  export  The annual  credit volume  can of  best  be  Canadian  shown by exports  considering assisted  7  by  t h e EDC  by more  than  1975.  In  figure  for  hand 31,  through twenty  I960,  1974 t o  the  1962-63  ¥308.2  to  in  1955 t o  over  the  in  year  the  fourteen  in  Export  In  an  the  have  annual  while  other  ended by  granted  December the billion  by  provides  f r o m an  volume  of  export  America  annual  in  the  f r o m DM402 m i l l i o n States  31,  comparable  on t h e  from ¥ 1 0 8 . 6  which  United grown  the  supported  credits  grew  increased  e n d e d December  period  grew  institution  Bank  I960 t o  year  Japan  insurance  exports  Exports  Germany,  1967.  Import  in  of  the of  period  Merchandise  Bank  mbH,  credit  $101.7 m i l l i o n ,  1967-68.  Republic  terms  year  period  direct  loan  program  annual Bank  real  six  increased,  in  real  "real"  from  growth  consider  implied  in exports  volume  o f $ U.S. 8 3 1 5 . 0  e n d e d December and  for  31,  growth  1974,  the  export  credit  an  annual  compound  at  exports  supported  by  provide  support  for  the  state  at  all the of  an  these sale  nature  those  above  average  figures  of  goods  of  mi I Ii on  may  capital  how  services  be u n d e r s t a t e d exports  exports  be r e d u c e d .  supported  program  of  25$.  Japanese  30$.  that  would  The  Export  Both  export  of  of  the  EDC  compound Import  these  credit  by  by  real any  rate.  indicate and  rate  the  approximately belief  the  rates  insurance  was  in  only  these  1967-68  While  true  of  to  increased  becoming  all  terms,  rate  1962-63  rates  measure  the  export  1975.  the  is  in  Import  Gesellschaft  the E x p o r t  In In  was  or  $32,383 m i l l i o n .  DM2719.7 m i l l i o n by  volume  billion  $ U . S . 5 3 3 . 0 mi I I i o n in  of  the F e d e r a l  supported  fifteen  the  600$  the Export  Ausfuhrkredit  in  $2045.7 m i l l i o n .  a volume of  loans  annual  just  facilities  direct  times  1975 was  increased  credit  cither  which  in  have  important in  a factor  the world  certain  market  cases.  been d i r e c t l y  For  credit place, example,  financed  by  8  Canada's two  Export  such  loans  agreements period  $5453.0  for  and  a total  a total  of  parts  Corporation.  of  1970,  $100 m i l l i o n .  as  In  were  to  Therefore,  the  in  by E D C ,  U.S.A.,  1970 3 . 3 $  while  by  granted  twenty-  forty-six  signed.  During  goods,  grew of  EDC  1974,  other manufactured  exported  financed  In  $659.4 m i l l i o n  classified  mi I I i o n .  were b e i n g to  for  exports  vehicles  Development  loan  this  excluding  same  motor  from $2970 m i l l i o n  eligible  1974 t h i s  Canadian  same f i g u r e  to  exports  had  increased  12.1$. With  undoubtedly instance, now w i t h range.  the  the  not  and  with  have  the  advancing the  future.  distant jets,  have  and  past  the  placed  prices  The  cost  was  in  cost  has  a strain  created a worldwide  responsibility  of  rising, of  the  a  more  jet  $7-8  challenge  developing  to  cash for  for  range,  but  the $20-25 flows  the  adequate  will  aircraft,  million  increased on t h e  credit  of  million  the  institutions  financial  measures.  DEFINITIONS  said  to oil  office  consist  buses,  are  used  be u s e d  defined  in  and  agricultural  be  implied this  terms  by  the  machinery,  steel  automobiles,  will  The  as  electrical  f i e l d machinery,  definition goods  goods  of  machinery,  trucks,  will  too  increases  Capital  and  in  wide-bodied  Such  charged  II.  be n e e d e d  in  purchasers  technology  rolling  parts  whenever  for  the  Department  construction  machinery,  and  U.S.  mill  all  terms  of  above.'  capital  tools,  equipment, This  equipment  or  capital  study.  commercial  interchangeably  in  credit, this  export  study.  finance, However,  or  are  mining  machine  railroad  the  Commerce  machinery,  machinery,  aircraft,  of  export  e a c h must  credit contain  9  the  following  elements:  1)  an o b l i g a t i o n o f t h e b u y e r t o make a down p r i o r to t h e shipment of t h e goods  2)  t h e l o a n must be a m o r t i z e d o v e r a p e r i o d s u c h t h a t r e g u l a r e q u a l p a y m e n t s a r e made w i t h no a c c u m u l a t i o n o f u n p a i d d e b t a t t h e end o f t h e repayment p e r i o d  3)  t h e l o a n must c a r r y an i n t e r e s t r a t e w h i c h i n some way i s r e l a t e d t o t h e i n t e r e s t r a t e s o f f e r e d f o r s i m i l a r loans in the l e n d i n g c o u n t r y i . e . the i n t e r e s t r a t e must be a c o m m e r c i a l r a t e a s o p p o s e d t o an " a i d " r a t e  4)  the c r e d i t is c o n f i n e d to the f o r e i g n exchange c o s t o f t h e t r a n s a c t i o n , w i t h an e x c e p t i o n b e i n g made f o r t h o s e l o c a l c u r r e n c y c o s t s w h i c h a r e d i r e c t l y a s s o c i a t e d with the c o n t r a c t  5)  t h e c r e d i t s h a l l be e l i g i b l e credit insurance  6)  the c o n t r a c t s h a l l grace p e r i o d s .  The  less  as  consisting  of  of  the  U.S.A.  and  of  the  Union  of  Japan  exception Spain,  of  developed  all  South  the  world  the Western the  any  countries  explicit  (LDCs)  will  be  Hemisphere  with  the  exception  in A f r i c a  with  the  exception  of  the  countries  in A s i a  and M a i n l a n d  China,  all  of  the  countries  in  of  and New Z e a l a n d  Australia  development  interest  political  of  of  for  export  all  Development  the  all  in  provide  national  Africa,  Turkey, Portugal,  industrial  nations  countries  Canada,  not  for  payment  rate  risk  Yugoslavia,  finance of  the  attached  questions  to  must  must  have  be o f  as  Gibraltar its  as  secondary  well  The as  the  with  countries  and  primary  country.  loans,  Oceania  the European  Malta,  recipient such  and  with  defined  length  importance  the of  Greece,  Cyprus.  objective  the  exception  of  the the  commercial to  the  credit, and  lender.  10  DeveIopment this  finance  study.  and  Foreign  foreign  aid  aid  programs  are  have  both been  used  synonymously  referred  to  as  throughout  the  "bankers  2 of  the  poor".  There  credit  contains  enough  aid  development  finance.  are  as  or  study, element  is is  of  the  deemed t o  hard  a grant  of  fast  or  rule  financial  interest  credit in  in  flows,  flows the  implies  interest  when  any  for  the  step  is  export  to  qualify  purpose  containing  a  that  tends  lowered  or  as  this  grant  The  to  portion  as  of  large  country.  The g r a n t  rate  an  element  recipient  a transaction.  the  about  concessionary  Concessionary  an  as  and  raise  of  aid  the  flows  maturity  lengthened.  one  year  a period  term  credit  III.  this  or  over  study,  less, greater  will  have  an  GROWTH OF  By the  than  one  a repayment  1950's  the  industrialized  turned  from a s e l l e r s  credit  factor  became more  desire  inability  to  to  pay  promote for  these  to  but  same  have  a repayment  term c r e d i t  less  than  five  in  excess  of  period  CREDIT  will  years, five  be  and  period repaid  a  long  years.  POLICIES  COMPETITION  retooling nations  in  the m a n u f a c t u r i n g  complete.  market,  the  exports goods  of  was  a buyers  important their  will  o r medium  UNIFORM EXPORT  market  nations  term c r e d i t  year  INTERNATIONAL  t h e mid  European  a short  intermediate  ATTEMPTS TO DEVELOP  i)  of  by  element  increase  For of  of  terms  concessional  no  official  and m o t i v a t e d  softening the  defined  is  of  sale  and of  capital  caused  The as  a dramatic  capital  a result,  goods. goods  sector  The and  the  industrialized  the  change  goods  in  LDCs the  11  method  by w h i c h The  of  years  crown  was  1945 f o r  In  the  or  the  the  the  United  funds  only  of  credits  Export  in  exceeding  the  six  Exchange  Control  Commission  required  that  within  six  months In  sagging buyers  exports outside  increased Other  1952,  to  with the  the  a maximum  of  five  nations  competition  in  length  of  Kingdom,  area  to  in  an  the  following  areas  the  2)  the p o r t i o n r e q u i r e d to  3)  the  amount  of  the  downpayment  4)  the  length  of  the  term accorded  5)  the  speed  the  premiums  and  availability of the retain  with  of  of  federal  founded  purchase 1952, to  exports.  year  to  The  goods all  the  be  by  repaid  period. its  transactions term could  national  U.K.  approval  stimulate  for  that  approved  price  a two  similar  I)  cost  to  effort  cases  a  1949 s t i p u l a t e d  subject  period  was  a number  Canadian  contracts  years.  began a d o p t i n g  for  contract  over  credit  in  were  for  Canada,  Up u n t i l  All  the  three  years  of  be u t i l i z e d  payable  t h e maximum  sterling  Act  Commission.  balance  In  Corporation  Kingdom.  in  one-half  United  extended  industrialized  international  the  United  1934 and  insurance  Guarantees  months  the F o r e i g n  export  to  in  credit.  Insurance  had  financed.  founded  export  Credits  the Act  manufactured  g o o d s was  of  providing  the  under  in  Bank was  source  Export  purpose  Kingdom,  trade  Import  large  the  allocated  services  export of  Export  U.S.  corporation,  in  any  international  with  be  importance.  strategies  and  soon  developed:  credit  c o n t r a c t p r i c e the e x p o r t e r f o r h i s own a c c o u n t required the  which  the  application  charged  for  credit  by  the  is  purchaser  credit is  processed  insurance.  12  i i)  THE BERNE UN I ON  The credit  war  Credits  by  was  not  of  its  they  basis.  decisions.  While  the  3  It  Members about  may  to  terms  provides  to  report  any  The Union  prevented  the  and  the  fostered  buyer  and  the  and  by  seller  des  international of  policies  members  to  abide  recommendations  recommended  and  a  recommendations.  these  conditions  development  the  an  its  and  from the terms  about  require  abide  that  d'Assureurs  coordination  understandings to  recognized  Union  bring  can n o t  departures on  the  terms  have  members  nations  of  standards. of  the  policies  "matching  from o v e r s t a t i n g  the  offered.  In regard  do n o t  issued.  being  try  Union  other  and  to  The Berne  question  be  principle"  Union)  created  credit  merely  r e q u i r e d to  they  on e x p o r t  t h e member g o v e r n m e n t s are  industrialized  so  (Berne  information  voluntary  of  desirable,  Internationaux  exchange on-a  governments  1953,  t h e members  t h e maximum  terms  of  that  the  Union  should  came t o  an  be p r o v i d e d  understanding  for  various  with  types  of  4 export  credit  should  not  granted have  be g r e a t e r  sales  of  a maximum  terms it  insurance.  was  were  term of  felt  that  the  the  replacement Until  the  heavy  length  of  five  years.  three  goods.  years.  shorter  debt  cash  agreed  capital  considerably  depreciation, asset  than  They  could  flow  than  that  t h e maximum  This Light  While the  period  maximum  term would  capital  equipment  it  life  be r e p a i d more  from the  credit  was of  appreciated the  undistributed  was  through  profits  and  be  to  that  associated  quickly  only  these  asset, the  use  of  the  capital  funds.  the  early  insurance  I960's  policies  t h e U n i o n was thereby  effective  limiting  the  in  coordinating  term of  export  credit.  13  By  that  of  the  terms to  time, nations  above  to  did  not  practice  not  today.  involve grace  banks  borrower  repays  any  are  for  were n o t time.  a  grace  in  ten  substantial  financing  makes  granted.  advanced  the  by  Import  a major  by  did  Longer  starting  points  various  periods  appears  to  some  the  while  semi-annual  caused  some  repayment from  which  outlined  institutions.  of  still  be  loans  installments,  granted  repayment  years. number o f it  the Exim B a n k ' s  difficult the  to  to  provide  bank's  loans  determine  participation the  loan  if  financing  scheme,  necessary  funds.  first  and  then  Bank. not  begin  was  formed,  recommendations  exporting  terms.  the  combine  the Exim  position  t h e maximum t e r m s  commercial  Bank  the  late  that  Under  1 9 6 1 , when t h e F C I A by  liberal  made  five-six  repays  constrained  Japan,  loans  indicates  to  competitive  addition,  t h e E x i m Bank  usually  unti I  more  implicit  up  being  The E x p o r t insurance  direct  that  and  funds  In  I  their  by a d o p t i n g  repayable  participation  commercial The  to  are  fact  periods  grant  periods.  Table  commence The  improve  facto  granting  t h e E x i m Bank  does  de  apply of  to  gradually  repayment  practiced by  desire  were g r a n t e d  count  The  the  nation,  only  of  offering so  the  in  export effect  Berne  recently  credit its  Union  joined  activities  until  the  that  Berne  Un i o n . In with  terms  abided  by  began t o  of this  of  I960's than  the  Berne  terms  Union  it  faced  the Berne  Union  the  five  recommendation  same p r o b l e m s  members  early  greater  increase The  the  the  Union  years  for  be e x t e n d e d o n l y  a short  a c c o r d e d any  in in  the mid the to  recommended t h a t  purchaser  I970's  early bind  p e r i o d , but  continues  I960's.  their  of  The  insurance  to  policies  LDCs.  The  gradually  they  heavy to  equipment.  f a c e many  inability  governments  to  members  the  of  of the  TABLE  EXPORT-IMPORT BANK  I  OF T H E UNITED  D E T A I L S OF CREDITS AUTHORIZED YEAR ENDED JUNE 3 0 ,  OBLIGOR  PURPOSE,  STATES  IN THE F I S C A L 1974  RATE AND TERMS  AMOUNT (  BRAZIL Varig-Viacao Rio Grande  Aereo  CANADA A i r Canada  $ MILLIONS  A i r c r a f t , one jumbo j e t D C - I O . R e p a y a b l e i n 10 semi-annual payments. Repayment t o commence b e g i n n i n g May 2 0 , 1980.  12.6  A i r c r a f t , one jumbo j e t 7 4 7 . R e p a y a b l e i n 10 semi-annual payments t o commence on May 2 0 , 1980.  I 1.6  Generators. Repayable in 15 s e m i - a n n u a l p a y m e n t s t o commence on May 3 0 , 1984.  10.6  )  Co Iomb i a Corp.  Elec.  Costa  A t l a n t i ca  D La  DENMARK Steamship Co. and S v e n d b o r g  SENEGAL Ministry  SOURCE:  of  1912  Finance  Export-Import  Steam t u r b i n e u n i t s r e p a y a b l e in 8 s e m i annual payments to commence on D e c . 5, 1979.  1.8  Tuna f i s h i n g vessels, r e p a y a b l e in 8 s e m i annual payments b e g i n n i n g on May 10, 1980.  4.2  Bank  of  the U n i t e d  States,  Cumulative  Records,  1974  15  recommendations  of  results.  While  the  may  with  agree  political  local  exporters,  and in  addition, it  is  the  prevents of  the  of  to  have  membership  in  the Union  if  the  A recent  by M c K i t t e r i c k  Union  the  the  Union  terms  position  study  of  from a c h i e v i n g  organizations,  The p o l i t i c i a n s ,  strive  doubtful  the  various  recommendations  pressure.  Union.  Finance  Union  officers  the  local  In  the  they  in  an  accorded  comprises  of  the  The R o l e  and M i d d l e t o n  of  found  is  to  help  Credit  EDC, to  resist  their  credit  adequately  all  as  hard  twenty-one  Export  that  it  export  only  LDCs  such  find  effort  meaningful  extended.  countries  represented  in  Development  t h e members  of  the  5 Union for  did  not  submit  example,  maturity  while  restricts times,  submit  the Japanese  its  ability  to  while  amongst  significant  U n i o n may  various  changes  in  The  of  are  at  least  export  deal  with  field  of  two  current in  nations export  and  by  the  length  years  credit  be e f f e c t i v e  industrial  the  Germans  statistics  on  effectively  the  the  of  old.  insurance  problems.  reducing its  is  further At  the  ability  credit  Italians,  to  level  of  bring  limited.  GATT  Paragraph  forms  statistics  concentration  iii.  as  breakdown  Union's  however,  Tariffs  any  statistics.  The  competition about  do n o t  comparable  and T r a d e of  by  (GATT)  export  "the  four  of  specifies  subsidy  grant  have  and  as  to  pay  of in  XVI that  such  by g o v e r n m e n t s  governments)  they  Article  export order  (or  of the are  General  following  Agreement shall  be  for  considered  prohibited:  special  credits to  the  at  obtain  institutions rates  the  below  funds  so  controlled  those  which  employed.  16  This  restriction  may be o f f e r e d on e x p o r t Variation the  rate  8.5$. that  in for  charged  some  loans.  by v a r i o u s  these  current  rates  spreads  local  do n o t  office  the 9-11$  are  of  not exist  t h e EDC  in  Germany  and  is  December  4.5$  to  no r e a s o n  market.  that  In  low o f  the  that  shows a w i d e  In  current  1968,  a high  to  the  of  believe  spring  of  Canadian  CREDIT ON DECEMBER 3 1 ,  rate  Nations,  Department  Credits  Export  Credit  7.0-8.5 5.7 6-6.5 5.9 6 5.75-8 5.5 6-7  of  Economic  and D e v e l o p m e n t System,  CREDITS  6 6  5.75 6 7.0-8.5 6 6 5.9  4.5 6-7  Export  1968.  LONG TERM  CREDITS  6 5.75-8  States  1969,  and  Social  Financing,  Affairs,  National  p.2  OECD  The credit  there  II  rates  I I  MEDIUM TERM  Be Ig i urn Canada Denmark France F e d e r a l RepubIi c of Italy Japan Sweden U n i t e d Ki ngdom  iv.  from a  indicated  COST OF EXPORT  COUNTRY  United  interest  range.  AVERAGE  SOURCE:  the  countries.  today's  TABLE  United  degree  However, T a b l e  varied  similar  in  rates  credit  to  medium t e r m c r e d i t s  While  1976 t h e was  the  limits  in  OECD has  also  1963 f o r m e d t h e  expressed Group  c o n c e r n about  on E x p o r t  Credits  the and  p r o b l e m of Credit  export  Guarantees  17  for  the  purpose  of  discussing  member g o v e r n m e n t s also in  had  the  little  export  in  success  credit  Netherlands  proposed  established  for  countries.  Loans  to  LDCs w o u l d  and  ten  years  medium and to  all  large  dropped  members  to  sale  the  1)  loans  involving  export  support  small  export  sales  large.  credit was  would  vessels.  have  than  granted  sized  $1.5  of  to  sales  were  million)  than  would  have  t h e maximum r e p a y m e n t  applied  eventually  successful  regard  to  the  by  in  enabling  credit  ship  terms  building  each government  20%  would  be  rate  to  the Q  p e r i o d would  be e i g h t  years.  accorded  would  required  applicable  its  nations  purchaser  3)  down  years.  conditions:  t h e minimum n e t i n t e r e s t c r e d i t w o u l d be 6%  million  $5  to  fifteen  and  eight  reached.  supported  2)  be  defined  regard  of  years  The t h i r t e e n major  of  trie  support  greater  a maturity two  years  A maximum t e r m o f  installments  for  was  with  a minimum down payment the  five  of  industrialized  (less  sales  however,  credit  of  has  cooperation  Government  requirements with  discussed  OECD C o m m i t t e e w a s ,  following  Medium  repayment  agreement  shipping  loans  m i l l i o n , while  equal  to  years.  to  LDCs.  The normal  and  aid  to  sales  among  organization  the  period  sales  five  apply  cooperation  international  1964,  repayment  proposal  of  in  a maximum  costs,  export  more  that  and $5.0  shipping  that  about  a maximum t e r m o f  Tied  improving  international  example,  r e a c h an u n d e r s t a n d i n g  of  conform to  For  and  This  7  bringing  when no m e a n i n g f u l The  agreed  in  field.  scale  as  local  cases.  field.  r e s p e c t i v e l y would  The N e t h e r l a n d s '  the  to  have  classified  payments, in  all  be b e t w e e n $1.5  were  this  policies  These  conditions  v.  appear  EUROPEAN  to  still  international  among  its  Group  "to  states  of  but  In  t h e members  I960,  forward  terms  credits,  cooperation  members,  put  and  in  effect  in  1976.  ECONOMIC COMMUNITY  The E u r o p e a n E c o n o m i c more  be  and  among  Community in  all  the  (EEC),  area  of  has  attempted  export  industrialized  finance  the  EEC  formed  suggestions  for  the  harmonization  investment  not  foster only  nations.  of  conditions  to  for  export  credit  guarantees  taking  into  a Policy  Coordination  between  insurance,  account  the  member  financial recommendations  9 of  the  Berne  Union".  EEC c o u l d  not  facets  of  export  member  states  credit  containing  Over  come t o  an a l l  credit.  come t o  1)  following  sales  maximum 3)  export  sales  export  sales  labelling  the P o l i c y  Group  than  had  if  it  hoped  to  period  its to  proceeded  terms  and  two  rate  of  socialist period  10  in  of  the  covering  that  regard  the  to  all  nine  export  duration  countries  hayg  would  have  a  years  countries 8.5  would  7%  would  have  a  years a  maximum  years.  approval  a more  proposed  years  of  recommendations gain  agreement  with  five  of  LDCs w o u l d  t h e members  conditions:  than  period  of  of  then  industrialized  repayment  repayment  By  to  type  Group  interest  to  years  agreement"  greater  repayment  maximum 4)  of  a minimum  export  2)  thirteen  encompassing  The P o l i c y  credits  have  next  a "gentlemen's  the  all  the  for  a "gentlemen's its  conventional  proposals fashion.  agreement" more  quickly  "Gentlemen's  19  agreements"  only  Representatives the  require (the  and  not  its  recommendations  discussion  larger  the  Ambassadors  Council to  t h e members  be  of  support  t h e members  However, This  of  with  the  minimum  rate  of  concept  that  term of  five  receive  better  argument  and  countries changes  to  be  adopt  to  industrialized  years.  They argued  8.5  both  the Western  The U.S.  special  terms  eventually  cost  the  any  U.S.  and  After  of  export  only  Nations.  The EEC  credit  a  agreed to  a the  maximum  should  not  accepted  this  industrialized  a number excess to  all  rejected  term accorded  coming  and  8.5$.  agree  have  countries  in  Group.  American  rate  could  contracts  considerable  conditions.  Japan  sought  want  eventually  socialist  without  not  representatives  countries  all  terminated  of  states)  did  obtain  basic  would  and J a p a n  for  member  the P o l i c y  that  but  t h e maximum  years.  of to  four  Permanent  Group  all-inclusive  rate,  that  out  The EEC  1  increase  nine  process.  hoped  these  the  credits  to  was  a minimum  addition,  agreed  set  of  of of  other $100  complete  million.  agreement  cond i t i o h s .  of  attempts  export  agreement Italy,  It  all-inclusive  than  the  political  In  including  The field  proposals.  fees. '  terms  of  The P o l i c y  then  commitment  8$.  discussions  on a I I  the EEC  include  an  Committee  recommendations  would  of  the  t h e EEC  the  the  favored  rate  bank  concept  in  t h e OECD w o u l d  all-inclusive and  of  to  of  Ministers.  adopted  the  the Americans  insurance  The  for  of lost  Representatives Japanese  approval  on any m a j o r  Japan  charged  credit  and  on a l l  of  the EEC  to  bring  show how d i f f i c u l t issue.  the U.S.A. official  In  agreed credits  it  October that which  about is  more to  1974,  a minimum had  cooperation  obtain  Britain, of  a term  7.5$ in  in  the  international France,  Germany,  interest  excess  of  would  five  years.  20  International aspects  of  cooperation  export  credit  has  The EEC P o l i c y type  of  export  that  such  credit  policies  on b r i n g i n g not  Group  has  insurance  are  yet  really  about  more u n i f o r m r u l e s  on  other  been a c h i e v e d .  also  attempted  policy.  a type  to  T h e Group  of  state  aid  introduce a  and and  standard  Commission as  such  believe  differences  12 in p o l i c i e s members be  may  of  cause  in  a standard  premium s c h e d u l e . adopted  would  voiced  opposition  with are  to  believe  for  to  premiums  that  for  times  large  of  all  and  insurance  is  to  that  ensure  is  their  activities  to  by  have  exporters  with  regard  include within  manufactured  in  charged  their  agree  In  addition,  because,  by  the E C G D . '  U.S.A.  with  are  the charged  body  charged  purchasers The  3  at  and J a p a n .  not  British  exporters  providing  exporters  have  those  private  the European the  private  while  public  for  common  premium  The B r i t i s h  the  rates  on a  to  export placed  a  One  of  credit at  a  disadvantage.  provided  matically  place  exporters  bodies  (ECGD),  The  conditions  comparable with  charged  would  to  classes.  proposed  those  corporate  T h e EEC members aid  With  are  and  different  premium s c h e d u l e s  the  rates  terms  unable see  two  Department  as  Community.  purchasers.  least  purchasers  exports,  as  are  would  private at  Guarantee  disadvantage  goals  and  the  on t h e  they  proposal  into  public  within  agreed  but  proposed  the proposed  the  competitive  the  British  four  competitive  public  Credits  financing up  policy,  be s u b d i v i d e d  by t h e E x p o r t  have  The G r o u p ' s  buyers  proposed  distortions  t h e EEC a c c o r d i n g l y  included  schedules  trade  agreed  for to  sales sales  the master  subcontractors.  to  In  the  following:  within to  third  the  to  ensure  community;  countries;  insurance  contract  addition,  t h e members  to  and  some  of  have  that  ho  official  coordinate  to  auto-  the  goods  agreed  to  21  advise of  the  more  than  accepted credit  Commission  rules  Policy  of  Group  to  sales  Commission This  include  in  the  under  provided  for  the main  contract.  power  on  provided  subcontractors  for in  a main  varies  facilities  p r o j e c t s may  The E u r o p e a n against incurred  Japanese in  throughout  the  emphasis  joint  financial  are  at  or A m e r i c a n  using  coordinating  in  be b e y o n d  consortia  in  term  to  lines  a meeting  eight  influence  the  notified  problem, years  their  of  term accorded the  of  voice  1,970, F r a n c e  of  to  to  the  from  against  several  community.  In  on  five. the  and  limits  a considerable groups.  of  in  scale has  risks  for  well  different  addition,  size  of  projects  such  as  to  in  firms  produce  involved  a particular  disadvantage  as  goods  coverage  resulted  The d i s a d v a n t a g e s as  for  on t h e  consortia  production  acceptable  cover  depending  large  or  automatically  T h e maximum  aircraft  ventures  currencies  the m u l t i t u d e  and  t h e members  state.  from 30-40$  industrial  The  days  contractor,  a member  plants,  projects.  seven  for  a  previously  credits,  a discussion period  from  buyer  t h e maximum  subcontracts,  world  either  departs  with  terms.  a subcontract  together  credits  call  a restraining  increasing  required  in  as  have  example,  t h e maximum  acts  that  and may  increase  After  for  credits,  members  For  The  banding  major  to  agreements  cover  produced  issue.  wanted  of  cover  transaction  extend  softening  of  The o t h e r  process  insurance  supplier  Germany.  to  their  type  to  the  it  to East  In  any  proposed  that  consultative  granting  respect  debate  agreed  progressive  or  credits. the  Commission  credit  years  with  or mixed  disapproval  the  five  before  when include  in  the  these  firm. competing the  risk  the  problem  encountered  programs  offered  by  the Americans  have  agencies  access  to  a  22  large  resource  government  and  difficulties  credit  as  of  such  an  IV.  This  somewhat  prevent  the  him  early  insurance with  as  the  to  automobile.  independent.  export  would  of  interests  of  bank  provide  the  be  both  an  export  t h e member  hamper  their  these  standardizing  undoubtedly  The that  nation  the  states  commercial and  collect  countries  development  risks  risks  protracted  past that  due  for  fear  foreign  exchange  a  industrialized  and  the  the  commercial  for  any  other  is  however, of  risk,  had  export  political  of  can  such  as  and  its  it  not  possible  the  relatively  might  been nations,  risks  risk  In  credit  large is  might  restrictions  the  a form of  it  accounts.  problems  introduce  vendor  that  receivable  because  the  abroad  insurance  the  involved  risk,  credit  once  commercial  provided  in  aware funds  insurance  political  export  products  was  to  The p o p u l a t i o n  evaluate  to  of  these  began the  his  his  both  both  to  For  The buyer  sell  exporter  1930's,  similar  independent  to  overcome  sales.  or  the  overcome  a community  a means  will  introduction  complicated  reduce  foreign  properly  the  and  To  being  of  to  average  as  to  and  to  with  INSURANCE  from r e p a t r i a t i n g  liquidated. as  attempt  Eurexbank,  The n a t i o n a l  difficulties  reluctant  costly  addition,  an  relationship  institution.  Prior  be b o t h  finance  a closer  that  be c a l l e d  policies.  EXPORT!;CREDIT  was  In  proposed  to  export  practical  have  community.  bank,  of  insurance  well  the Japanese  Commission  source  as  and  financial  the  established. alternate  base  cells  small  associated  be  viewed  fire,  life,  are for  actuaries  number  of  world.  which  default.  are The  insured failure  include of  the  the  insolvency  purchaser  to  pay  for  the  goods w i t h i n  six  months  of  the  due  date  constitutes  protracted  default. The  political  1)  t h e t r a n s f e r r i s k w h i c h i s d e f i n e d as t h e r i s k a s s o c i a t e d with c o n v e r t i n g the p u r c h a s e r ' s local c u r r e n c y i n t o t h e c u r r e n c y r e q u i r e d by t h e v e n d o r  2)  the c a n c e l l a t i o n export I i cence  3)  the c a n c e l l a t i o n of the import the shipment  4)  war, h o s t i l i t i e s , c i v i l war, r e b e l l i o n , r e v o l u t i o n , i n s u r r e c t i o n , c i v i l commotion or s i m i l a r disturbances  5)  e x p r o p r i a t i o n or c o n f i s c a t i o n of the p r o d u c t s t h e b u s i n e s s o f t h e b u y e r by a g o v e r n m e n t authority  6)  any the  In  the  specifically Guarantee beyond  the  outlined  in  the  assigned is  in  level  turn of  policy  the a  function  foreign  payments  factors  as  the  people,  of  buyer's  The  of  the  the  buyer  law w h i c h  those  these  or  non-commercial the  are  risks  risks  Export  Credits  deemed t o  foreign  be  to  grading  a particular  country  in  policy  detail  the  government  and  stability,  exchange  looks  according the  economic  nation,  foreign  vary  worthiness  attached  general  the  to  prevents  which  credit  insurer of  of  vendor's  buyer.  The r i s k  capacity  structure  the  its  a  risks  insuring  reserves,  of  c o v e r e d , whereas all  nation's  prospects.  productive the  the  that  are  or  for  country.  exchange  of  the  issued,  only  cover  supplier  charged  buyer's  balance  of  the  premiums  of  to  of  policy  t h e EDC  include:  authority  f o r c e of payment.  t h e E x i m Bank  and  usually  non-renewal  of  control  type  or  case  The to  insured  a c t i o n having the buyer from making  Department  the  risks  at  technical and  the  its  and  its  such ability amount  of  24  external the  debt  foreign  outstanding.  country  to  by T o m l i n s o n ,  does  ratio  payments  for  of  debt  a narrow  not  economy  The  insurer  is  service  its  foreign  like  see  a debt  to  or  to  foreign  a ratio  debt.  ratio,  earnings,  greater  than  in  the  The ECGD,  service  exchange  of  interested  of  ability  as  reported  defined greater  20$ f o r  of  as  the  than  a broadly  12$  based  economy. Once t h e assigned are  to  one  considered  of the  position  four  categories,  the  review,  upward m o b i l i t y  in  his  possible  or  would  and  the  that  if  the  of  automatically  be r e c l a s s i f i e d  to  of  lack its  C or  B,  carefully  analyzed,  C,  The A  or  the  lowest  nations  are  under  structure  is  particularly  procedures  foreign  classification  D category.  constant Tomlinson  officer which  exchange and  then  it  of  the the  delayed that  almost  He s t a t e d  is  markets  concerned about An  it  premiums.  limited.  controls. any  of  D.  assigned  all  introduced  lose  the  A,  exchange  the  been  are  ranking  foreign  through  has  such  t h e ECGD was  a country  payment  would  as  positions  in  review that  cancelled  country  that  introduction  ECGD s t a t e d  risk  safest  Despite  found  fact  country's  certainly  is  "unlikely  15 ever  to  be r e c l a s s i f i e d  countries  were It  case. they  All only  classified  should  100$ c o v e r a g e  as  for  not  all  policies  risks  contain  90-95$  insured.  In  cases  political  risks.  issued-whether  by  the  ECGD  some  covers  all  for  policy vary  export  III  in J u l y  that  type  coverage the  Table  outlined  The premiums it  B".  be assumed  provide some  A or  the  shows how some  insurance  the  of  co-insurance  only  policy,  political  covers  according sales  or  the  1969.  in  the  of  for  only  the  such  clause  and  70$ of to  policies  provide is  not  the  under  which  commercial  risks  the type  certain  loss of  for  policy  specified  items,  TABLE: I 11  E.C.G.D.  A  R I S K GRADING  B  1969  C  D  Austra1i a  Czechoslovakia  Argentina  Afghanistan  Austria  Greece  China  Brazi1  Belgium  1srea1  Co 1omb i a  Ceylon  Canada  Malayasia  Guatemala  C h i Ie  France  Po1 and  Iran  Cuba  German F e d e r a l Repub 1 i c  Saudi  1 raq.  Ghana  Italy  Venezue I a  Arabia  Korea  (South)  India  Japan  Pak i s t a n  Indonesia  Mexico  Peru  Korea  (North)  Portugal  Paraguay  Spain  Syr i a  Swed en  Turkey  Swi t z e r 1 and  United Arab RepubIi c  U.S.A. Vatican  SOURCE:  City  Tomlinson,  J.W.C.  E.C.G.D. Risk Grading, P a p e r , 1969, p. 1-3  Unpublished  Research  26  the  overall  the  co-insurance  charged in  the  past  result ability  with  the  increased  volume  the to as  reasonable  such  than  are  have  insure  "normal  to one  percent  of  goods  evaluate in  premiums.  income  to  of  reserves In  the Export  all  for  cover  future  countries  small.  In  their  Credits  Guarantee  United  Kingdom e x p o r t s .  1$ of  the  amount  insured  insured $1.4  amounted amount  of  billion  first  of  in  more  and  are  addition,  only to  concerned  United  current  insurance  out  States  losses  a  their  approximately  in  the  during  one-tenth  of  one  under  various  loss  of  same p e r i o d  paid  public  provide  cover  the  has  usually  insured  this  was  Net  approximately  direct  t h i r t y - t h r e e years  During  exports.  a  accurately  credit  Department  the  as  are  to  are  insured.  In  losses,  export  ($244 m i l l i o n )  operation  to $1.9 m i l l i o n ,  less  claims.  In  insurance this  period  percent  of  the  insured. The  insurance  volume  policies  authorizations 1966,  t h e EDC  years  occured  They  any  dramatically  amount  insurers  losses  the  the  of  premiums  sales  insured.  The  sufficient  the  type"  risk  maximizers.  of  program  being  percentage  declined  has  profit  been v e r y  three  of  political  the  general,  policies  billion  first  In  not  expenses.  have  to  f i r m and  premium s c h e d u l e s  a reduction  level  operation,  in  insurer  generating  $28  of  in  and  ratios  Premiums  one-half  the  exporter.  insurance  reduction  of  operating  the  The  contributed bodies  than  e x p e r i e n c e of  by  credit  few y e a r s .  less  of  credit  carried  on e x p o r t  currently  its  export  of  of  has  exports  grown r a p i d l y .  the Export  to $2929 m i l l i o n increased In  order  insured  in  provide  annual  Import  Bank  1975.  The annual  f r o m $263 mi I I i o n to  The  in  the  volume  increased  1969 t o  a comprehensive  of  0  f  analysis  million  exports  million of  of  insurance  from $693  volume $911  types  in  the  insured 1975.  entire  by  export  credit  the  various  The  basic  types  types  Association  I)  picture, of  of  (FCIA)  it  insurance  policies in  Master  is  useful  to  policies  offered  by  conjunction with  Comprehensive  provide  a brief  available  to  the F o r e i g n  the  description exporters.  Credit  t h e E x i m Bank  Insurance  include:'  Policy  P r o v i d e s b l a n k e t c o v e r a g e ( u s u a l l y 90$) f o r b o t h p o l i t i c a l and c o m m e r c i a l r i s k s on a l l o f an e x p o r t e r ' s e l i g i b l e term c r e d i t s a f e s .  2)  Short  Term C o m p r e h e n s i v e  short  and  medium  Policy  P r o v i d e s 90$ coverage f o r commercial risks and 9 5 $ c o v e r a g e f o r p o l i t i c a l r i s k s on a l l o f an e x p o r t e r ' s e l i g i b l e c r e d i t s a l e s w h i c h have a t e r m o f l e s s t h a n 180 d a y s . T o be e l i g i b l e e a c h s a l e must have a t l e a s t 5 0 $ American content.  3)  Medium T e r m C o m p r e h e n s i v e  Policy  P r o v i d e s 9 0 $ c o v e r a g e f o r b o t h p o l i t i c a l and c o m m e r c i a l r i s k s on s a l e s o f c a p i t a l o r q u a s i - c a p i t a l goods s o l e l y of U.S. origin. E l i g i b l e s a l e s must o f f e r t e r m s o f 181 d a y s to f i v e years. T h i s type of p o l i c y u s u a l l y b u y e r by b u y e r b a s i s .  4)  Short  Term P o l i t i c a l  Provides  90$ coverage  Risk  for  is  issued  on  a  Policy  political  risk  only.  6  E l i g i b l e export sales are u s u a l l y r e q u i r e d t o have a t e r m o f l e s s t h a n 180 d a y s .  Medium T e r m P o l i t i c a l  Risk  Policy  P r o v i d e s 90$ c o v e r a g e f o r p o l i t i c a l risks only. U s u a l l y i s s u e d on a b u y e r by b u y e r basis. Covers e l i g i b l e export sales which have a t e r m f r o m 5 - 5 y e a r s .  Combined  Short  Term,  Medium T e r m C o m p r e h e n s i v e  P r o v i d e s c o v e r a g e f o r t h e s a l e of c a p i t a l or q u a s i - c a p i t a l goods to o v e r s e a s distributors and d e a l e r s . T h i s type of p o l i c y is issued on a d e a l e r by d e a l e r b a s i s and p r o v i d e s coverage f o r the t o t a l i n v e n t o r y while i t is in the d e a I e r s ' p o s s e s s i o n . If and when t h e p r o d u c t s are s o l d the coverage ceases in the case of a cash s a l e . In t h e c a s e o f a c r e d i t s a l e , the coverage w i l l remain in e f f e c t u n t i l the debt is r e t i r e d p r o v i d e d t h a t t h e p u r c h a s e r makes a 10$ down payment and f o r w a r d s p r o m i s s o r y n o t e s f o r the b a l a n c e to the e x p o r t e r .  Master  Political  Risk  Policy  P r o v i d e s c o v e r a g e of 70$ f o r p o l i t i c a l risks only. E l i g i b l e e x p o r t s a l e s must have a t e r m of l e s s than f i v e y e a r s . T h e premium i s b a s e d upon t h e s p r e a d o f t h e r i s k s i n t h e foreign markets. The premium f o r t h i s t y p e of p o l i c y i s c o n s i d e r a b l y lower than t h a t c h a r g e d f o r o t h e r t y p e s of p o l i c i e s because the e x p o r t e r i s r e t a i n i n g 30$ of the r i s k .  Policy  29  Sma!I  8)  This  Business  policy  is  P o l i cy  designed  to  meet  the  needs  of  f i r m s j u s t e n t e r i n g t h e e x p o r t m a r k e t and t o a s s i s t t h o s e e x p o r t e r s w i t h a modest e x p o r t s a l e s volume. Under t h i s p o l i c y which p r o v i d e s 90$ c o m p r e h e n s i v e c o v e r a g e f o r a l l s h o r t and medium t e r m s a l e s , t h e exporter may c h o o s e t o i n s u r e a l l e x p o r t s a l e s o r just c e r t a i n s a l e s to s p e c i f i c markets. T o q u a l i f y f o r t h i s t y p e of p o l i c y t h e e x p o r t e r must have an a n n u a l e x p o r t v o l u m e o f l e s s t h a n $200,000. The coverage remains i n e f f e c t u n t i l an a g g r e g a t e o f $500,000 o f e x p o r t s h a v e been i n s u r e d f o r t h e e x p o r t e r o r u n t i l two y e a r s have e l a p s e d s i n c e t h e issue date, whichever comes f i r s t . The premiums v a r y , but a r e s i g n i f i c a n t l y less t h a n t h o s e c h a r g e d on o t h e r t y p e s of c o m p r e h e n s i v e pdIi cy.  9)  Discretionary  Credit  Limit  Policy  Once an e x p o r t e r has a p r o v e n r e c o r d w i t h t h e F C I A , he may, u n d e r a s p e c i a l t y p e of a g r e e m e n t , be a b l e t o q u a l i f y t r a n s a c t i o n s f o r insurance coverage without submitting a s p e c i a l application to the FCIA. T h e e x p o r t e r i s a s s i g n e d a maximum c r e d i t l i m i t and as r e c e i p t s a r e r e c e i v e d f o r p a s t e x p o r t s a l e s , he may a u t o m a t i c a l l y make new e x p o r t s a l e s and i n c l u d e them i n h i s insured assets. In e f f e c t , t h e e x p o r t e r has a l i n e o f c r e d i t w i t h t h e F C I A and as l o n g a s he f i l e s a m o n t h l y r e p o r t of h i s e x p o r t s a l e s w i t h the F C I A and p a y s t h e r e q u i r e d p r e m i u m , he c a n c o n t i n u e to i n s u r e h i s e x p o r t s a l e s . The maximum amount o f c o v e r a g e t h a t may be outstanding a t any one p o i n t i n t i m e i s , o f c o u r s e , s p e c i f i e d by t h e F C I A .  In facing  the  export  sales.  addition  exporter, The  to  reducing  insurance  exporter  may  the  commercial  policies assign  and  facilitate the  proceeds  political  the of  risks  financing an  export  of  credit loan  insurance  policy  to  finance  his  usually  willing  t o make  the  strength  bank  usually  of  default  of  the  to  retain  example,  if  the  commercial the  net  sale  amount  is  the  gross  issuing  the  recourse  policy.  to  the  credit  provides  90$  coverage  sale  exporter for  contract  his  value  the  T h e bank  may  for  less  his  for  down  for  banks  policy. in  the  requires  the  political to  case  payment  For and  retain  The n e t  of  The  own a c c o u n t .  all  a  are  because  exporter  be r e q u i r e d  the  basis  also  own a c c o u n t .  security  commercial  insurance  of  the  the  The  as  on a n o n - r e c o u r s e  of  the  a portion  then  of  loans  right  by  policy  risks,  such  the  institution  requirements.  corporation  covered  exporter  a financial  operating  retains  not  to  10$  of  amount  of  the  provided  by  the  purchaser. The good w h i c h will,  exporter  requires  export  special any  of  export  his  products  necessary credit  qualify  for  Act.  cooperative  financing  discussed (FY) total  in  of  success  $212.6 of  in  greater  ended June  to  30,  period  use  meet  of  to  in  the  produce  excess  direct  institutions.  the  needs  of  the  policy  Bank,  facility  1974,  million  his  later  the  under  the Exim B a n k ' s  on t h e  (CFF)  financing detail  under  Exim its  program  Section  which sales.  in  the  Bank  (This  of  31  has  In  that  EDC  of  his the  Export  the  will  fiscal loans  a small  be year  for  facility.  export  has  strength  aided  the  the  He must  developed  1563  Relending  the  that  facility  authorized  indicates  facilities  on t h e  greatly  study.)  CFF and  He  exporter.  29 o r  capital  years.  ensure  hand,  has  of  example,  bank  he must  other  type  five  small  insurance  loans  of  For  from a c h a r t e r e d or  the  lending  financing  The E x i m  exporter  unlikely  granting  direct  Development  American  little  credit  facilities  obtain  is  a repayment  t h e r e f o r e , make  national no  small  credit  a  The insurance  31  by  itself  V.  cannot  meet  BANKS AND EXPORT  The economic  activity  must  to  grant  beginning  to  extend  international needed  the  exporter  who  complete  an e x p o r t  because  of  provide  the  potential  in  The  bank  only  will  international  the  consortium financing  Canada.  a five  offer  year  small  to  advice the  exporter.  financing  banks they  his  to  been  slowly  In  addition, the  financing  business.  credit of  have  are  provide  banker  be a b l e  in  period.  extended  If  he may  the  international  the  field.  play  period,  formed  of  seeks  the  year  being  banks While  a 7-r8  needs to  usually in  to  are  financing,  terms  offered  international match  the  by  trade  credit  attempted  was  created projects  Bank  Bank  of in  to  a bank for  the  terms  in  banker  is  to  first  unable  identify  An  order  to  other  will  not  type  of  exceed those product  which  involved.  already  established  their  international  1964 f o r  throughout and  amounts  of  increase  financial  the  a trend funds  consortia.  the the  purpose  and  in  the  Bank  of  in 2-7  example,  providing  in  the  United  Dominion  international year  area.  the  MAIBL term  members Kingdom,  Bank  finance  Banks  flexibility  medium  founding  from the  the Toronto  setter  For  w o r l d . T h e  Standard  from A u s t r a l i a  MAIBL became  substantial  the  funds.  have  the Midland  Commercial  sale  commercial  horizons  necessary  development  for  of  community.  Banks through  it  credit  customary  needs  be u n d e r s t a t e d .  consortia  of  are  that  beyond  their  necessary  The  not  expertise  sources  financing  ever-changing  finds  his  role  credit  banking  t o meet  the  CREDIT  important  reluctant  were  a l l o t  the  from by  on t h e i r  lending own  32  were of  reluctant  reasons  the  to  including  lucrative  cooperated  and  the  and  political  inability offset  of may  to  credit.  to  Instead,  totally but  and  of  their  overcome even  t h e most  executive he  company  sees and  his  future  specific  finance  of  for  success tapped  in  it  the  a  number  proved  if  the  sees  portion  may  prove  field  his  managing  like  of  to  in  private  change  The  retain  in  area  a The  risks  banks a  can  to  be a s i g n i f i c a n t  loan  portfolio  the  banking.  The p r o b l e m  The  ORION  finance bright,  international  attitude  in  group  may young  between  importance the  not  CONCLUSIONS  first  chapter  of  this  study  has  shown t h e  of  finance.  flows  increasing  is  source  MAIBL and  this  be  relatively  their  The  banks'  will  of  investment  term  commercial  political  overcome.  future  this  personnel.  international  countries.  hopefully  foreign  portfolio  and  to  in  future.  The  that  banks  international  growth  insurance.  desire  barrier  the  experienced  commercial  credit  in  both  their  international  foreign  will  lack  consortia  in  difficult rarely  keep  a small  of  patterns  personnel  be  their  evaluate  their  term c r e d i t s  active  to  the  export  if  could  restricting  desire  evaluate  use  future  international  VI.  the  better  be  financial  distant  form  MAIBL's  field  more  properly  The development  developing  his  to  longer  indicate  prove  becoming  their  field  resources.  inability  portfolio,  allocated  credit  factors  properly  never  term  their  term c r e d i t  legislation.  The major  liquid to  and  slowly  risks,  through  probably liquid  are  banks'  relatively  international  custom  pooled  field.  are  the  intermediate  Banks credit  enter  increasingly  of  too  33  important throughout national  role  export  its  will  large. OECD,  adopt  an  position.  have  playing  is  exports  type  of  has  view  is  supported  t h e EEC  to  bring  also  does  strategy  is  about  the  a relatively  that  decrease.  the  attempts  a greater  interested  uncontrolled  in  The  ensuring  nations, to  industrialized  credit  practices  of  Berne  the  amount  of  flows  that  deemed n e c e s s a r y  international  by  in  not  trade  demonstrated  primarily  The p r o b a b i l i t y governing  in d e t e r m i n i n g  developed  nation  world  whatever  is  introduction  Each  of  agreement  This and  share  credit  practices  environment.  their  sign  This  credit  market  therefore, protect  export  the w o r l d .  competitive that  that  nations is  not  Union,  the  international  cooperation. The  problems  dimensions,—export provides  the  financing pay  cash  credit  the  consisting net  of  new  reasonable markets. theory  Direct  point  payments should  loans.  rate  of  being  institutions. in  in  loans  which  to  the  at  arrange  is  by  the  a type  least  credit  purchaser  granted  effect  have  Export  needed to  are  in  credit  loans.  Loans  its  approximately funds  growth growth  applied  ten  year  that  would of by  the  the  necessary  allow  of  two  insurance  him  national  institution's  loans,  equal may  the  period  credit  debt  ending  cash  be r e q u i r e d  national  total  various  the  be o b t a i n e d  export  The E x i m B a n k ' s the  future,  on o u t s t a n d i n g  Any  The r a p i d  from  over 400$  and  collateral  bank.  institution,  some  profit  granting  the  export  to  export  self-financing  intermediary. At  and  vendor.  with  insurance  a commercial  granting  financial  credit  exporter with  with to  associated  by  cash  non-cash  outflow to  export  June 30,  credit  1975.  created  in  however,  outstanding  expenditures  accomodate  borrowing  has,  inflow  the  by a  capital  prevented  this  granting  has In  increased the  last  by fiscal  34  year  Exim B a n k ' s  total  billion.  The E x p o r t  growth  total  in  outstanding figure  was  net  for  of  If  a total  and It  t h e EDC  not  do n o t of  the  investors  of in  commitment  of  new  to  obtain  funds  loan  exporter portion  outstanding fn t h e  its  over and  of  borrowings  total  is  the  for  debt  payable  is of  outstanding  these  organizations the  a certain via  a period  a  funds  it  time  the  are  of  as  of  EDC,  interest  the  and  it is  the  it  appears  is  million.  true  a  of  as  the  of  rate down.  that  their  1975, was  also  if  only payable  consider  large  funds  a  and  substantial  obtained  borrows  drawn  EDC  E x i m Bank  are manufactured  interest  are  the  signing  not  signed,  be u n d e r t a k e n .  one must by  agree-  a review  $965.1 m i l l i o n  T h e EDC  funds  future  Normally,  goods  $462.9  on December 3 1 , of  comparable  1973,  the T r e a s u r y  incurring  purchaser.  when t h e  to  the  contracts  of  as  total  years.  operations  addition,  agreement.  disburses,  established  debt  t h e FY  While  their  EDC,  In  case  rate  loan  of  the  In  such  rapid  forty-one  the  should  taxpayer.  subsidy  p r i v a t e market.  r e c e i v e d by  the  to  six  of  the  activity  organizations  the  at  of  1975,  of  value  into  $6.85  a similar  just  a total  a total  to  1969, E D C ' s 31,  in  The v a l u e  continue  case  In  280$  signed  with  type  that  a direct  committed  disbursed  this  cost  agreements.  funds  are  of  December  of  billion  shown  31,  $ 9 3 5 . 7 mi I I i o n .  rates  be a r g u e d  nations.  EDC  agreements  growth  require  $14.9 m i l l i o n to  loan  a direct  their  respective  year  $1,135 m i l l i o n .  benefits can  are  portion  fiscal  By  increase  p a r t i c i p a t i o n , was  phenomenal  costs  they  of  thirty-six  these  the  past  has  On December  $253.6 m i l l i o n . an  by $ 1 . 5  Corporation  debt.  $965.1 m i l l i o n ,  bank  signed  was  the  increased  Development  outstanding  debt  In ments  borrowings  a  volumes  commitment  when  the  are by  the  substantial  applicable The  to  interest  these rate  35  applicable credit  is  to  signed,  Corporations  such  t o meet  their  rate  l/8$  of  would  loans  With  appear  should  means  its  it  market, needs that  the  of  of  if  still  overall  financial capital  raise  to  Canada  to  when  the  earlier.  Canadian  necessary  funds  similar  margin  Crown  needed  Revenue Fund at  federal  a  government  rates  in  the  attached  to  EDC's  the  from having  three  to  years.  past  for  federal  and  loan  few  years  direct  small  size  government  the Mackenzie V a l l e y  the  portion  Canadian  interest  of  the  to  $1.5 of  the  of  funds  and  exists that  available  figure  to  meet capital  capital  dictate  the  ensure  1972,  on December  the  all in  FY  financing  billion  presently  that  end  comparable  Pipeline  should  agreements  the Canadian  funds,  its  that  market  rate  At  signed  agreements  additional  differential  the  The u n d i s b u r s e d  signing  The r e l a t i v e l y  as  under  was $ 4 2 2 . 9 m i l l i o n  b o r r o w an  offshore between funds  through  can  the  Fund. of  effectiveness  will  past  have  and  that  financing  stopped  interest  balance  impact  in  a substantial  Revenue  markets  established  Consolidated  $1461.8 m i l l i o n .  a comparable  The  the  interest  t h e EDC  such  the Eurobond market  Consolidated  is  years  borrow  undisbursed  demand  large  at  of  operating  1975 was  projects  be r a i s e d  1-2  applicable  financing  great  The  to  hand,  from the  escalation the  been  able  needs  dramatically  that  EDC must  are  rate  commitments.  market.  the  EDC  the  total  would  past  as  other  decreasing.  on December 3 1 ,  1975,  have  the  undisbursed  figure  w h i c h may  that  be  increased  total  on t h e  operating  The has  credit,  above  borrowings. it  the  this of  EDC's  study  will  the Export activities  be a n a l y z e d ; a public  the  be c o n c e r n e d w i t h Development  will costs  corporation  have and such  Corporation.  on t h e  benefits as  examining  EDC  The  Canadian that  promote  accrue Canadian  31,  36  exports  will  be d i s c u s s e d  presented.  In  effect,  a method  by w h i c h  maximize  the  the  Canadian  operation  the  some  capital  benefits  to  the  In  to  develop  order  the  is  meeting  export be  it  in  will  firm.  also  comparative products  attempt  determine  broaden to  the  analyze  a c c o m p I i sh  the  Business the  base  of  future  of  cash  how and where  trade  Development of  have  find to  some  and  of  Bank,  the  Industry,  financing  that  type  of  effective  of  the  systems  America w i l l by  to  on  as  Department Trade  and  sector.  This  facilities  be  of  the  size  of  various should  comparative or  advantage,  technological  exports  will  advantage  those of  in  The  nations  comparative such  type  exports.  labour  equipment  grants  how  of  based  skilled  the  of  according  state  capital  industrial  the  States  theories  basically  applicability  Canada's  United  resources,  facilities  how s u c c e s s f u l this  portions  a breakdown  Canada's  Department  of  the  they  natural  analysis  theory.  provided  Regional  Commerce study  provided  by  EDC,  Economic  are  will  by  used  to  attempt  the  EDC  goal.  A simple the  advantage  in which  Financing  and  understanding  objectives,  International  The  Expansion,  a better  provide  be  economy.  equipment  know-how.  the F e d e r a l  order  capital  raw m a t e r i a I s ,  to  in  Canadian  analysis  those  be m a x i m i z e d  a breakdown  and  of  to  include  American  will  is  will  all  future  study  and  product  concepts  can  this  the  Kingdom section  exporting  of  for  United  analysis  the  exports  its  The  Canadian  function  Canadian  reviewed. of  recommendations  objective  Canadian  system  in  and  needs the  well-structured of  the Export  nedessary  funds  method  will  Development should  be d e v e l o p e d  Corporation.  be r a i s e d  wiI I  be  to The  forecast problem  discussed  37  and  a unique  position  solution  of  the  concern  must  also  exports  are  being  encompasses  finance  to  developing If  the  study,  export  maintain  developing  nations  the  volume At  developing  a  the  flows  for  has  the of  of  aid  their  and  to  have  extremely  to  to  of  the  such  policies  to  be  flows. the  problem  be a w o r l d  capital  is  development  exports  servicing  be  that  expect  component  LDCs w i l l  should  where  the  equipment  It  cannot  is  exported  policy  existing  debt  with  EDC  finance.  capital  the  Canada  being  financial  nations  a chance  dealing  reserve  capital  the  stops  of  to  goods  such  perhaps  credit  the  secondary  benefit  development  a serious to  of  type  continue  Canada  net  portion  increasing  face  a new p o l i c y  the  developed  existing  exports  present,  and  the  presented.  then  export  nations  of  large  a hybrid  without  will  be  purchaser  by LDCs  where  the  industrialized  reduced.  If  However,  nations  annual  the  credit  determine  utilizing  maximizing  on d e v e l o p i n g  both  to  of  purchased  begins.  continue  goal  this  problem  banks w i l l  considered.  concentrating  difficult  the  of  be  the  chartered  While basic  to  or  else  substantially leader  equipment  in  exports  to  LDCs. Chapter activities Kingdom. Export the  of  II  the Export  Chapter  III  Import' Bank  description  Development  will  the  the  Corporation.  be  the  financing  in  the  export  Credits  will  of  and  provide  focus United  analysis The  agreements  credit  Guarantee its  of  the of  on  IV  activities attention  has  an  the  Chapter  guarantees field  and  Department  attention  States.  focus  and  insurance  a description  already  in  of  the  of  provide  briefly  the  both  Export  chapter  The E D C ' s  the  United  Canada's the  been  of  activities will  for  sector.  analysis  will  activity discussed  38  and w i l l credit  large  portion  be d e a l t  insurance  marginal a  not  markup  facility basis.  i n j e c t i o n of of  the  addition,  it  by  insurance  because  export  credit  will  the  Development objectives  any  length  basically  is  of  a  very  lack  on t h e  to of  in  do  this  of  the  on t h e i r  insurance only  of  and  if  the  exports  information.  credit  very  sector  at  the  export  plus  occur  contracts  an a n a l y s i s  The  on a c o s t  could  published  export  study.  provided  low and  defaulted  impossible  requiring a  substantial  same  time.  supported  The a n a l y s i s  guarantees  sector  of  will,  the  field. Chapter V the  proposed  method  Corporation. of  is  funds  concentrate  In as  is  at  The p r o b a b i l i t y  purchasers  In  therefore,  with  the  study  cash of  raising  Chapter and  forecasting  VI  t h e more  the  will  technique  necessary conclude  important  by  will  funds  be for  developed the  summarizing  results.  Export the  39  FOOTNOTES  CHAPTER  I  1.  Nehrt,  Lee C . , F i n a n c i n g C a p i t a l Equipment E x p o r t s , I n t e r n a t i o n a l T e x t b o o k C o . , 1966. p . 3  2.  M c K i t t e r i c k , N a t h a n i e l and B. J e n k i n s M i d d l e t o n , " T h e B a n k e r s o f t h e R i c h and t h e B a n k e r s of t h e P o o r : T h e R o l e o f E x p o r t C r e d i t i n D e v e l o p m e n t F i n a n c e " , New D i r e c t i ons i n D e v e I o p m e n t , Co Ii n B r a d f o r d and O t h e r s , New Y o r k , P r a e g e r P u b l i s h e r s , 1974. p . 1 0 2  3.  Fair,  D.  E.,  "Export  December 4.  United  Credit  1 9 7 0 , No.  5.  McKitterick  6.  As  1966.  and M i d d l e t o n ,  International  Ibid_g_ p . 6 4  8.  Ibid,  p.  Terrell,  Harry,  Terrell,  3 cit.  Fund  124,  I I.  Ibid,  p.  12.  ibid,  p.1499  Terrell,  p.  143.  Staff  of C o m m e r c i a l C r e d i t s by Imports of C a p i t a l Goods", Papers,  Vol.  XVII,  1970.  122,  "Three Dec.  Dec.  of  Export  1972.  Initiatives  1974.  p.  p.  Credit  in  the E E C " ,  The  1591  in E x p o r t  Credit",  The  Banker,  1497  1498  Harry,  Banker, Tomlinson,  "Harmonization  Vol.  122,  J . William  Research Loc.cit.  "Harmonization  Vol.  Harry,  Vol.  15.  Export Practices  65  Banker,  14.  Review,  E c o n o m i c and S o c i a l A f f a i r s , F i n a n c i n g - P a r t One C u r r e n t  op.  Monetary  Banks  62  7.  13.  p.  The T h r e e  Pa.,  30  q u o t e d i n , A z i z a l , Mohammed, ' T h e Use Developing Countries for Financing p.  10.  p.  N a t i o n s , Department of C r e d i t s and D e v e l o p m e n t and P r o b l e m s ,  9.  Problems",  88,  Scranton,  Paper,  Dec. C ,  1969.  of  1972.  E.C.G.D. p.6  Export p.  Credit  in  the  EEC",  6  Risk  Grading,  Unpublished  The  40  FOOTNOTES CONTINUED  16.  A  comprehensive offered Aid  but  by  to Export  Sept.  1971.  The E x p o r t provides  somewhat  the FCIA  is  dated  Finance",  pp.  review of  included  the  in H a s k e l l ,  The J o u r n a l  of  insurance Paul  policies  T.,TCIA,  Commercial  Bank  A  Vital  Lending,  40-9  Import  current  Bank's  Publication,  information  on any  E x i m Bank -  new  type  of  How  it  policies  Works. being  introduced. 17.  ,  "International  1969.  pp.  Finance Pa.,  11-58,  for  intext  Banking Cited  Multinational Educational  Supplement",  in L . C  Nehrt  Business, Publishers,  The Economi s t ,  (editor),  Second E d i t i o n , 1972.  p.  Nov.  15,  International 370  Scranton,  CHAPTER  THE EXPORT  The Credits  not  has  able  The  trade.  In  default,  The  financial  who  then  acertain  if  sale.  ECGD  terms  being  potential  the  same b a s i c The  repayment  buyer  the and  factors  export  that  must  p e r i o d must  have  be g r e a t e r  than  41  involving  the  standing  of  greater three  exporter bank.  ECGD  to  potential as  the  worthiness  purchaser's an  t h a n , £ 100,000 from  trading.  factors  credit  evaluating  years  transfer,  the  such  the  exporter.  house  his  in  provides  export  approaches  export,  in  the  the B r i t i s h  considers  considered  a value  with  does  credit  ECGD  the  from a c l e a r i n g  exporter  ECGD  of  for  against  by ECGD t o  the  financial are  guarantees  transaction  of  terms  objectives,  associated  application  nature the  risks  the  the  the  its  competition  support.'  general  coverage  financing  a guarantee  offered,  the  risk.  provided  support  the  financial  are  evaluating  of  in  foreign  government  achieve  guarantees  obtain  United  any  provides  necessary  the  with  other  the  Export  terms  and  they w i l l in  policy  the  exporters  war  obtains To  and  establishing  that  lengthening to  in  ensure  equivalent  insurance  insurance  to  on e q u a l  order  DEPARTMENT  government  was  or  any  credit  standard  insolvency,  insurance  GUARANTEE  British  compete  initiate  international export  the  Department to  credit  normally  both  of  Guarantee  Kingdom a r e that  goal  CREDITS  I I  the  country—  insurance and date  the of  of  42  shipment.Once his  bank  bank.  to  the  negotiate  The B r i t i s h  applications  and  guarantee.  Once  received  the  After  by  paying  the  loan  the  are manufactured  ECGD  recourse  recourse  guarantee.  direct  loans  banks.  to  the  the  This  provided  on  the  exports  of  the  for  the  but  any  to  guarantee  to  to  provide  the  ECGD's  exporter. is  no  longer  on p a y m e n t ,  the  ECGD  the  to  unconditional  T h e ECGD  default  loan  and  he  defaults look  date.  the  the  such  of  supplier  must  agrees  and  to  strength  the  purchaser  due  system  to  the  either  retains  on payment  by  the  not  the  right  covered  also  which  supply sector  obtain are  funds to  supported  for  export  will of  the  by  the  data  on  in  insurance  later  in  the  granted  in  Corporation  and  the  the  the ECGD's  of  exports.  export  volumes  of  by  the  Britain The  banking The  credit capital  activities.  England,  chapter.  Scotland.  bulk  of  granted  and  British  granting  The Bank  loans  credit  in  London  support the  examined  export  banks  Refinance to  be  of  involved  facility  house  by  not  supplier.  provide  relevant  is  issuance  the  portion  the Export  the  or  facility  clearing  around  T h e ECGD  purchaser  a rediscount  rediscount  to  revolves  guarantees.  private  difficult  the  financial  houses,  syndicates  If  receptive  released  issuing  exporter  exporter  British  provides  discount  for  The ECGD  days  A substantial is  fee  are  purchaser  on t h e by  approaches  3  and  however,  funds  transaction.  ninety  to  the  its  guarantee.  The policies  goods  supplier  the  grants  no  of  between  generally  bank  within  agreement  the  been v e r y  the  payment  issued  has  purchaser,  the  its  loan  is  system  in  implement  a  guarantee  banking  involved has  ECGD  reliance  makes  it  equipment  The B r i t i s h  do  4 3  not  appear  result  of  provide  to  guarantees  the  name  repayment.  In  applicable The E D C , not  to  this  growth  I.  and  1950's  t o more  example,  the  a repayment were  being  the  1964,  up  to  the  will  British  British  of  the  volume  of  in  the  as  Bank  the  the  of  terms  does  does  it  is  The  to  of  but  information  data  EDC  exporter.  exporter,  detail.  a  rate  the  a result,  some  and  interest  name  great  on p r o v i d i n g  flexible  a year  not  not  balance  indicate  the  system.  other  authorized take  ECGD had  than  4  and  million  the  early  exchange  the  ECGD.  support  British  five  years  provided  the  export  export terms direct  credit being aid  insurance  financial a year  earnings  the  exports that  early  resulted  I960,  which  similar  granting  the  has  October  offered to  in  guarantees  I970's.  In  to  form of  provided  in  by  national  to match the  insurance  foreign  policies  authorized  by  years.  export  overseas  offered  thirteen  of  and  fromj^300-400  billion in  ECGD was  not  of  increased  more  the  the  as  and  the  Similar  exports  British  sold  financed  OF SYSTEM  decline  did  name  situation  concentrate  of  support  By  for  period  T h e ECGD was  indicate  rate.  than £ 2  adoption  to  interest  t h e ECGD  The  fails  goods  the Exim  indicates  applicable  annual  by  t h e E x i m Bank but  the  products  the  flexibility  issued  the  of Both  provides  analyze  chapter  t h e ECGD.  hand,  be a v a i l a b l e to  by  breakdown  purchaser,  loan,  other  the  FLEXIBILITY  the  issued the  each  The  in  of  a detailed  addition,  on t h e  possible of  to  indicate  appear  provide  for  required terms  institutions.  provided  buyer's  with m a t u r i t i e s  that  country. ranging  44  In all  of  the  collision  the  early  nation's course.  I960's  export  competition  guarantees  more  repayment  to  periods  traditional was  view  resolved  Bank  of  only  to  portion  of the  to  the  total  not  the  large  the  month  while  the  thirteen  years  as  of  of  the  of  being  its  banks being  for  provided  ECGD a p p e a r e d  terms  term  their  with  ensure  be  forced  insurance viewed  far  a bank  to  on  a  by and  loans  beyond  loan.  rediscount  nearly  with  the  This  facility  conflict  by  the  would  Central which  for  agreed  refinance  Bank's had  refinancing  of  eligible banking  eligible  export  the  credit  Therefore,  Bank  of  England,  the  if  it  as  applied three  a  the  '  that  18 m o n t h s  facility  because assets  of  were  their  than  than  This  even  of  greater  i n more  community  banks  facility  longer  the  credit.  the  a portion  discount  was  which matured  the  when  a term of  credit the  that  or  proved  to  allowed  the  liquid  asset  eligible  rediscount  loan  facility  exporter. that  fixed-rate  The  it  requirements.  a portion,  period.  The  with  British  of  England  credits  amount  ratio  average  of  eligible  refinanced  To  of  years,  position,  popular  liquidity  portion  ECGD was  five  Bank  eligible  classify  assisted  too  the  the  introduction  export  amount  be e x t r e m e l y  were  the  extend  to  which  and  to  portfolio.  insured The  for  hand,  appropriate  the  liquidity  years.  banks  an  the  1961,  credit  3 0 $ of  of  up  one  system,  England.  a tight  export  of  with  In in  than  banking  financing,  On t h e  international  the  the  the  the  percentage  bankers  agreed  export  and  bank's  gross  rediscounting  of  eligible  that  each would  shipbuilding deposits  facility  loans  credit  over  has  not  the  did  not  refinance  which  that  exceeded  previous  been u s e d  become  5%  twelve extensively  45  by  the  the  British  first  time In  period  1965,  measure  agreed  export  to  credit  been g r a n t e d become term  granted  by  more  had  the  England  rate.  Bank  England  of  therefore, compete  whole  to  1962,  This  repayable agreement  and  the  and w h i c h  facility  granted  in  did  had  not  1965 w i t h  refinancing. any  any  a  This  export  credit to  interest  policies rate  on  rate  charged  bank  secured  was such  loans  difficult  for  exports  banks  export  within  as  which well  financing  seven  reached  years  one  year  were  as at was  was the  the  the  of  British  rate.  initially  after  life  insurance  fixed  than  by  loans  the  usually  supported  some a  for  5 tolg$more  increasingly  foreign  was  years  of  central  acceptable  over  provide  balance  the  a  a t e r m more  fluctuate  agreed  repayment  time,  that  term of  could  The B r i t i s h  loans  years,  the  the  CREDIT  the  interest  rate  five  of  for  refinanced.  At  for  the  was  introduced  five  credits  reduced  credit  England  is,  eligible  facility  community.  insurance  The  than  those  became  the  outstanding  That  years  effectively  of  credit. the  of  lengthening  ago.  five  credits. to  of  Bank  greater  years  bank  the  use  export  gradual  export  when  to  eligible  the  1970,  became  against  of  until  banking  credit  of  a term of five  eligible  b a n k s made  credit,  INTEREST RATE FOR EXPORT  export  the  refinancing  than  of  Prior by  export  facility  conservative  II.  to  which  an  1970,  a result  refinance  excess  refinancing  as  for  operative  in  In  when J[\27 m i l l i o n  applicable  further bank  banks.  tied the  low,  rate  of  England  the  loan.  It,  to  fixed-rate  companies, The  of  to  exporter  established  Bank  Bank  in  for at  1962,  bank  5.5$. introduced  46  its refinancing The  facility.  5.5$  matter  was  credit  at a 5.5$  standing  reviewed.  that  major change in world  r a t e was The  rate  6  term  at which time  the U.S.  In October credit  late  the  to continue to p r o v i d e export  f i v e year p e r i o d with the under-  in the b a s i c s t r u c t u r e of the  7$ f o r export to charge  1967,  the agreement would be s u b j e c t to review  i n t e r e s t r a t e s in the  subsidizing  until  banks agreed  for a further  as they began to r e a l i z e  scale.  maintained  interest  1960's caused  that both they and  their  i f t h e r e was  rates.  The  increase  the banks some concern customers were  e x p o r t e r or the overseas buyer  on a s u b s t a n t i a l  1970,  for a fixed  was  a new  agreement, c a l l i n g  reached.  a 1$ commitment  a  r a t e of  In a d d i t i o n , the banks were p e r m i t t e d  fee f o r a l l approved  a p p l i c a t i o n s f o r long  credit.^ In 1974,  s t r u c t u r e was  the ECGD was  adopted.  f i x e d r a t e of 7$ was over more than  five  For  r e o r g a n i z e d and  a new  loans r e p a y a b l e over a 2-5  to be charged, w h i l e f o r those years a v a r i a b l e r a t e  adopted.  Most of the  believed  to be granted  longer term at the  schedule  loans supported  lower end  of the  as c r e d i t s p r o v i d e d f o r ship b u i l d i n g  The export c r e d i t  problem  of e s t a b l i s h i n g  interpretations.  hardening  interest  of  On  rates will  loans  the one  a  repayable  of from 6-8g$ was by the ECGD are  r a t e schedule as w e l l from any  official  England.  a competitive interest  i s c o n s t a n t l y being reviewed  of d i f f e r e n t  year p e r i o d  loans are excluded  imposed by the Bank of  rate  range.  E x p o r t c r e d i t s p r o v i d e d under the f i x e d  monetary r e s t r a i n t s  interest  and  rate for  i s s u b j e c t to a number  hand, i t can be argued  make the B r i t i s h  exporter  that a  less competitive  47  and  it  will  c r e a t e more  of  a debt  nations.  T h e LDCs p u r c h a s e  equipment  exports.  and  customers  British if  the  exporter should  GATT,  and/or come  subsidizing  charged  by  insurance  banks  the  cost  export  lender,  premia.  The  use  can  to  of  any  credit  the  consists  fees,  management  total  could  be w e l l  of  then  The  fees  beyond  that such  rates.  interest  and the  a  directly  interest  the  the  Articles  from  than market  owners  argue  subsidized, revenues.  capital  subsidize  The b a n k s  commitment cost  world's  to  government  lower  developing  that  be a s k e d  be  general  the  the  argue  not  is  prevent  the  of  one  for  of  purchaser.  purchaser  through  burden  volume  should  overseas  theoretically  total  the  the  hand,  from g o v e r n m e n t ' s  exports  The  other  British  and/or  however,  a substantial  On t h e  the  exporter  subsidy of  of  servicing  rate  export figure  credit expressed  9 by  the  interest  showed cost  III.  that  of  rate.  charges  export  Fair,  other  credit  by  Kingdom e x p o r t s industry.  In  financial product of  than  support  guarantee  the  to  provide  the  which  is  a type  Export  rate  Credit  could  Problems,  increase  the  guarantees  to  encourage  economic  assistance  to  a depressed  the  industry ship  t h e ECGD and  F i n a n c e Company  interest  of  financial  case,  The B r i t i s h  from both  the  study  CREDIT  issue  latter  guarantee,  abroad.  Mortgage  or  his  0.75-1.75$.  OTHER FORMS OF EXPORT  T h e ECGD may  in  Limited. of  hope  may  is  be more  building the  that  by  successful  industry  private  policy  has  sector  T h e ECGD o f f e r s  insurance  providing  that  in  United British  the  selling  its  been  the  beneficiary  through  the  Ship  a ship  building  provides  95$  48  coverage bears  against  all  mortgage Ltd.  the  is  to  apply  Kingdom.  for  such  are  not  The  British  Refinance  All  funds  advanced  policies.  T h e ERC  export  divided  company  founded  the  which  and  are  Mortgage in  outlining  of  ships  first  builder  secured  the  by  Company  purpose  of  constructed  purchasers  the  ship  Finance  for  by  the is  1951  foreign  secured  statistics  if  position  purchasers  domestic  e x p o r t e r may  Corporation  the  are  express  The E C G D ' s The Ship  to  risks  are  eligible  mortgages  success  of  in  on  the  these  two  from  the  available.  for  the  Both  political  ship.  loans  Unfortunately  programs  of  the  loans,  and  risk.  owned  medium t e r m  1 0  Export  over  a privately  United  ships.  commercial  preshipment  security  providing the  all  purpose by  of  t h e ERC  As  the  proportionately  facilities  of  encounters  difficulty  (ERC),  t h e ERC  the  exporter  between to  financing  with  a r e made  small its  credit  corporation long  by ECGD  t h e ERC  the  export  medium and  secured  payments  appeal in  are  obtain  a private  providing  provides  sale.  also  of  by  the the  exporter  exports  term export  guarantees  85%  and  founded  the  or  credit.  financed  through  the  one  portion  the  exporter.'' to  funds  The  firm  of  1961  insurance  purchaser,  and  in  the  which local  banks.  IV.  CONCLUSIONS  T h e ECGD needs credit  of  the  takes  British  insurer  and  great  pride  exporter. reports  that  It  in  its  claims  to  ability be t h e  it  insures  in  By  comparison,  some  to  respond  world's form  to  the  largest  over  25%  of  I2 the  United  Canada's  Kingdom's  total  exports.  exports  received  some  type  of  EDC  only  about  support  in  5%  of  the  year  49  ended  December  8 0 $ of  all  ECGD has as  an  sixteen  up  1974.  insurance  office  built  31,  The B r i t i s h  applications  offices  located  in New Y o r k .  a massive  Over  credit  file  institution  within  48  throughout the  years  on o v e r  also  hours the  the  of  to  receipt.'  United  British  150,000  claims  approve The  3  Kingdom as  well  corporation  purchasers  of  has  United  14 Kingdom e x p o r t s . speeds  up  the  Insurance than  processing  plan  years upon  This  duration,  the  type  both  commercial  years  the  contract.  run  satisfactorily,  for  the  balance The  almost  the  of  the  export  f o r m an  export-import  believe  funds. more the to  The  that  shape  England  of the is  domestic  England private  a good  at  no  and  nature  of  capital the  market.  example  of  after is  the  (80-90$, will  be  the  if  contract  the  first  increased  in to  far the  the  to  resisted  two has  100$  of  the  the  necessary pressures  providing  the  helps  to  sector  tuning"  facility  tuning"  the  because  public "fine  Kingdom  E x i m Bank  market  The  United  provide  U.S.  private  The r e d i s c o u n t "fine  greater  during  is  capable  markets.  of  charge.  sector so  Percentage  coverage  years,  offered  have  Full  involved)  risks  ECGD p r o v i d e s  the  undoubtedly  contracts  risks  extra  private  market  its  for  risk  two  on a l l  modelled  private  competitive  efficient Bank  the  of  authorities bank  that  the  facilities  on t h e  through  political  coverage  information  percentage  and  end  contract  exclusively  The g o v e r n m e n t  and  the  credit  funds.  they  At  plan  normal  policy  this  applications.  provides  the  of  access  insurance  Contract.  for  rely  of  to  a unique  provided of  ability  T h e ECGD o f f e r s  three  depending  The  of  process.  the  needed  develop through  needed Bank  to  of  50  However, at  least  are  doubt.  supported  indicate insured  too  While  export  by ECGD. of  of  fairs.  t o send  believe of  that  critical  is  that  belief  nation  develop  balance  of  its  payments  position  primarily  Export  sales,  in t u r n ,  government  as  policy.  in d e v e l o p i n g  states  the balance  improved by  an  in the s h o r t  increase  balance  of  will  of  is  abroad of  that  to those  Export  only  is  If  p r o d u c e d and missions  the B r i t i s h  one o f ; E C G D ' s  focused  firms  The  position  both  be i m p r o v e d  of  credit.  It a  influencing that  policies.  in response  to  a nation  can o n l y  the  a r e not  increase, long  this  relatively Grossfield  factors  the  industrial  sector.  exports  over  failures.  in h e l p i n g  therefore,  industrial  coordinate  investment  development  created  is,  major  on e x p o r t  He a r g u e s  explicit  or t o  a r e , in  banks.  of  and i n f a v o r a b l y  the increased  credit.  being  are  efforts  t h e ECGD t o e f f e c t i v e l y  credit  payments  conservative  the bankers  on s a l e s  nation. of  the  the manufacturers  of  exports  t h e goods a r e  sales  i n e f f e c t i v e , both  a nation's  of  that  the e f f e c t i v e n e s s  a result  run, if  in export  payments  of  structure of  accrue  ineffective that  credit  industrial  occurs  of  staff  the a t t e n t i o n  export  believe  the products  the p o s i t i o n  a study  of  growth  type  of  and b u s i n e s s m e n  6  of  U.K.  or  f a c t may  unless  critical  criticism  all  this  the manufacturers'  the i n a b i l i t y  bankers  incentivesjis  been  representatives  GrossfieIdJ in  his  provided  have  form of  25$ o f  not being  bank  to r e p r e s e n t  that  policies,  ignorance  The s a l e s  forced  efforts  is  states  The m a n u f a c t u r e r s  the bankers'  trade  the  credit  t o some  insurance  and do n o t s u p p o r t  unwillingness  exporters  credit  The e x p o r t e r s  their  effect,  are subject  ECGD p r o u d l y  the banks.  cautious  because  systems  by e x p o r t  that  attitude  all  also  be  offset the  nation's  r u n as t h e  51  foreign The of  type an  borrower of  repays  arguments  optimal  strategy  the  debt  presented with  i n c u r r e d when by  regard  Grossfield to  export  he p u r c h a s e d show t h a t  credit  is  the  the  article.  development  a difficult  task.  52  FOOTNOTES  CHAPTER  1.  Fair,  D.E., 88,  "Export  December  Credit 1970.  Problems".  p.  Nehrt,  3.  Loc.  4.  U n i t e d N a t i o n s , Department of C r e d i t s and D e v e l o p m e n t  Lee C . , F i n a n c i n g C a p i t a l Equipment E x p o r t s , I n t e r n a t i o n a l T e x t b o o k C o m p a n y , 1966. p. 10  Verghese,  Fair,  7.  Fair,  S.K., p.  D.E., D.E.,  Op. Op.  p.  D.E.,  Op.  11.  Verghese,  S.K.,  cit.  5 and  Credit  New D e l h i ,  cit.  p. p.  Insurance  Indian  Facilities  Institute  in  of  Foreign  Vol.  124,  Trade,  38 40  the Export  cit. Op. Op.  p.  Game", The B a n k e r ,  Sept.  40  cit. cit.  , Financing Business  p.  Export Practices  I 162  Lee C . ,  12.  p.  12  p.  I 10  Foreign  International,  Operations, 1964.  p.  Second  Edition,  London,  Second  Edition,  London,  112  cit.  14.  , Financing Foreign Business  15.  ,. 1974.  16.  Pa.,  124  1974.  Nehrt,  Loc.  Number  Scranton,  E c o n o m i c and S o c i a l A f f a i r s , F i n a n c i n g , P a r t One, C u r r e n t  Credit  1970.  10.  13.  Export  and A b r o a d ,  , "Playing  Fair,  1966.  India  8.  9.  Review,  cit.  and P r o b l e m s ,  6.  The T h r e e Banks  31  2.  5.  I I  p.  International, "Playing  Operations, 1964.  the Export  p.  112  Game", The B a n k e r ,  Vo 1.  124,  Sept.  1163  G r o s s f i e l d , K., " T h e E f f e c t i v e n e s s o f B a n k e r . V o l . 119, O c t . 1961. p p .  Investment 1028-37  Incentives",  The  CHAPTER  T H E EXPORT  The U n i t e d nation. 11$ o f  In total  shown by 1973,  each  world  U.S.  In  the  equipment  following Central Middle of  of  regions  the  enormous  figures of  for  indicate world  of  aircraft;  1973, it  countries  the are  the  and  of  in O c e a n i a ;  Japan.  Only  Economies,  in  exported  the  or  European and  States  nearly  regions  site  U.S. each  the  all  exports of  South  nations  of  the  in  of  latest  EEC,  exports  does  pub I i s h e d  does indicate  trade  the  greatest  Economic  Community,  the  Organization  the U n i t e d  States.  had  65$ of all  which  it  the  the  comparison  1973,  and  countries  exports  this  the  have  12$ o f  53  The  In  bi I I i o n .  exceeded U.S.  in  be  (revised  in N o r t h ,  totaI  While  petroleum prices  Countries United  and  can  transportation  of  and J a p a n  equipment.  countries the  all  least  goods.  were $ 2 5 . 4  nations  in A f r i c a ;  the American market.  that  trade  developing  LDCs  Planned  Petroleum Exporting In  the  the  increase  size  machinery  Considered  transportation  the  exports  at  market  equipment  for  exception  and  of  U.S.  manufactured  transportation  Canadian  exports  of  the  exports  the  Centrally  type  of  exporting  produced  1972 e x c e e d e d t o t a I  with  the  total  of  the  and  size  has  way,  of  allow  for  of  one  U.S.  another  all  not  of  all  the  largest  in  East;  machinery  share  alI  years  of  STATES  the w o r l d ' s  The- e n o r m o u s  billion.  :  far,  thirty  machinery  in  by  exports  Canada's  category  America;  Asia  EFTA,  the  of  were $ 7 . 9  one  past  biI I ion whiIe  same y e a r ,  this  the  is,  exports.  exports  were $ 2 6 . 6  IMPORT BANK OF T H E UNITED  States  considering  7)  in  of  I I I  the w o r l d ' s  export  telecommunications  market  equipment  54  and  nearly  capital  19$ of  all  railway  vehicles.  equipment  and  as  are  Export-Import designed shown Bank  to  Bank  is  support  a dramatic  such  eligible  the American  American  increase  supported  export  sales  the  comparable  figure  for  and  guarantee  export  exports.  in  the  past  with  for  these  export  credit  ten  $12.5  nearly  of  granting  years. value  In  of  the  is  to  The  institution  1966,  five  Exim  while  annual year  have  the  billion,  Total  in  are  activities  FY  $2.1  billion.  doubled  products  finance.  The Exim B a n k ' s  a total  1975 was  authorizations  All  loan  period  2 ending  June 30,  1975.  One o f the operations  of  1  have  a standard  chapter  will  the  purposes  Canada's  against  provide  of  this  Export  which  a review  study  Development  to measure and  the  constructively  Corporation.  EDC's  an a n a l y s i s  of  In  activities  the Exim  criticize order  to  this  Bank's  operations.  I.  PURPOSE AND  Edge factoring provide  Act  firms,  some  (WHTC)  International  sector  of  classified  and  Sales  Corporations  governments  subsidiaries  f o r m of  International  for  GOVERNING AUTHORITY  or  the as  commercial direct  U.S.  banks  export  in  banks,  credit.  (DISCS)  are  increasing  aimed  agencies  recipient  at  (AID) to  nation,  development  but  finance.  and  provides  foster its  investment  addition  Corporations  Development  their  of  OF THE EXIM BANK  the  In  to  the  E x i m Bank  addition,  both  the Western U.S.  companies,  loans  development  activities  are  Domestic  Hemisphere  exports.  direct  the  all  The to  of more  Trade  Agency  foreign  the  industrial  correctly  55  T h e E x i m Bank means made  of  financing  for  that  so  that  in  general.  U.S. of  it  and  involved  and  in  secondary agency  helping  importance which  is  developing  E x i m Bank  can  only  compete a  have  be  of  T h e Bank  last  granted  by  granting that  it  have  any  credit is  in  to  Bank  unless  t o meet  this  obtains  of  the  the U.S.  condition. the U.S.  j.e.  to  country  unless  the  nations  Bank  U.S.A.  which  both  firms  is  to  by  was  Any of  but  not  act  as  which  loans  repayment.  amended  on  from p a r t i c i p a t i n g  the P r e s i d e n t Further,  engage  in  the  armed  the  domiciled  applications 3  of  is  granted  assurance  (which  1945  trade  govern-  encourage,  institutions.-  the  of  those  a reasonable of  and  in  t h e E x i m Bank  consider  financial  Act  credits  supplement  prohibits  those  activities  p r o d u c e d by  to  U.S.  financing  goods  offer  with  governing  project  changed  sectors  only  purchase  private must  the  and  only  dealings  vessels  and  is  is  were  promotion  industrial  a  however,  export  the  loans  capital  interest  the  in  U.S.  The  intended  and  It  engaged  to  financing  provide  were,  organization  their  bank.  best  The the  LDCs d e v e l o p  a Communist  of  the  concerned with  primarily  nations.  the  of  No  is  the  t h e Armed F o r c e s  by  objectives  specifically  1975)  with  and  The E x p o r t - I m p o r t 4,  loans  private  by t h e E x i m Bank  January  Russia.  the  is  resort  been r e j e c t e d  trade  to  1934  facilitating  spent  d i r e c t l y with  lender  in  actively  and  the U.S.A.  established  the to  developed  in  originally  the  T h e E x i m Bank  exports  ment  American  purpose  was  was  in  determines Bank  may  conflict  not with  U.S.A. Act  also  requires  Exim Bank, Maritime If  the  Maritime  shall  that  Commission's  U.S.  be t r a n s p o r t e d  Commission exporter  all  is  certifies unable  exports, in  that  t o meet  approval,  the  supported  American it  is  this  impossible requirement  g o o d s may  be  56  shipped  in  t h e most The A c t  until  June 3 0 ,  convenient  specifies  1978,  at  by C o n g r e s s .  In  of  governing  the  Bank's  the  The A c t guarantees  and  also  that  which  past  manner. the  shall  time  the  Bank's  Congress  has  readily  Act  for  an  specifies  insurance  Bank  additional  that  remain  activities approved four  t h e maximum  that  the  Bank  may  than  $25 b i l l i o n .  in  have  existence must  the  year  be  reviewed  renewal  period.  amount  of  loans,  outstanding  at  any  one  i  time  shall  taken  not  into  account  outstanding may,  be g r e a t e r  guarantees  t h e r e f o r e , have The A c t  and  include  officers, to  when  designate  and  and  its  and  ten  of  of  officer  matters  annual  salaries  of  the  President,  directors  of  the  Bank;  interests For  example,  Appendix its  or  parties  emigration,  with  the  extending right  a very  or  close  is  for  and  the F i r s t  expressly  credit  to  any  opportunity relative  in  to the  of  $40  guidance  a section  may n o t  enter  prohibited nonmarket join  by  The  Bank  billion.  of  directors,  of  the  the  specifying and  Bank  Bank the  the  three  describing into  contracts.  Section  409  economy w h i c h  permanently  United  are  any  requiring  Vice-President sections  loans  all-encompassing  the P r e s i d e n t  innumerable Bank  the  25$ of  be  a section  to  businesses;  to  all  included.  liability  Bank;  report  whom t h e  t h e E x i m Bank  X from  citizens  small  the  100$ o f only  are  appear  clause  to  on a l l  other  policies  appendices  interest  concerning  ceiling,  outstanding  employees  a specific  this  insurance  a maximum  a conflict  agents  calculating  While  States.  of  denies  through  II.  S E R V I C E S PROVIDED BY EXIM BANK  The ways  by  promotion  the Exim Bank.  objectives  exports  The methods  is  used  assisted  by  the  in  Bank  four  to  different  accomplish  1)  s h o r t and medium t e r m e x p o r t c r e d i t r i s k s a r e u n d e r w r i t t e n in c o n j u n c t i o n w i t h the F o r e i g n C r e d i t Insurance Association  2)  d i r e c t and i n d i r e c t l o n g t e r m c r e d i t i s g r a n t e d to overseas p r o j e c t s which r e q u i r e f i n a n c i n g assistance. T h e p r o j e c t s must u s e U . S . made c a p i t a l equipment  3)  g u a r a n t e e s a r e i s s u e d t o c o m m e r c i a l b a n k s and other f i n a n c i a l i n s t i t u t i o n s which p r o v i d e medium t e r m e x p o r t c r e d i t  4)  l i n e s of c r e d i t a r e g r a n t e d to enable the small f o r e i g n a c c e s s tp the c a p i t a l goods i ndustry  credit  to  and m u t u a l  1962,  was  insurance  commercial  beyond  that  Bank.  The  entire  up  to  its  insurance  extent  that  least  as  is  the  $150,000  is  the  provide  the F o r e i g n of  policy.  jointly  by  any  goods  value  has  in  Any  by  been  stock  underwrites  commercial and  the  the Exim  by  risks Exim  Bank.  resident  United  added  of  Insurance  seventy  The FCIA  exporter the  type  Credit  the FCIA  underwritten to  any  some  Exim Bank.  per  available  or m a n u f a c t u r e s 50$ of  not  a partnership  and  risk  foreign governments b u s i n e s s to g a i n p r o d u c e d by A m e r i c a n  did  time,  underwritten  political  who p r o d u c e s  that  companies  are  U.S.A.  at  At  created  risks  figure  The  t h e E x i m Bank  insurance.  Association(FCIA)  all  U.S.  are:  Prior export  of  in  States  to  labour  or  the the  58  material  exclusively The  to  types  of  a medium  insurance  are  the  risk  classes,  the  countries  with  t o make  regional on an  are  and  the  effect,  credit  from a short  Kingdom.  The  category  A  to  each year  premium  FCIA  the  it  more were  and  U.S.  also  now h a s  for  that  study. policy  export  followed  assigned  lowest  the FCIA  and  for  to  risk.  of  such  responsive  to  the  established  by  one  Table  to  the  length  the  of  four  IV  outlines  needs  of the  better  a quasi-public  of  with  type  of  of  was  exporters. U.S.A.  the  and  the  the  various  brokers The  Exim  relationship-  providing  export  insurance.  i )  PARTICIPATION FINANCE  Prior  to  1971,  the Exim B a n k ' s  growth  was  FCIA  facilities  FCIA-  working body  for  needed  the FCIA  insurance  on b e h a l f closer  time  acquaint  Independent  a much  criticized  criticism,  country  policies  developed  been  throughout  designed  throughout  has  the  a result  insurance  this  and  category.  history,  program  the FCIA  term p o l i t i c a l  to  are  the  the Exim Bank.  issue have  risk  in  T h e premiums  countries being  by  earlier  similar  schedule As  located  to  policy.  by a m e t h o d  education  the FCIA  authorized  Bank In  by  range  offices  insurance brokers offered  issued  fifteen  high  insured  outlined  assigned its  risks  those  applications.^  reorganized  embarked  commercial  to  determined  relatively  Twelve  similar  United  In  process  and  origin.*  term comprehensive  in  to  are  policies  ECGD  its  U.S.  political  t h e E x i m Bank The  of  constrained  by  the  TABLE  FCIA  Risk  Grading  for  IV  Export  Insurance,  1964.  D  B AI I  c o u n t r i es  Western with of  most  Europe  the  Portugal,  Most  and  of  Central  exception  Spain,  Finland,  Mexico  in  Latin  A r g e n t i na  the  Amer i c a n  Bo I i v i a  American  Countries  BraziI I ndones i a  c o u n t r i es  Yugoslavia F i n I and  and T u r k e y  I nd i a Canada  Pak i s t a n  Japan  PortugaI Spain  SOURCE:  Bus i n e s s ed i t i o n ,  International, 1964,  p.  39  Financing  Foreign  Operations,  2nd  60  federal  government's  required  that  all  annual  of  Exim  budgetary  expenditures  budgetary  receipts.  private  market,  a budgetary minimize  Under  the  disbursements  such  to  therefore,  financing were  was  a result  instead  t h e E x i m Bank  annually  approve  its  the  direct  business, facility  of  these  latter  further  while  drawing  enable  credit  loan  the  are  programs private  exporter  he o b t a i n s .  the is  program  both  only  the  funds to  obtain  to  by  the From  7  to  1971,  Federal to  the  budget. have  expenses.  and  to  provide  the  E x i m Bank  is  much  of  cooperative in  to  importance.  extend  the market.  a blended  The E x i m Bank  federal  concentrate  In  increasing  into  in  essential  required  continues  rapidly  as  receipts.  began  concept  be o f f s e t  made  unified  financing  enable  if  lending.  administrative  participation  (CFF)  Bank  direct  from  to  considered  the  of  removed  even  be b u d g e t a r y  it  budget  be d e s i g n a t e d  borrowings,  considered  as  federal  t h e y were r e q u i r e d  system,  financing  export  The u n i f i e d  present  Bank's  programs  as  and  activities  While  Both  not  disbursements  Congress  the  and  standpoint,  Exim B a n k ' s  Bank's  Exim Bank's  were  on p a r t i c i p a t i o n  budget.  In  to  funds  addition,  interest  prepared  its  rate  lend  on  its  the any  funds  g at  a rate  blending In  lower process  addition,  provide  the  under  risks, The  the  of  to  of  U.S.  charged the  by  the  effective  participation  covering the  cooperative  purpose  purchasers  that  reduces  a guarantee,  commercial  for  than  rate  which  financing  a substantial  financial financing  banks.  the  borrower  program  portion  Hence  of  the  must  pay.  t h e E x i m Bank  will  the  and  political  institution. facility  extending  export  goods  services  and  commercial  credit who  to  was the  either  introduced  in  late  thousands  of  potential  did  not  have  the  1970  61  financial  resources  of  arrange  how t o  the  to  the  purchase financing  into  located  throughout  the w o r l d .  bank  designated  as  is  finance  outlined whether  takes  U.S.  by he  area  is  necessary  exports  a  for to  cash,  or  enable  If  the  three  Under  1 0  goods  who were  them t o  application  is  usually  and  or  the  readily  terms  unaware  purchase  the  (CI)  of  is  provided  banks  must  to  the  a U.S.  the  the  that  agree policy  the  U.S.A. of  CI  in  The  CI  the  satisfactory, to  each  export,  approach  in  has  agreement,  and  can  forwarded  approved  the  creditworthiness  standing  and  of  purchaser  g o o d s made  facility,  commercial  according  Yugoslavia,  credit CI  hundred  services  establishes  by  financing  institution  purchase  applicant's  approved  the  A potential  to  and  is  are  cooperative  nearly  Colombia  loan  application  conditions  of  in Z a i r e ,  obtain  the  a cooperating  application  customer.  with  the Exim Bank.  to  the  agreements  under  entered  his  goods  goods."' The Exim Bank,  to  the  the  1  Exim Bank. the  following  met:  1)  t h e p u r c h a s e r must p r o v i d e a minimum down o f 10$ o f t h e c o n t r a c t p r i c e  2)  the remaining balance is then e l i g i b l e f o r The e x p o r t e r must a g r e e t o r e t a i n a t l e a s t t h i s e l i g i b l e amount f o r h i s own a c c o u n t . of own  course, bank  to  arrange finance  an  operating  this  credit  payment  financing. 10$ of He may,  through  his  amount  3)  the r e m a i n i n g b a l a n c e , 81$ of the o r i g i n a l contract p r i c e , i s t h e n f i n a n c e d j o i n t l y by t h e CI and t h e Exim Bank. T h e E x i m Bank w i l l p r o v i d e a maximum o f o n e - h a l f of the needed funds ( 4 0 . 5 $ of t h e t o t a l contract price)  4)  t h e CI may c h a r g e t h e b o r r o w e r i t s n o r m a l r a t e o f i n t e r e s t on t h a t p o r t i o n o f t h e l o a n i t p r o v i d e s . H o w e v e r , on any f u n d s p r o v i d e d by t h e E x i m Bank  The  62  "the CI may c h a r g e t h e b o r r o w e r t h e E x i m B a n k ' s r a t e t o t h e CI  small the  The  6)  the goods must, v e s s e I.  The  development  exporters In  of  FY  1491  contracts  and  1974,  of to  in  the  size by  $1,400,000  to  sale  trucks,  T h e mean included sewing  the size  spare  of  CFF has  for  the Royal  the  proven  year  a total  of  to  to  contract for  and  paper  was  shrimp  U.S.  be a boon t o  the  both  throughout  C F F was  offered,  $ 2 0 7 . 7 mi I I i o n were the  Beach  to  on a  purchasers  that  cover  Cliff  aircraft  parts  machines,  full  f r o m $350  of  be s h i p p e d  unsophisticated  fourth  food machine cover  possible,  the  applications  ranged  if  small  industrial  exported  above  t h e r e p a y m e n t t e r m s must be t h o s e n o r m a l l y g r a n t e d in i n t e r n a t i o n a l t r a d e f o r t h a t p a r t i c u l a r t y p e of product. Loans which r e q u i r e a repayment p e r i o d of g r e a t e r than f i v e y e a r s a r e a c c e p t a b l e to the Exim Bank  world.  Airways.  2.5$  5)  U.S.  a total  a rate  the  purchase  Hotel  trawlers,  cup m a c h i n e s .  The  air The  of  an  in T h a i l a n d  New Z e a l a n d  $139,000.  approved.  to  National products  conditioners, terms  of  repayment  12 ranged  from  1-7  Table  years  exclusive  V provides  small  into  respective  countries.  relending  facilities  the  C F F and  analysis this  shows t h a t  group  of  nations.  By  products  were  only  exports far, the  the  are  implied  a breakdown  relatively their  American  of  exports.  7.9$  developing  The The  of  the  regional of  periods.  purchasers  importers  and  have  includes  E x i m Bank  purchased  nations  the  table  by number  being  largest  of  grace  1 3 . 1 $ by  dollar  Central  of and  of  this South  these grouped  exports  the FY  by r e s i d e n t s  importers  been  all  for  of  under  1974. volume  developed group  of  America.  The of  TABLE V  LOANS GRANTED  (All  Country  where  purchaser I  UNDER T H E EXIM  was  DEVELOPED  dollars)  the resident NATIONS  NUMBER  Australi a  12 2 7  Austri a Belgium Canada Denmark  I I 3 6 21 5 2  F i nI and France Germany Ireland Italy Japan Netherlands New Z e a l and U n i t e d Kingdom Total I I  BANK'S  C F F AMD RELENDING F A C I L I T Y IN THE F I S C A L YEAR ENDED JUNE 3 0 , 1974. c u r r e n c y f i g u r e s are e x p r e s s e d in m i l l i o n s of U.S.  28 2 6 17 123  AMOUNT IN MILLIONS OF U . S . DOLLARS 2. I 0.4 1.8 2.7 0.2 2.4 5.4 0.8 0.5 0.3 4.3 1.6 1.6 3.8 27.9  DEVELOPING NATIONS A.  CENTRAL AND  SOUTH AMERICA  Braz i I Chile Colombia Costa Rica Domi n i c a n R e p u b I i c Ecuador El Salvador Honduras Mexi co Panama Peru Venezue I a Virgin Islands Total  680 9 21 2 2 7 49 66 15 2 9 864  89.8 0.5 1.3 1.4 0.5 0.7 0.4 1.6 7.5 2. I 0.3 2.2 0. I 108.4  TABLE V  CONT'D  C o u n t r y where t h e p u r c h a s e r was r e s i d e n t NUMBER  AMOUNT  IN  OF U . S . B.  C.  ASIA Taiwan Hong Kong  1  Korea Pakistan Philippines Singapore Thailand Total  190  T H E MIDDLE  Total  1  14 6  6  ^  3  / ^  22-5 * * ' 5  44.7  EAST 34 84 118  EUROPE Greece  5  1.2  Portugal  6  I. I  33  5.7  Spain Total  9  3.4  53  11.4  4 2 8  1.2 0.6 0.4  14  2.2  AFRICA Algeria Liberia Zaire Total  F.  ,  9  387  Yugoslavia  E.  0 3  4  Iran Israel  D.  MILLIONS  DOLLARS  NOT ELSEWHERE C L A S S I F I E D Greenland  I  0.3  Poland Romania Total  I 2 4  0.2 0.4 0.9  T A B L E V CONT'D  NUMBER  $  AMOUNT  IN  $  MILLIONS OF U.S. Developed Nations LDCs C . & S. A m e r i c a LDCs Asia LDCs Middle East  123 864 387 1 18  LDCs  Europe  53  LDCs  Africa  14 4 1563  O t h e r LDCs Total  SOURCE:  Export  Import  7.9 55.3 24.8 7.5 3.4 0.9 0.2 . 100$  B a n k , Cumu1 a t i ve R e c o r d s ,  DOLLARS 27.9 108.4 44.7 17. 1 M.4  13. 1 51.0 21.0 8.0 5.4  2.2 0.9 2J2.6  1.0 0.5 100$  1974,  p.  95-172  66  Brazil,  with  individual  success  of  is  a world  wide  U.S.  exports  exporter  costing hotel Bank.  are  must less  The  some m e r i t $800 and  that  Columbia  are  A m e r i c a n goods  offers  programs.  Under  the  which not  protection  offered  commercial  bank  discretionary  of  to  of  five  the  the  by  largest  guarantees  enters  the Exim Bank.  The  jointly  they  Canadian  that  activity. a food  the Thai  bank  are  are banks  and  institutions.  u n d e r $1 m i l l i o n  small The  machine sold  and  to  the  finding the In  to  as  the  Bank  of  t h e FY  cover  a  Exim  now d e s i g n a t e d  also  of  their  The r e l a t i v e l y  States,  banks  that  by  United  hundred  direct Bank  into  specifies  and  a master the  British  1974,  the  importation  bank  bank  the  financial  guarantee  guarantee  terms  of  facility,  Guarantee  guarantee,  specified  commercial  loan  Exporter  limit  commercial within  the  indicates  The p u r c h a s e r s  from t h i s  by  t h e E x i m Bank  the  in  clearly  3  of  a discretionary  limit  provided  cooperative finance  array  only  a service.  considers  cooperating just  facility  jointly  big  Commercial  t h e E x i m Bank  each bank,  issuance  was  the Exim Bank.  when one  indicates  as  such  be b e n e f i t t i n g  Canada.'  a wide  by  three  totalling into  for  financed  The  financing  be p r o d u c e d  nearly  addition  also  instance,  be  designated loans  to  can  institutions  attractive.  Bank  $89.8 m i l l i o n  financing  and  have  fact  In  the  appears  than  granted  demand  also  facility  of  of  cooperative  institutions  in T h a i l a n d  cooperating  they  a total  utilizing  financial  facility  for  The there  U.S.  loans  importer.  that  local  680  and but  approval. may  commit  limits retains  Program  also  Under  the the  this  the  a portion  of  with  grants  E x i m Bank  without  for  agreement  conditions it  Exim  of  to  prior the  the approval fee  paid  67  by  the  exporter  to  compensate  it  for  the  work  involved  in  processing  the  ,. .. 14 appIication. The make  guarantee  agreement  a minimum down payment  balance note.  payable,  equal  T h e e x p o r t e r must  portion.  The r e m a i n d e r  commercial guarantee risks  bank plan,  on t h e  defined  as  the  those of  within  first  the  years.  agree of  to  the  carry  contract  installments  of  less  than  and,  of  the  assumes  course,  contract  price,  called  at  least  price  of  the  the  half  contract  the  a  promissory  the  financed  provided  by  the  comprehensive 100$ o f  all  commercial  installments of  any  with  risk  political  purchaser  with  which  a term  on  the  risk  are  contract  installments  commercial  assumes  in  is  Early  those  the  10$ o f  accept  first  any  the  to  loan.  or  for  (81$)  Under  the  years  e i g h t e e n months  that  agrees  occur within three  requires  as  basis.  bank  which  the  installments,  commercial  E x i m Bank  installments  10$ o f  on a n o n - r e c o u r s e  early  a maturity  three  in  of  usually  with  occur  exceeding  later  on  all  i nstaIIments.'~* The Exim B a n k ' s according both  to  the  length  the p u r c h a s e r  coverage  provided.  purposes  is  purchaser fee  for  used.  in  a three  approximately charges  the  of his  the  for  country  A rating  lowest year  risk  credit the  annual  issuing  credit of  system  The g u a r a n t e e  5$ of  and n o t  and  fees  fee  interest  residence  for  to  a one  is  less  a purchaser  guarantee's  type  p e r i o d , the  similar  category to  this  value.  charges.'  in  the  These 6  the  amount  credit l/3$.  to  are  of  of  for  insurance  a  The  D category fees  vary  worthiness  one u s e d  year  the  guarantee  credit  and  than  of  guarantee is  one  time  68  The Under  this  coverage occurs charges  type  for  as  E x i m Bank  both  the  an  of  outstanding  the  Bank  commercial  and  political  of  fee  the  liability  foreign  guarantee  of  age  of  purchaser  the  the  the is  of  E x i m Bank  equipment;  equipment;  export  ranging  T h e E x i m Bank the  introduced  guarantee  result  annual  recently  used  -  vendor  is  facility.  comprehensive  provided  the  lease  equipment.  The Exim  0 . 7 5 $ on t h e  estimated  to  guarantee  to  loans  In  as  average  granted  issuing  the  determine  going  Bank  7  factors to  guarantee  provide  equipment.  such used  to  year!  American  lease  risks,  U.S.  prepared  considers  the  of  following  t h e method  and w h e t h e r  agrees  from 0.5  also  a  its  condition  the  value  purchase  to  of  new U . S .  and the made  18  equipment  to  replace  the  T h e E x i m Bank domestic  and  foreign  Both bank  exporter  direct nor  loan  the  the  their  local  bank,  Their  local  bank  processing the is  forwarded  time  notified  of  of  In  the  they  most  can  be  central defined  the  approval  are  of  a number  guarantee  When  to  and  both  cases  neither  submit  They  their  of  less  than  if  t h e E x i m Bank  be t h e  time  elapsed  to  date  that  the  the  supplier  approach  involved  the  for  the  application.  processes  bank  over  the  the  local  commercial  advantages  work  office  rejection.  the  administrative  significantly  to  of  and  the Exim Bank.  known,  the  application or  its  facility  former  where  the is  offer  d i r e c t l y with  does  issue  financing  deals  time  to  submission  program.  to  sold.  institutions.  program  application.  turnaround  Turnaround of  the  being  prepared  co-operative  of  purchaser  is  financial  guarantee  type  equipment  in  the  application,  application  processing.  from  the  date  applicant  is  69  The  turnaround  operating  time  under  will  the  This  limited tion,  resources  only  25$  Exim B a n k ' s  i i)  discretionary  type  on t h e E x i m B a n k ' s  be e s p e c i a l l y  of  financial  the  lending  the  the  granted  it  financing  resources.  outstanding  volume  by  also  It  stretches  of  direct  guarantees  are  local the  bank  is  Exim  reduces the  Bank.  the  strain  Bank's  loans.  In  charged  addi-  against  the  authority.  DIRECT LENDING  T h e E x i m Bank of  limit  participation  by r e d u c i n g  of  low where  participation  current  policy  has  been  financing  is  to  to  provide  successful  the  field  less  than  in  of  extending  direct  loans.  of  funds  50$  the  the  principle  The  Bank's  needed  to  finance  19  the  export  extend funds into  its  guarantee  funds  after  advanced  Repayment the  the  by  capital  to  the  a financial  and  the  the  on any  In  cases  certain If,  for  example,  institution  or  a group  Bank  participate  in  the  to The  lower  the  blending  purpose.  bank  is  of  will by  be r e p a i d  provide within  t h e E x i m Bank  of  entered that  five  will  grant  contract  is  too  institutions  to  handle  the  project.  In  of  Bank  commercial  t h e E x i m Bank  usually  to  part  agreements  to  rate  On o c c a s i o n  provides  prefers  interest and  which  prepared  commence  retired.  overall Exim  however,  financing  banks  t h e E x i m Bank  financial will  joint  provided  loan  is,  institution  commercial  funds  bank's  It  The  commercial  commercial  purchaser.  goods.  importer.  t h e E x i m Bank  years.  to  American  required by  any  of  some  t o meet  it  international  bank  prefers  cases  to  direct  large  is  the  one  Exim  necessary  competition.  funds  achieves  be  direct  in  for  loans  this contact  the  70  with  the  borrower. The Exim  of  direct  4 4 $ of loan  loan  the  figure  is  was  plan,  sale  of  t h e Bank  details  or  the  the  be  of  reducing  exports.  financed  In  under In  FY  the  FY  the  1973  Bank's  1975,  the  volume over  direct  comparable  up  the  processing  a preliminary  or  to  of  by  the  financial  project,  commitment  provide  specified  direct  goods  at  relevant  Under  early  borrower,  to  information  the  stage.  the  U-S.  include  information  data  appli-  finance  and must  financial  and m a r k e t i n g  to  a very  institution,  loan  facility.  a commitment  prospective  current  and  of  on it he  demonstrate about  interna-  .... 20 competition.  as  1971  the  commitments  were  being  At  speed  project  The A m e r i c a n As  in  38$.  engineering  the  success  Exim Bank.  submitted  proposed  appropriate  goods  prepared  project  some  to A m e r i c a n  the  than to  is  may  feasibility  ,. tional  by  a participating  of  borrower,  the  introduced  a certain  supplier  of  less  effort  application  achieved  provided  provided  t h e Bank  this  The  an  has  value  slightly In  cations  support  export  program  Bank  early  that  time  exporter  E x i m Bank  has  reported  r e c e i v e d at  approximately  made  13$ of  the the  good u s e that  rate  of  this  applications of  facility. for  $750 m i l l i o n  applications  preliminary  per  r e c e i v e d by  month. the  Bank  21  were  either  denied  iii)  DISCOUNT LOAN PROGRAM In  in  times  loan  of  1966  for  in  an  monetary  program.  Even  credit  and  effort  to  restraint, in  tight  technical  reduce the Exim  money  reasons  the  cancelled,  competition  Bank  situations  or  introduced government  for a  bank  credit  discount  authorities  71  try  to  ensure  increase  the  the  banks  its  discount  that  bank  are  in  of  exports  ability  a tight  loan  at  level  exporter's  Exim the  the  to  is  obtain  liquidity  maintained. the  situation  In  necessary the  order  credit  E x i m Bank  to  when  introduced  program.  normally  a rate  agrees  to  purchase  0.5-1.0$ b e l o w  the  debt  the weighted  obligations  average  from  interest  yield  22 of the  the  bill.  applicant  program  the  commercial unable the  to  loan bank  must  must  commercial  state  prior  necessary  the  loan  rate.  a t e r m of  facility.  have  the  the  lending  have  the  loan  to  prime  must  provide  term of  yield  bank's  discount  category The  The  to  bank To be  greater granting  funds  unless  for  and  the  loan  that  it  the  loan  qualifies  that  approval  of  t h e E x i m Bank  all  prior  bank  may  loans to  than  this  year  imperative  discounting  less  one  is  the  be  eligible  than  It  granted  may n o t  the is under  in  this  being  not  granted.  exceed  the  23 t e r m of  the  original  This  program  additional  liquidity  it  the  reduces  namely which  export is  to  he d i s c o u n t s  the  iv)  for  credit.  charged  less  has  In  on e x p o r t charge  than  P R I V A T E EXPORT  note the  the with  rate  The  loan  aided  the  competition  institutions  5 ~ l $  loan.  may  the  exporter  commercial  the  exporter  addition,  be p r e p a i d  it  while  faces  for  credit.  There  borrower  a high  charged  the  FUNDING CORPORATION  two  banks  helps  t h e E x i m Bank  in  is  rate  he w i l l  borrower.  at  the  the  be  It  time  resource,  for  interest, forced  provides  same  rate  incentive of  penalty.  ways.  a scarce  reduce no  without  to  of  interest  the for pay  lending if  72  The in  1971  trade Bank  by  and and  Private  a number finance  is  Export  of  and  designed  Funding  private the  to  Corporation  institutions  Exim Bank.  mobilize  (PEFCO)  involved  PEFCO  is  previously  was  in  international  controlled  untapped  established  by  private  the  Exim  capital  24 sources funds of  of  credit.  from p e n s i o n  both  paper  short  and  guaranteed  success on Iy  export  in  one  funds long  by  private  its  An  foreign  exchange  funds  investor, or  gage  market.  Ill  T H E WORLD BANK  To  this  range  analysis type  of  which date, In  to  of  which will  export  invest  his  funds  point  services  are  the  provide  comparative  example,  this  1973,  institutional  through  are it  the  supported  has for  is by  insight  advantage  holds  credit in  met  issuance by  with  example,  export  limited it  granted  a higher  of  true  Why  in  Bank's whether for  Exim  the American  necessary  with  domestic  the  programs.  no  Bank  offers  exporter. receives  analyze Such  the an  a H e c k s c h e r - O h I in  exports  the  mort-  economy  to  is  yielding  yield  the  it  should  low  the American  first  into  field.  shown t h a t  that  the  how d i f f i c u l t  a relatively  investing  needs  benefits it  indicates  obtain  has  the  supported  some  by  chapter  t o meet net  can  risk  activities  being  PEFCO  the  political  identify  of  into  for  from the Exim B a n k ' s exports  attract  companies  To  objectives.  success  investor  asset?  order  insurance  to  Ioan.  institutional  In  attempted  the Exim Bank.  achieving  attract  a wide  and  has  term o b l i g a t i o n s  The m a r g i n a l to  |t  supported  by  73  export of  finance  whether  programs.  export  credit  The W o r l d against  which  The W o r l d Third bution  of  certain  is  Bank's  to measure  Bank  World  The  is  the  world's  types  of  of  developing  nations.  projects also  that  are  indicate  Bank of  this  the  the  in  in  the  growth  the  scope ment  by  the World  direct  of  this  field  loan,  produced  CFF,  or  approximately  is  economic of  of  An  of  must  strive  analysis  agriculture,  study.  progress  agriculture,  nations  adequate  developed  and  rate.  areas  of  supported  are  guarantee  can  not  of  a better  being  Bank's types  the  distripromoting  provides demanded  activities of  capital  The r e v i e w  being  the  same  nations  are  Bank.  the  nations.  therefore,  that  the  by  standard  concerned with  the World  identify  being  the  will  undertaken.  United  States  programs  fashion  of  and  the  in  Section  be a c h i e v e d  without  Exim IV  chapter.  developing  tion  goods  projects  the  and,  to  the  as  effect  not  section  nations  in  is  to  indication  patterns.  chosen  helping  nations  of  trade  an  industrialized  order  capital  A review  goods  be a n a l y z e d  Social growth  being  capital  under  will  this  in which  The financed  in  been  the  Bank  type  by  be p r e s e n t e d  This  certain  of  will  in  from  indication  the  the  of  provide  altering  concerned with  economies  a good  also  have  exports  wealth.  exports  in  activities  the  their  will  effective  primarily  develop  analysis  of  infrastructures to  to the  education  The World  concern  industry  this  Bank's  achieve  and  education.  a "more  problems  in  The  term  addition,  popula-  developing is  beyond  fostering  industrial  In  normal"  facing  population  efforts  on w h i c h study.  and  sectors  the  the develop-  can  infrastructure  nations  be  can  be  74  broken  down  into  four  telecommunications  activities  that  if  by  these  this  i)  and  supply.  A preliminary  the  Bank  involving  Therefore,  the  Exim  water  only  development  of  the  and  the  supply  other  industrial  electric  review EDC  the  indicates  systems  three  of  power,  are  financed  infrastructure  projects  will  be  reviewed  TRANSPORTATION  the  travel  of  must  be  value  priority.  products.  The  also  low  for  transportation  commodities  travel.  bulky  high  demand  volume  personal  of  both  transportation,  section.  The on  of  exports  agencies.  categories in  any,  categories-  and w a t e r  financing few,  main  A  carried  distance  the  considered. agricultural  large  Railroads  In  the  and  normally  and  a derived  on  the  commodity  percentage  are  is  the  the  benefits the  developing  primary of  or  people  products of  efficient  is  depending  attached  nations  exports  most  demand  are the  and  a  r  !  to movement  assigned  LDCS  to  a  such  e  economic  means  25 of  moving  type of  of  the  bulky Air  bulk  traffic  shipping LDCs  to  vessel  their  commodities  at  transportation  movement  of  people  By  the  over is  intermediate also  eventual  usually  markets.  a  low  cost  has  the  advantage  and  goods  end  of  per  when  1971,  long  required Ships  ton of  time  or  mile  to  are  great  and  possesses  move  is  equipment  exports at  moving  distances.  aimed  a high  Some  the  efficient  over  speed  transportation  distances.  at  the  value. had  become  the  26) largest  single  accounted  for  component more  than  of 30%  the of  World both  Bank's  lending  financing volume  and  activity. number  of  It  75  applications. Pakistan, were  The  Spain  developing  and  nations  Yugoslavia  were  of  the  East  Africa,  primary  India,  areas  where  Mexico, the  projects  undertaken. In  forecast  the  that  five  $4.3  year  billion  period would  ended  December  be a l l o c a t e d  to  31,  1976 t h e  Bank  transportation  projects  a 90%  in  27 in  the  developing  spending year  over  period  the  nations.  This  previous  the World  five  Bank's  figure  year  implies  period.  activities  were  concentrated  b e t t e r f e e d e r roads in the d e v e l o p i n g w o r l d .  revitalizing  3)  d e v o t i n g more r e s o u r c e s t o t h e d e v e l o p m e n t o f c o a s t a l and o c e a n s h i p p i n g facilities. The p r o b l e m s f o r a n a t i o n a r i s i n g from p u r c h a s i n g i t s own s h i p s i n c l u d e t h e h i g h c a p i t a l c o s t as w e l l as t h e h i g h o p e r a t i n g costs. The b e n e f i t s i n c l u d e b e i n g a b l e t o c o n s e r v e f o r e i g n e x c h a n g e e a r n i n g s and h a v i n g an a s s u r e d means of t r a n s p o r t a t i o n f o r its exports. T h e LDCs must a l s o c a r e f u l l y e x a m i n e the problem of c o n t a i n e r i z a t i o n . This labour s a v i n g d e v i c e i s b e i n g w i d e l y a d o p t e d by t h e d e v e l o p e d n a t i o n s but i s of l i t t l e v a l u e to the LDCs.  4)  d e v e l o p i n g a i r p o r t f a c i l i t i e s and n a v i g a t i o n a l aids for air transport. T h e W o r l d Bank d o e s  The to  five  on:  2)  decaying  the  recent  developing r e g i o n s of  ELECTRIC  designed  t h e most  1)  various  railways.  n o t n o r m a l l y provide f u n d s of l a r g e a i r c r a f t .  i i)  In  increase  to  finance  the  purchase  POWER  developing  produce  nations  electricity  investment has  been  in  generating  increasing  at  an  plants annual  rate  76  of  10$ and  A power of  this  rate  generating  generation,  are  capital  and  the  billion  of  growth  system  usually  transmission  intensive  and  and  must  be  Through  1971  this  World  this  area  in  the  $2.5  billion,  or  expected  to  continue  consists  of  an  distribution  a very  equipment  of  is  area  from  had  r e c e i v e d the  financing.  The v o l u m e  five  year  ending  24$ above  the  of  actual  in  of  Such  the  1976  figure  is  for  projects  nations. of  $5.3  allocated  forecast  the  1  technology  benefit  funds  future."  network  industrialized  Bank  period  integrated  part  the  the  facilities.  substantial  imported  in  to  to  previous  be  five  30 years. The out of  the  world  nuclear  using  The  higher  ideally  has  power  problems. third  development  capital  the  purchaser.  INDUSTRIAL  of  of  in  all  and  developing  of  generating  increasing.  nuclear steam  However,  nations  power  large  purposes  carefully  facilities  plants  systems  other  than  considered  by  the  poses  installations.  relatively for  be  industrialization  manufactured  payments  economy.  use  power  through-  development  a number  are  about  The  projects  of  oneare  and  the  problem  those  for  which  both  the  of  it  supplier  and  PROJECTS  Through volume  the  costs  new t e c h n o l o g y  i n t e n d e d must  iii)  in  conventional  for  was  nuclear  steadily  plants  than  suited  the  been  of  goods,  greater  The World  Bank  increased  efficiency has  a nation  can  generate  employment,  improved  and m o d e r n i z a t i o n  devoted  15$ o f  its  an  total  increased balance  throughout financing  its  77  activity  to  understated mediaries  in  this  area?'  because  The  it  often  financing  The World  importance  participates  industrial  Bank's  projects,  while  light  and  manufacturers.  trate  on p r o d u c i n g  goods  the  Bank's  with  other  activity  is  financial  inter-  projects.  direct  large  heavy  its  of  loans  indirect  usually  loans  are  be  five  year  period  this  area  by  relatively  c o n c e n t r a t e d more  The m a j o r i t y  w h i c h may  support  of  the  classified  projects  as  on  concen-  substitutes  for  imports. In increase $1.3  billion  those tion Of the  its  the  activity  in  spent  1967-1971?  projects  a  of  will  will  forest scale  Bank  proposes  a half be  such  times  allocated as  steel  production projects  to  the to  produc-  complexes.  oriented  towards  exports.  TELECOMMUNICATIONS EQUIPMENT  a nation  by  industry  and  services  tourist by  and  input,  be s m a l l e r  Telecommunications  and  and  two  funds  capital  plants  the World  some  Its  2  large  fertilizer  importance  production  iv)  in  requiring  facilities,  secondary  current  the  types  providing  efficient  government. and  increases  industry. unsatisfied  of  an  equipment  It  the  The v a l u e demand  telecommunication  also  of  which  aids  means aids  of  in  facilities  the  economic  communication  the  national  provided  telecommunications exists  for  facilities.  In  development  for  the  both  movement the  of  goods  growing  facilities  telephones, 1970,  for  of  radios  is  shown  and  developing  other  78  nations  had  only  By development area  1971 and  received  importance  6.8$  of  the World  development  Colombia,  the  of  had  amount of  provided  of  support  such  developing  Venezuela,  production  telephones?  Iran  facilities.  telecommunications  3  $600 m i l l i o n  telecommunication  the  Brazil,  development  of  smallest  of  world  Bank  the  A number  own  total  expansion  stated.  their  of  for  facilities.  While  this  Bank,  the  from the World  facilities  must  not  nations,. incIuding Egypt,  are  slowly  One  of  key  factors  facilities  is  the  be  under-  Argentina,  and  the  the  developing affecting  lack  of  the  standard34  ization  in  the  This  factor  must  be  equipment  virtually  undertaken  chaser  to  consider  cantly  reduced.  increase  by In  in  the  field  50$  in  of  the  areas  to  expressing bulk  price,  Bank the  of  carrying  five  year  this  water  future  of  are  The  this  need  nuclear  developing  the  infrastructure  IV  COMMODITIES SUPPORTED BY THE EXIM B A N K ' S PROGRAMS  Tables  VI  and V I I  to  develop  provide  their  better  concerned industrial  insight  pur-  signifi-  will 1976?^  activities  can  be  Bank  made. appears  aircraft,  generating  The  needed  be p r i m a r i l y  large  is  31,  the World  for  the  area  Bank's  conclusions  system  of  factors  in  the World  and  the  ability  finance  important,  carriers  of  ended December  a few  the  manufacturers.  expansion  activity  period  finance  should  and  its  review  about  different  supplier.  forecast  doubt  nations  that  the  quality  development  some  by  initial  development  all  modern  the  concluding  While be  dictates  by  The W o r l d  produced  with  plants. building  sectors.  into  the  products  0  TABLE VI EXPORT-IMPORT BANK OF THE UNITED STATES ANALYS1S OF CREDITS AUTHORIZED FROM JULY 1, MILLIONS OF U . S . DOLLARS EXPORTED COMODITY /  IMPORTER  OEVELOPED NATIONS  *  AMOUNT INDUSTRIAL  PROJECTS  Greater than $2 M i l l i o n Less than $2 Mi 11 ion Mineral Development TRANSPORTATION  EQUIPMENT  Aircraft Rai Iroads Ships ELECTRIC POWER PROJECTS Conventional Generating Nuclear Generating  AMOUNT  %  30.3 2.4 7.2  (1.3)  (1083.1 )  (24.2)  (1962.3)  (29.7)  1.3  787.8 228.7 66.6  17.6 5. 1 1.5  1632.2 240.5 89.6  24.7 3.6 1.4  (3.5)  (966.2)  (21.6)  (1048.0)  (15.9)  3.5  392.3 573.9  8.8 12.8  449. 1 598.9  6.8 9. 1  (103.1)  (2.3)  (103.1)  (1.6)  (331.9)  (7.4)  (388.0)  (5.9)  (291.2)  (6.4)  (461.6)  (7.0)  386. 1 22.3 35.9  81.8 4.7 7.6  (873.1)  (53.1)  838.3 11.8 23.0  51.0 0.8 1.3  — —  (65.3)  (4.0)  (16.5)  2.4 1.6  16.5  —  — — — —  (50.7)  (3.1)  (5.4)  ALL OTHERS  (170.4)  (10.3)  —  —  TOTAL  1645.3  100.0  472.3  100.0  COOPERATIVE FINANCING  SOURCE:  Export-import  FACILITY  Bank, Annual  $  1999. 1 158.0 478.6  27.6 1.3 0.6  — —  AMOUNT  25.9 2.6 9.6  454. 1 20.8 10.9  1  %  1158.9 1 14.9 431.8  (94.1)  40.3 25.0  AMOUNT  TOTAL  (39.9)  (444.3)  6. 1  DEVELOPING ; NATIONS  (2635.7)  (29.5)  (6.1)  1975  (38.1)  (485.8)  —  TELECOMMUNICATIONS  COMMAND ECONOMIES  1973-JUNE 30,  (1.3)  (1705.6)  4481.1  100.0  6598.7  100.0  Reports  ^1  TABLET VII EXPORT-IMPORT BANK OF THE UNITED STATES ANALYSIS EXPORTED C0M0DITY /  IMPORTER  ULVLLUKtU' NATIONS AMOUNT  INDUSTRIAL PROJECTS Greater than $2 Mi I I I on Less than $2 Ml 11 Ion M i n e r a l Development TRANSPORTATION EQUIPMENT Aircraft RaiIroads Ships ELECTRIC POWER PROJECTS Conventional Generating Nuclear Generating  OF CREDITS AUTHORIZED FROM JULY I, 1973-JUNE 30 MILLIONS OF U.S. DOLLARS '  %  FACILITY  ALL OTHERS TOTAL  SOURCE:  Bank, Annual  %  DEVELOPING NATIONS AMOUNT  TOTAL  %  AMOUNT  (1705.6)  (64.8)  (2635.7)  19.3 14. 1 7.5  1158.9 1 14.9 431.8  58.0 72.7 90.2  1999.1 158.0 478.6  (6.1)  (0.3)  (1083.1 )  (55.2)  ( 1962.3)  6. 1  0.4  787.8 228.7 66.6  48.2 95. 1 74.3  1632.2 240.5 89.6  (16.5)  (1-6)  (966.2)  (92.2)  (1048.0)  16.5  3.7  392.3 573.9  87.3 95.8  449. 1 598.9  —•  —  (103.1)  (100.0)  (103.1)  (331.9)  (85.5)  (388.0)  (291.2)  (63.1)  (461.6)  67.9  6598.7 .  (18.4)  (444.3)  (16.8)  454. 1 20.8 10.9  22.7 13.2 2.3  386. 1 22.3 35.9  (873.1)  (44.5)  838.3 11.8 23.0  51.4 4.9 25.7  (65.3)  (6.2)  40.3 25.0  9.0 4.2  (50.7)  (13.1)  (170.4)  (36.9)  —  24.9  472.3  1645.3  Export-Import  AMOUNT  (485.8)  TELECOMMUNICATIONS COOPERATIVE FINANCING  COMMAND ECONOMIES  1975  (5.4)  (1.4)  — 7.2  4481.1  Reports  00  o  81  being in  financed  ranked  and  order,  are  America  and  of  Table Exim B a n k ' s  consisted sold  to  developed Lockheed models  of  the  United  Period  equipment  nuclear  was  had  road  large  under  exports  located  year  in  period,  as  did  the  supported, aircraft  the  cooperative  were  sold  Central the  approximately  two  importance  by  the Exim B a n k ' s 50$  year  of  period  those  number  of  to  and  South  large  number  same  dollar  the small  number  aircraft  analyzed,  export  such  as  of  the  in  of  total  were  For  Boeing  Boeing  25$  facilities  aircraft  the  the  nearly  credit  financed  conventional  one-half  of  developed nations.  aircraft  t h e more  than  all  types  only than  VI  of  analysis  shows  constitute  of  747  the and  727 and  financed  two  developing exports.  shows t h a t  and m i n e r a l  of  from  capital  the  that  the  capital  imported  group 50$  that  also  plants  products  the  less  equipment  two  the U.S.A.  indicates  power  of  Table  the  being  737  imports  States.  analysis  types  being  the  as  more  reviewed, the  the main  nations  well  purchasing  aircraft,  financed  In  wide-bodied  for  projects;  financed  shows t h e  small  account  in  clearly  relatively  as  the  exports  Europe.  Over  nations  being  imported  from  aircraft.  The ested  in A f r i c a  exports  VI  68$ of  In  The  industrial  goods  Asia.  in  Bank.  the m a j o r i t y  supported  101 I,  from the  with  operations.  exports  scale  Nearly  nations  nations  Import  capital  Southeast  financed  developing  the  of  nations,  developing  volume  large  facility.  developing  of  the E x p o r t  the m u l t i t u d e  financing  of  by  total  the  During  large  the  United  exports  are  the  in which  the  year  projects,  projects  States.  inter-  two  industrial  development  were  Aircraft developing  market.  telecommunications of  nations  lesser  groups  equipment of  and  products  railwhich  82  arc  financed  exports  of  national the  world's  prime  when  insatiable this 724  of  Bank. product  Statistics  would  indicate  exporter  exporter of  One w o u l d  of  of  It  railway  the World  Bank  demand  situation  for  is  states  and  if  these  financed  U.S.  exports  of $103.1  this  have  may be p o s s i b l e  are being  to  espec-  an  explain  w h i c h make  financed  period  million  situation,  nations  the p r o d u c t s  exported  t h e two y e a r  a total  developing  examining  in  was  and t h e  1 9 7 3 t h e U.S.  to e x p l a i n  It  Inter-  States  equipment  equipment  that  U.S.  1973 the U n i t e d  In  products.  by c a r e f u l l y  to determine  in  that  substantial.  vehicles?"'  difficult  such  expect  telecommunications  telecommunications  exports.  alno  be f a i r l y  that  J u n e 3 0 , 1 9 7 5 , t h e E x i m Bank  similar  ially  type  largest  billion  ending of  this  Trade  third  $1.1  by t h e E x i m  by  up  SITC  other  methods. According by  the U n i t e d  to the  Nations,  International  total  U-S-  equipment  and o t h e r m a n u f a c t u r e d  1973 were  $37.6  exported  billion,  to developed was e x p o r t e d  America  and $ 2 . 8 b i l l i o n  VI  these  and V I I  with  total  statistics to  figures  this  Of  a r e not  U.S.  exports that  economies.  certain  revised  $26.8  nations  comparable  nearly  (SITC  in  to  of  hand,  i  and S o u t h n  S  E  Asia.  presented  capital of  when  in  o r 7 1 . 2 $ was  observations.  three-quarters  On t h e o t h e r  central  those  some  6 , 7 and 8 )  $10.8 billion, $5.9  by t h e L D C S  types  published transportation  billion  the remaining  one t o make  of  Statistics  of m a c h i n e r y ,  amount,  was p u r c h a s e d  do p e r m i t  developed  goods  to developing  they  indicate  exports  economies.  billion  While  of  Trade  in  Tables  In  dealing  goods,  the t o t a l analyzing  t h e U.N. is the  exported capital  83  equipment results  exports  appear—nearly  developing that the  financed  the  nations.  bulk  of  the  developing  68$ of  Both  countries  in  U.S.  statistics  needs  of  developing  tions  such  soely  one  the as of  the  the  largest  more  equipment  agencies,  the  nations  theory,  to  the  development  the  eight  the are  opposite imported  however, and  which  is  by  the  indicate  SE A s i a  limit  and  the  that  in  to  harder 1969,  developing  countries,  the  of  purchase  exported  of  of  the  to  Argentina,  was  their in  of  role  and  period.  the of  owed  Brazil,  the by  India,  that  United  and  other  plants hand,  railway  the  as  external  public  Iran,  Bank.  can  Consider  countries.  Indonesia,  with  the World  countires  limit.  eight  granting  coordinated  such  developing  only  future.  generating  credit  be c l o s e l y  total  being  countries.  national  lower  as  the  On t h e  the  organiza-  indicates  nuclear  to  in  near  equipment,  agencies,  debt  attention  the  activities  of  public  officers  telecommunications  should  of  terms  one-half  nations  year  finance  amount  see  capital  same g r o u p  Bank,  of  changed  aircraft  the  pay more  attitude  be  a two  that  must  EDC who  activities  of  example,  do,  America  Exim B a n k ' s  this  activities a  the  billion  $0.3  the Exim  service  exports  arguement  should  over  as  is  of  credit  exporters  billion  exported  the  The  and  such  There  all  of  world  than  was In  the  exactly  equipment  nations.  exports  analysis  developing  slightly  group  South  export  E x i m Bank  exported $1.4  the  Bank,  statistics  and  support  provide  promoting  The  to  of  manufactured  which  States,  that  sets  Central  institutions  of  the Exim  nations. The  one  by  for  debt These  Mexico,  of  84  Pakistan  and T u r k e y ,  i n c l u d e many  credit  granting  agencies.  export  credit  to  finance  be v u l n e r a b l e  to  debt  The maintain credit IMF  the  is  being  pointed  rate  of  if  the  the  a net  credit  gross  I  the  has  outflow.  only  be  have  The  to  a result,  not  of  to  too  double  to  The  that  fact  the  may  at  least export  A study  years  and  in  on t o  by  an  interest  twelve  point  the  years  out  that  interest  rate  then  twenty-first  year  to  a ?..5%  by  on  future.  striving  ten  goes  national  they  distant  quadrupIe  and  the  heavily  overlooked.  study  maturity  have  as  the  a maturity  will  year  and  exports.  not  of  depended  constantly  of  must  customers  have  in  are  outflow  flows  a thirty  will  problems  loan  gross  annual  has  flows  a  best  development  annually  if  the  nations  nations  annual  that  then  to m a i n t a i n  their  developed  repaid  out  These  service  same n e t  of  1  maintain  the  present  net  The Pearson the World  Bank  Group  outflow. Commission  on e c o n o m i c  pointed  grounds  out  have  that  been  projects  rejected  subsequently  by  financed  38 by  an  with  export which  national present civil  credit  who  credit  agencies  little  The World  national  various  can  and  should  credit  private  adopt  usually  of  more  of  by an  the World  financial  the  his  extensive  agencies Bank,  institutions  and  of  needs  their be  ease  areas  attitudes.  where At  optimistic  of  or  the  before  it  activities  an  aggressive  developing proceeds with  those  developed.  national have  the  the  own p o s i t i o n  studies  must  the  one  overly  overall  coordinating  granting  out  responsible  concerned with of  coordination  point  arranged  conducts  some way  lack  be o b t a i n e d  knowledge  Bank  Recently and  is  This  a politician  has  a project  the  agency.  financing  servant,  economy.  of  export  the  salesman  with  credit  credit  formed  granting  consortia  to  agencies undertake  85  major  projects.  forthcoming, increased debt to  then  flows  servicing  accept  IV.  If  the  of  of  burden  of  progressively  type  credit  credit the  of  and  agencies  must  development  developing  more  international  defaults  an  either  finance  nations,  in  cooperation  or  not  mix  to  ease  t h e y must  increasing  is  number  the  be  prepared  of  countries.  CONCLUSIONS  offered  by  types  of  discount guarantee  programs loan  program,  the  the  vitally  has  that  facility.  In  a total  of  is  the  only  a special  the  is the  needs The  $177.0  the  initiative  year  proved  the  shown  through  were  program  and  lease  successful.  reviewed  of  the  in  this  adequately the  of  the  financing  1,000  The a v e r a g e  for  served  needs  cooperative  1975 n e a r Iy  authorized.  new  the  responsibility  are  the  Insurance  the w e l f a r e  in m e e t i n g  ended J u n e 3 0 ,  million  the  facilities  developing  be most  businessman  the  facility,  agency  with  Bank  in  credit  to  credit  charged  of  best  financing export  by  Credit  c o n c e r n e d about  small  success  probably  the  national  officer  of  fiscal  have  served  the F o r e i g n  comprehensive  is  and  be w e l l  cooperative  T h e E x i m Bank  exporter  CFF  size  of  loans the  $181,000. The Exim B a n k ' s  A survey  taken  which  the Exim Bank.  was  has  to  and  of  which  loan  as  Bank  all  study  for  Import  such  facility,  exporter  small  appears  T h e E x i m Bank  small  ensuring  industry  the Export  Association.  the  this  national  export  American  by  more  of  Chamber  36,000 of  activities  exporters  Commerce  of  and  the  have  not,  however,  170 c o m m e r c i a l  U.S.A.  to  look  at  banks the  escaped  was  criticism.  conducted  Bank's  by  activities.  86  The  commercial  banks'  most  frequent  discount  loan  criticisms  facility  of  should  t h e E x i m Bank  be more  were:  1)  the  flexible  2)  the FCIA is not a d e q u a t e l y p r e f o r m i n g i t s f u n c t i o n and s h o u I d t h e r e f o r e , become a s u b s i d i a r y o f t h e Exim Bank. ? g  In  early  1975,  the FCIA  increased  its  i n s u r a n c e premiums  by  50$  to  40 compensate  for  may p r o v i d e  an  increase  support  for  the  The M a c h i n e r y survey  of  of  opinion  the  its  members that  in d e f a u l t s . criticism  and A l l i e d  in  the  other  of  the  Products  I960's  nations  The  size  of  the  rate  increase  FCIA. Institute  indicated  that  o f f e r e d more  reported that  most  members  favorable  a  were  credit  terms  belief  that  41 for  financing  "was  not  exports.  particularly  criticism  was  T h e members interested  corrected with  One o f  the  erupted  after  million  to  enable  it  fertilizer  plant,  a trade  this  type  could  of  be p u t  the  biggest  loan to  Bank  was  controversies to  grant the  by S e n a t o r in  loans  the  the  truck H.  United  the  under $100,000".  of  U.S.S.R.  the Exim  a credit  needed to  factory.  Jackson States  Exim  This  CFF.  concerning  equipment  c e n t r e , and  use  expressed  introduction  purchase  lead  better  in making  the  agreed  to  also  who  Bank  of  $289  develop  The a t t a c k b e l i e v e d the  t o meet  a on funds  the  needs  of  that  funds  would  42 domestic be had  lent to  business. to  pay  eventually governing  He was  the U.S.S.R.  at  also  critical  of  a 6-7$  interest  rate  l l g $ to  borrow  lead  an amendment  act  to  which  once  funds  again  in  the  being  the  fact  while  the  domestic market. r e i n t r o d u c e d to  prohibits  t h e E x i m Bank  U.S. The  the  firms criticisms  Exim  from  Bank's  granting  87  credit  to  the At  of  the  Soviet least  Bank's  airlines  Union.  one  of  the  activities.  large  U.S.  Officers  received a competitive  of  edge  airlines  has  also  been  Pan Am c h a r g e d  that  foreign  by p u r c h a s i n g  U.S.  made  critical  planes  43 at  E x i m Bank  that the  subsidized  interest  In  total,  the  criticisms  have  various  groups  are  interested  in  E x i m Bank  export  which  analysis  credit  occupies  manufacturing  an  is  arranging  sales  aircraft as  were  late  by  I960's.  exported  ties. —  i.e.  been m a j o r  seeing  The the  to  can  the  used  role  in  the  supported to  and  services  would  provided have  indicate provided  and  in  the  aircraft Exim  by  Bank.  A  activity  the  in B o e i n g ' s  also  indicated  nations  where  the  South  America  and  on  U.S. SE  that  industry The  aircraft  the  Bank's  difficulty  were  unable  slowdown local  in  to the  plant  financed  had  in  economy,  Seattle  the  already Asia.  of  havp it  indicates  scale  benefit  if  effects  Bank  economy.  undoubtedly  the  devastating  analysis  those  by  of  the  large  national  bulk  new w i d e - b o d i e d  by  support  the  the  industry  reduction  The  Central  exports  receives  financing  witnessed  the  of  industry  the  primarily  industry  activity.  on t h e  of  important  financing  count  not  improved.  The that  rates.  strong  in  products trade  88  FOOTNOTES  CHAPTER  1.  United Nations, of  Department  International  Commodity, 2.  Export-Import  3.  Ibid,  p.  U.S.  , Financing  Exports  9,  Foreign  Financing  March  1964,  "Exim  Bank  1971,  p.  Yearbook  Trade  by  Investment,  and C o u n c i l  Washington, for  9.  Export-Import  Bank,  Annual  Export-Import Can  Bank,  do F o r  Second  E d i t i o n , New  York,  38 Exports,  1066,  the  How  Report,  Exim Bank:  You,  p.  p.  Scranton,  Pa.,  II?  Budget",  Bank i nq Vo I.  LXIII,  50  Exim Bank,  1 9 7 6 , p.  it  Works,  Fiscal  What  it  1 9 7 5 , p.  year  is,  1972,  What  it  8 p.  13  Does,  What  it  2  a n n u a l r e p o r t s of t h e E x p o r t - I m p o r t Bank f o r 1971 and 1972 each p r o v i d e a d e s c r i p t i o n of the C o o p e r a t i v e F i n a n c i n g F a c i l i t y . The  information  annual How of Details  is  reports.  |t W o r k s ,  provided  on p a g e s  The E x p o r t - I m p o r t  1975 on p a g e s  7-8  38 and  Bank's  provides  13 o f  the  publication a detailed  respective Exim  Bank,  description  CFF. of  rate  all and  CFF  institution  Export-Import  loans  terms  Cumulative 13.  2,  27  Equipment  and  Bank,  12.  p.  Company,  Export-Import  The  Overseas  Operations,  8.  11.  Affairs,  p.26  Institute  1964,  Capital  textbook  Henry J . ,  No.  10.  and  Products  International,  Lee C . ,  Kearns,  1975,  Advancement,  International 7.  Report  and A l l i e d  Business Nehrt,  Social  1975, Volume  24  5.  6.  and  Statistics  686-94  Annual  Technological 4.  p.  Financing Machinery  Economics  Trade  1975,  Bank,  of  I I I  are  of  loan,  provided  Records,  Bank,  including  the  1974,  Cumulative  in  the  and  name  the  of  the  name o f  the Export-Import  on p p .  buyer,  the  Bank's  95-172  Records,  1974,  pp.  the  purpose,  cooperating  127-8  publication  89  FOOTNOTES  14.  Export-Import  15.  Ibid,  16.  Loomis,  p.  Bank,  CONTINUED  E x i m Bank-How  It  Works,  1975, p.  19 John E . ,  International  Finance; Official  Business, Revised E d i t i o n , Washington, 1970, p. 36 17.  E x p o r t - I m p o r t : Bank,  18.  Loomis,  19.  Videt, Pote,  Op.  cit.  Export-Import  21.  Kearns,  Works,  Note,  Boston,  Mass.,  1975, p.  Bank,  E x i m Bank-How  in  U.S. Inc.,  25  the United  Harvard Business  It to  World  No.  Loomis,  23.  Export-Import  24.  Loomis,  Op.  Business,  cit.  Op.  p.  Bank,  cit.  p.  Vol. VI,  Works, Export 2,  States,  School,  26.  Ibid,  p.  151  27.  Ibid,  p.  161  28.  Ibid,  pp.  29.  Ibid,  p.  221  30.  Ibid,  p.  224  3|.  Ibid,  p.  103  32.  | b i d , p.  108  33.  Ibid,  199  166-79  1975, p p . Sa|es",  March.April  1975,  2-3  Columbia Journal 1971,  p.36  46 E x i m Bank-How  It  Works,  1975, p p .  22-3  24  , W o r l d Bank O p e r a t i o n s S e c t o r a l B a l t i m o r e , The I n t e r n a t i o n a l Bank f o r D e v e l o p m e n t , 1972, p . 1 4 7  p.  and  BNA B o o k s  p.33  H e n r y J . , " C r e d i t : A Key  22.  25.  It  Agencies  D.C,  13  20.  of  E x i m Bank-How  Government E x p o r t A s s i s t a n c e  Research p.  18  P r o g r a m s and P o l i c i e s , R e c o n s t r u c t i o n and  90  FOOTNOTES  CONTINUED  34.  Ibid,  p. 2 0 4  35.  Ibid,  p.207  36.  U n i t e d N a t i o n s , D e p a r t m e n t o f E c o n o m i c s and S o c i a l A f f a i r s , Y e a r b o o k of I n t e r n a t i o n a l T r a d e S t a t i s t i c s 1 9 7 5 , V o l u m e 2 , T r a d e by Commodity, 1975, pp. 686-94  37.  Mohammed, A z i z a l , " T h e U s e o f C o m m e r c i a l C r e d i t s by D e v e l o p i n g C o u n t r i e s f o r F i n a n c i n g I m p o r t s o f C a p i t a l G o o d s " , IMF S t a f f P a p e r s , V o l . X V I I , 1 9 7 0 , p. 69  38.  Pearson,  Lester  B.,  et. a l . , Partners  C o m m i s s i o n on I n t e r n a t i o n a l P u b l i s h e r s , 1 9 6 9 , p . 120 39.  , " T h e E x i m Bank 1970, V o l . L X I I  40.  Videt,  41.  As r e p o r t e d  and E x p o r t  New Y o r k ,  Financing",  of t h e  Praeger  Banking,  October  N o . 4 , p. 56  P . , O p . c i t . p . 18 in N e h r t ,  Scranton, 42.  in Development-Report  Development,  see S t e r n , N.Y.  Lee C . , F i n a n c i n g  P a . , International  M . , "Low Cost Times,  E x i m Bank  Capital  Textbook Loans  Equipment  Company,  to Soviet  Exports,  1 9 6 6 , p. 101 Hit  by J a c k s o n " ,  June 4 , 1974,  and Dale, for 43.  Edwin  L., "Soviet  April  7 , 1974  a discussion  Videt,  of t h i s  Controversy situation.  P . , O p . c i t . p. 22  at t h e Exim B a n k " ,  N.Y. T i m e s ,  CHAPTER  |V  EXPORT DEVELOPMENT CORPORATION  Canada the  high  one  quarter  in  the  standard of  to  reach  capital  goods  have  the  of  promotion t h e methods export  repayable  over  banks  of  Canada  their  function,  financing. the  The  commercial  countries.  The  of  as  occurs  as  to  found  international  the major As  have  trading  insurance  and  capital  goods  been  they  are  reach  export  very with  is  pro-  by  finance.  usually  requires  provide  short  91  be  goal  to  exporter,  to  producers  this  such  risks  Canadian  one  provide  insurance  export  study  to  is  our  this  reluctant it,  of  in  than  view  size  concerned  greater  political  Canadian  to  activity  Canada,  markets  elsev/here  of  on t h e the  central  nations  outlined  developed  In  maintain  Approximately  small  depend  production. in  to  a result  The r e l a t i v e l y  of  the  trade  citizens.  located  private and  its  producers  levels  a period  have  by  primarily  nations  sale  place.  Canadian  exports.  credit  The is  of  international  activity  market  sector,  upon  enjoyed  economic  economic  All  viding  living  forces  competitive.  of  of  our  market  manufacturing of  dependent  international  domestic market  is  five  companies  years.  are  encountered therefore,  financing The  chartered  financing  has  because  and. mediurn  reluctant in  which  dealing found  it  term  to  insure  in  foreign  difficult  92  "to c o m p e t e  in In  and  other  Export  Credits  "to c o v e r  Act  an  to  effort  was  to  in  amended  exported  Canadian  Over  years  to  promote  to  the  Export  foreign allow  has  Development  of  countries the  As  of  and  the  Development  2)  by  the  a result was  of  government from this  the  for  goods  by  an  for  services. its  agencies  credit  changing  established  wanted  governing  and  export  Crown  who  term f i n a n c i n g  technical  Insurance  3)  insurance  emphasis, act  of  the  Parliament  developing  for  EDC  1  trade  and  (export  "established  between Canada  other  fulfills  exporters  buyers,  was  powers  its  against credit  for  and  provided  function  by  non-payment  the  other  by  providing:  by  insurance)  Insurance f o r Canadian Investment a g a i n s t loss due t o n o n - c o m m e r c i a l c r e d i t r i s k , (foreign insurance)  Loans  to  major  technical  credit  is  sources, CREDIT The  Corporation  financial  Act."  investment  Canadian  related  Canada  this  exporters  non-payment  long  changed  Development  foreign  EXPORT  used  of  of  I960 t h e E C l C ' s  provide and  gradually  facilitating  1)  I.  to  purpose  Canadian  In  between  1969.  by means  Export  countries.  Corporation  The E x p o r t purpose  risks  trade  1944 e s t a b l i s h e d  The main  certain  goods  field.  in  for  the mechanism  financing  on J u n e 2 7 ,  government  ECIC  capital  develop  insurance  against  exports  and  Corporation.  provide  to  marketplace.  facilitate  the F e d e r a l  themselves  the  to  Insurance  buyers  was  international  nations  Corporation  sold  the  not  buyers services  available  (export  credit  of  capital  for  which  from or  goods  extended  regular export  and  commercial  finance).  INSURANCE  export  exporter  foreign  credit  against  insurance  the  various  provided  by EDC  types  commercial  of  insures and  the political  93  risks  detailed  encompassing which  is  previously  definition  outside  and w h i c h  arises  tinental  U.S.A.  to  that  for  adopted  those  the  risks  $1.5 by  in  time,  the  Board  Federal  it  appears  is of  risk  insurance that  EDC  credit  divided  is  insurance equally  31,  1975, was  of  insurance  the and  somewhat only  permitted  On December  the  is  for  an  any  allcause  seller the  con-  different  provides  coverage  policy.  policies  policies  and  Canada  agency  and  $ 9 1 0 . 7 mi I I i o n  that  of  adopted  coverage  outside  EDC  issued  insured  the  has  purchaser  The American  export  amount  all  the  occurring  liability  Directors  under  Corporation  in  all  Government.  liability  year,  of  both  T h e EDC  provides  interpretation  outlined  This  study.  which  of  the FCIA.  under  billion.  risk  events  This  T h e maximum point  of  this  control  from  by  in  to  policies  issued  is  policies  authorized  by  E D C ' s maximum  exports  at  policies  between  $816.3  assume,  the  have  authorized  the  contingent  million. in  any  Since  last  the  fiscal  a relatively  short  term. Table Canadian the up  exports  EDC. in  VIII  The  are  fact  example  is  so  with  British  figures  are  raw m a t e r i a l s  and  credit  are  component  Canadian which  the  three  facilities  of  Canadian  explains  figure  percent  can  why be  that  of  offered  exports  this  by  end  insured  compared  25$ of  total  all  for .United  ECGD. is  produced  this  than  indicate  by t h e  the major in  under  two-thirds  insurance  products  materials  single  3%  insured  less  undoubtedly  The  Export  largest  nearly  economy  that  insured  small.  Kingdom e x p o r t s  fabricated  being  that  the American  •figure  indicates  provided in  for  a broad  the Canadian  group  category  of is  economy.  products wood,  range  insured  pulp,  of Inedible  and  the  newsprint,  TABLE COMMODITIES  COMODITY AMOUNT  INSURED BY EXPORT  •*  2.7 42.7  Serv i ces End P r o d u c t s ,  6.5 170.8  1.2 30.4  26.7  4.8  7.3  1.3 13.9  Industrial  Which  Machinery  Communications Ai rcraft Automobiles Farm  of  Equipment  and  Electrical Other  End  Parts  Equipment Products  TOTAL Canadian  Exports  a $  End P r o d u c t s  of T o t a l  SOURCE:  as  Inedible  Development  8. 1  1974  %  0.8 11.7 1.6  AMOUNT 4.9 193.9 19.4  TOTAL  %  AMOUNT  % 0.8  0.5 20.7  15.2 375.2  486.2  2. 1 51 . 7  42.8 1022.4  20.5 213.8  2.2 22.8  31.0 512.3  5.9 2.3  105.3 35.9  4. 1 2.6  131.5 33.7  1.8 6.6 1.7  24. 1 26. 1  1.2 1.3  296.5 4.0 127.7  59.5 0.8 25.6  23.4 7. 1  4.7  55.2  1 .4  15.2 4.2  3. 1 0.8  21.5 38. 1  6.6 9.7  1.3  9.9  2.0  • 8.0  1 . 1 0.9  24.8  18.8 2. 1 51 . 1 1.6 25.6 5.3  1 .4  8.4 37.9  1.5 6.7  61.5  12.3  56.3  5.9  155.7  7.8  561 . 6  100.0  498.6  100*0  938.7  100.0  1998.9  100.0  20150.0  a %  Exports  Export  0.8  3.9 58.4  CORPORATION  7.6  16820.0  Total insured Exports of T o t a l E x p o r t s Total  1. 1 21.9  78.2 4.7  Machinery  DEVELOPMENT  SELECTED YEARS MILLIONS OF DOLLARS 1972 1970 AMOUNT  L i V G An ima1s 6.4 F o o d , F e e d , B e v e r a g e s and T o b a c c o 122.9 Crude M a t e r i a l s , Inedible 15.3 Fabricated Materials, Inedible 239.7 Inedible  VIII  32177.0  69147.0  3.33  2.47  2.92  2.89  1.01  0.63  0.66  0.74  as  C o r p o r a t i o n , Annual  Reports  paper  and  million Steel with  other  or  6 5 . 7 $ of  products 19$ o f  consumer  exports  grounds clined  inedible  of  and  the  assume  of  a small  Limited, Domtar to  be  Ltd.,  of  of  dealing  feature the  paper  Abitibi  with  the  helps  In  is  fabricated  component  of  that  the  in  for  $319.6  materials.  this  of  the  category  Canadian  to  political when are  Company Forest  Limited, Products  corporation  sales  excess  and  world  in  assuming  market.  financing  its  to  for  increase  Canada  should  the  less this  of  consists  MacMillan  of  such  $1.3  commercial  It  is  also  as  MacMillan  It as  does  Bloedel  and  unlikely Bloedel  not  Limited, appear  MacMillan  billion,  is  Ltd.  the  Bloedel  not  political that  type  lumber  ConsoIidated-Bathurst Limited.  the  Further,  industry as  in  that by  the  disin-  dealing  consisted  such  a multinational volume  of  assisted  forest  on  therefore  be q u e s t i o n e d .  producers,  end  justified  considers  1974  The C a n a d i a n  equipment  Exported  be  and  being  in  goods  exports.  risks  one  capital  capital  can  evaluate  exports  scale  that  of  exports.  s e r v i c e must  insured  consists  theory,  exports  such  economy,  in  and  a corporation  order  insured  However,  large  Paper  category  total  unable  products.  evaluating in  1$ o f  Canadian  and B . C .  annual  necessary  domestic  of  of  total  commercial  value  number  likely  capable  the  the  Limited  1974 a c c o u n t e d  indicates  insurance,  exporter  percent  and  than  marketplace.  one-third  pulp  25$ of  credit  insurance,  nearly  about  Export  three  largesti  Table VIII  less  to  in  inedible  end p r o d u c t s  comprise  that  insured  second  durables.  international than  the  which  total.  comprise  products  products,  total  were  the  The and  paper  risks insurance  obtain  receivables. industrial strive  to  output produce  and  to  goods  diversify in  which  its  96 she  has  a comparative  in w o r l d exports  markets. consist  insurance. of  advantage.  Table  of  inedible  The E D C ' s  limited  value  VI I I  in  indicates  that  end p r o d u c t s  insurance  helping  The p r o d u c t s  less  be  fully  competitive  than  \% of  Canadian  supported  facility  Canada  must  by  export  t h e r e f o r e , appears  develop  a more  credit to  be  diversified  industrial  sector. II.  FOREIGN  INVESTMENT  INSURANCE  In  an a t t e m p t  to match  other  countries,  program. can  Under  obtain  the this  armed  patriate  earnings  once so  issued  long  to.  as  The  the  that  can  \% per  mi I I i  be  and  loans,  of  affecting program  in  joint  for by  ventures  for  management  some  examples  The  cost  of  ability  to  designed  to  and  not  policy any  and  type  insurance  expropre-  fifteen  the  the  to  abroad  term of  virtually  of  invest due  is  by  are  nationals. years  EDC,  adhered  type  of  royalty of  of  Insurance  foreign  contracts  are  the  of  nationals  with  investor,  conditions  coverage  loss  also  a maximum the  v/ho  their  is  to  Investment  businessmen  possibility  The  cancelled  provides  the F o r e i g n  factors  issued  terms  insured.  Canadian  facility.  insurance,  while  are  offered  foreign  and  investment  approximately  annum.  of  number  basic  Equity,  The type  the  capital.  agreements, be  or  facilities  Canadian  participation  only  insurance  licencing  or  policies  can  investment.  against  conflict,  Canadian The  developed  facility  protection  riation,  encourage  EDC  the  of the  on.  only  In  the  forty-five  outstanding value  investor  of  first  appears four  policies  policies  investments  reluctant  years were  increased insured  that  t o make  t h e EDC  issued. by  In  eleven  increased  by  FY  to  use  of  offered  this such  1975 t h e  thirty-five  57%  to  $68.4  total  and  97 The  facility  who  enter  joint  The  risks  of  of  use  of  ventures  with  some  foreign  technology  that  increased  use  Ill-  of  loans  capital  to  Section  and  any  such  loans  the  Corporations's  or  guarantees  at  any  point  EDC may  Trade, that  also  the  to  is  Federal It  an  ad  by  hoc  Standing  of  can  investors  a developing  be  T h e EDC  foreign  trade  1975 s i g n a l s  country.  are  eliminated  which w i l l  insurance.  29 of  time was  the A c t ,  claims and  high  through  protect  the  the  transfer  facility  undoubtedly  a major  hopes  breakthrough  in  3  to  finance  of  directors  that  t h e maximum  not  e x c e e d $850 mi I I i o n . $1500 m i l l i o n ,  exports  capital the  permitted Government  Committee  authorized  did  finance  basis.  was  addition  national present,  to  assume  is  the  $850  which  interest  At  of  each are  by  under  loans  of  1973,  to  1973 loans  outstanding this  1974 was  these  further  ceilings  situations  Minister  additional  directly  guarantee  grant  amount  special  the  t h e maximum  of  Industry,  liability  authorized  by  established  on  million.  Corporation's  A review  to  also  Prior  in  long  Canadian  may  to  In  and  direct  of  institutions.  proviso  to  provide  purchase  the  In  appears  the  to  increased  in  may  The C o r p o r a t i o n  financial  $4250 m i l l i o n .  be  E.D.C.  services.  private  board  and Commerce.  EDC  risks  know-how.  customers  subject in  to  considered  Canadian  inconvertibility  insurance  in  technical  made  ceiling  increased  Such  Canada's  for  nationals  currency  investment  foreign  goods  maximum  for  support  FI NANCE  Under term  LDCs.  activity  foreign  EXPORT  the  and  and m a n a g e r i a l  a stimulus  the  with  investment  provides the  provide  expropriation  when d e a l i n g the  can  some  of  on F i n a n c e , T r a d e  ceilings  are  the minutes  and  evidence  and E c o n o m i c A f f a i r s  for  of 1973  the  98 failed  to  disclose  belief  that  t h e method  EDC's  ceilings  supported  by  financing  on December  in  their  noting  authorized  few new a g r e e m e n t s to  $1.5  once  again  31,  financing  was  requested  to  the  future $4.25  to  $1240.2  Corporation. growth,  the  established total  The by  the  of In  time,  Corporation's  by t h e  new and  1974 P a r i i a m e n t  was  the in  an  increase very  increased  Corporation  receivable  increasing that  the  undisbursed  signed  subsequently  1973,  is  and  Without have  The  basis  receivable  would  permitted notes  ceiling.  million.  was  end o f  the  on an ad h o c  notes  $841.0  level  mi I I i o n .  At  of  ceiling  the  total  a bill  determine  the C o r p o r a t i o n  1973.  1973 t h e  pass  authorized  legislation. undisbursed once  again  lending  an  obvious  move  finance  ceiling  was  was  to  ceilings  allow  for  increased  to  bi I I i o n . To  transaction tended  qualify must  credit  financially be  ceiling  close  to  1972 was  However,  very  are  EDC's  31,  in  billion.  On December  of  that  used  be o f  terms  and  for  a  long  a type  (i.e.  benefits  to  Canada  Canadian  material  and  beyond  economically  creditworthy.  term  financing  for  an  five  sound  The  transaction  must  and  in  the  and  labour  content  amount  years).  and  addition  loan  the  which  foreign  employment  not  less  must  than  ex-  must  borrower  transaction  the  justifies  The p r o j e c t  provide  of  f r o m EDC  must and  have  80$.  be  industrial  a All  goods  4 and  services  must  be  Up u n t i l any  long  term  exported  1974,  financing  $1 m i l l i o n .  This  "any  equipment  EDC  capital support  so  EDC  from had  contracts  Canada.  an  unwritten  which  had  minimum r e q u i r e m e n t was  long  as  or the  service  export  transaction  policy  a value  removed  in  transaction  justifies  of of  not less  considering than  1974 and is  now  eligible  extended  credit  for terms  in  accordance  with  The Canada's also  advice  to  the  proposed  The  former  purpose  make  use  EDC  the  of  is  EDC  providing  agreements  recent  an  exporter  approaches sale. to  In  provide  EDC  fiscal  which has  EDC order  to  of  of  view  provides where  priorities.  believes  EDC's  abroad  the main  hopes  which purpose  direct  jobs  In  7  more  to when  concluded  that  EDC  been  for  signed  Therefore, have  and  created  created  1975,  $ 1 1 3 5 mi I I i o n . should  are  jobs  Canada  are  study  employment  by E D C .  stimulate  Statistics  Statcan's  direct  to  providing  commissioned  is  responsible  financing  a prospective  acertain  detailed  ascertain  scale  his  EDC  approximately  created  in  year.  require  to  to  projects  EDC  thereby  employment  exporter  found  financing  financed  will  6  export. of  project  however,  capital  how many  totalling  A Canadian sales  trade.  try  country's  In  increasing  On o c c a s i o n ,  even  Aitken,  sector,  goods  man-years  country.  major  term  100 m a n - y e a r s  direct  to  financed  equipment.  long  contract  the  host  T.  determine  a capital  e a c h $1 m i l l i o n  export  H.  Canadians. to  concerned with  and may  the  Canadian  manufacturing  approximately  t h e most  EDC,  capital  By  for  on  l e n d money  promote  a study  financing  country  of  to  finances  114,000  to  that  recipient  rates  practice."  primarily  hopeful  recipient  is  is  the  Canadian  income  undertake  to  project  Canadian  more  is  president  main  of  but  benefit  the  international  Corporation  exports  be of  normal  evaluate  if  to  the  information  the  for  his  be w i l l i n g  application about  bringing  attention  purchaser  they would  the  for  EDC  to  of  An  proposed  EDC.  Once  product  he  finance  requires  project.  any  the  the  exporter  application  100  form  for  long  Some o f  the  term  financing  information  1)  detailed company  2)  required financial  for  Board  of  for  information  about  timing,  costs  details  of  to  the  and  the  that  this  It  inquiry  could  be  agreement  with  the  borrower  borrower,  EDC  that is  the  each Canadian  being  copies  of  A minimum  financed all  exporter by E D C .  invoices  purchase  of  is  and  funds  a multiplicity  the  to  of  on  both  the  required  to  the  economy. would  elapsed  approval  of  signs  the  \/\0%  of  that  submit  from  EDC's  A  the project  must  the to  value  the  of  ensure  contract  other major  the  the  financing  from  purchaser  fact  from  the  a  exporter.  The  readily  months.  3 - 4 EDC  be  time  by  instructions  purchased  approximately  including  information  Canadian  of  years  financing  e x p o r t e r must  goods  five  Canadian  approved,  aware  including  project  final  suppliers.  is  borrower  of  of  order  the  Each  for  the  that  then,  study.  includes:  on t h e  next  the  the  this  exporter's  accruing  to  appears  in  application  the  type  until  the  pays  and  to  on t h e  and  amount  benefits  exporter.  Directors  years  the  country  unlikely  original  five  II  years  projections  is  involve  five  information  last  Once  can  information  last  forecast detailed  Appendix  application  financial  It  the  the  as  the  the  importing  of  in  covering  4)  date  included  detailed  3)  available  is  Corporation suppliers.  the  contract  Q is  necessary  before  the  and F i n a n c i a l  Services  to  80%  verify  the  the  Canadian  example,  is  perused  Division  of  EDC  Canadian  The C a n a d i a n of  invoice  content  exporter  International  content  to  then  The T e c h n i c a l  authenticates  each  invoice  regulation.  requirement  sell  by EDC.  his  Hydrodynamics  goods  restricts in  Company  the  the world Ltd.  ability market.  (HYCO),  a  For  westcoast  firm,  has  vessel  successfully  which  is  used  r e c o v e r y work.  was  Prior  In  the Export  granted to  type of  As  was  Division  located  with to  fairly  the problems  of  to  compete  candidate  to  represented  30,  Export  contract  larger  the  percentage  by C a n a d i a n In  creased  of  the  from $1.3  past  of  technology  $1.1  submersible  million  London,  sale  of  any  England.  similar  the Canadian  content  and F i n a n c i a l is  two  ability  of  Services  located  groups,  bureaucracy, this  by HYCO a p p e a r s  the  firm's  directly  in  coupled  appear  Canadian  and  needs  ownership  in  Canada  small  of  however,  by t h e  Investors. stock  Company,  like  Canadian like  EDC.  By  was  the  Development  companies  ideal  1975,  Crown C o r p o r a t i o n s  the of  be an  financed  outstanding  Steam N a v i g a t i o n if  to  financed  1964 by C a n a d i a n  Perhaps  the  the  The s a l e  in  Corporation to  the of  and  a Pisces  L i m i t e d of  between t h e s e  w h i c h was  and O r i e n t a l  were more r e s p o n s i v e  of  loan  a government  support.  line.  surveys  the manufacturer  produced  established  shipping  A  submersible  markets.  1974, 44.33$ of  Development  retained  with  world  being  first  by t h e P e n i n s u l a r based  while  of  in d e s i g n ,  sale  The T e c h n i c a l  restricting  r e c e i v e EDC  HYCO was September  for  vessel  the  checking  The d i s t a n c e  created barriers  The  U.K.  involved.  dealing  the  financed  the  in Ottawa,  B.C.  exporter  Canadian  Oceanics  had n o t  a type  underwater  Corporation.  a result,  Vancouver,  have  of  uniquely  Vickers  c o n t r a c t , EDC  product.  is  is  types  1 9 7 5 , HYCO f i n a n c e d  the p u r c h a s e r ,  this  and m a r k e t e d  various  Development  requirement  North  for  The p r o d u c t  and m a n u f a c t u r e . through  developed  owned large the  Corporation  businessmen, HYCO w o u l d  a be  investors. four  billion  years to  $5.1  EDC's  lending  billion.  ceiling  The annual  has  been  total  of  in-  financing Table to  IX  agreements shows t h a t  December  the  total  December grow a t  31,  of  is  producers  of  mainly  growth  product  are  comparative  of  to  this  finance  IV.  $1135.0  these  are  type  of  questions, been  attempting  all  perused,  of the  the  Development  Corporation.  The products  facility.  been  first  which  establish  of  the  held  stage  are  Canada's  to  world  exports.  of  fiscal  expects  comparison, year  its  ended  signings  to  of  Canadian  the  ability to  win  be a s k e d  does  Canada  how a r e  the  when  one  these the  to  have  products,  funds  business.'  considers  exporters,  appear  being  to  financing  international  successful  this  what  type  any  who  are  the  provided  CONTRACTS  formulate  some  answers  term f i n a n c i n g  literature  with  local  in  the  against  has  officers  analysis  for  trade  The  the  is  support  to  under  will  which  compare  latter  will  then  the of  been of  be  be  the  aforementioned the  EDC  and  Export  that  EDC's  trade  group  financing  considered the  have  revi.ewed  the  identify  patterns to  to  agreements  academic  eligible  a standard  financed  to  relevant  have  the  way  up  activity?  long  discussions  the  signed  in  to  and  in  contracts  growth  in m a n u f a c t u r i n g  exports  By  dramatically.  The phenomenal  these  exporting,  all  EDC  services  have  increased  of  signed  A N A L Y S I S OF LONG TERM F I N A N C I N G In  of  and  rate—who  total  million.  rate.  goods  has  million.  agreements  advantages  purchasers  $559.0  questions  they  t h e EDC  attributed  capital  interesting  dramatic of  1970 was  1975 was  by  cumulative  10-15$ annual  agreements  Some  the  financing  31, a  signed  in  order  patterns  subdivided  into  the  TABLE EXPORT SCHEDULE  Agreements  to  and  Exporters  Undisbursed  Financing  SOURCE:  Undisbursed  Export  CORPORATION  OF FINANCING AGREEMENTS AND  DISBURSEMENTS  1971  1972  1973  1974  1975  559.0  340.0  283.3  462.9  659.4  1135.0  418.7  123.9  216.8  224.7  356.3  637.4  Period  140.3  216.1  66.5  238.2  303.1  497.6  Financing  140.3  356.4  422.9  661.1  964.2  1461.8  Disbursements  Canadian  Cumulative  DEVELOPMENT  1961-1970 Signed  Cancellations  IX  for  Development  C o r p o r a t i o n , Annual  Reports  a  104 categories of  the  groups The  used  E x i m Bank of  and  exports  trade  This  earlier  section  exporters  will  and  by more  1974.  first  of  of  year  level In  as  1968,  and  South  Six  years  stantial  not  growth  be  also  analyzed.  be  structure  various  presented.  of  the  Canadian  the  also in  six  the  exports  period  ending  may  appear  to  considering  same  six  year  that  December  the  following  period:  5)  American  exports  increased  All  of  figures  indicate  losing  its  share  p e r i o d , Japanese  exports  Canadian  to  the  exports  exports  America later gain  all  were $ 1 . 2  t h e y were  can  All  of  of  these  States  the  $15.8  comparisons in  the  90$ of being  do,  the major  nations  than  Part  however,  in  EDC's  that the  greater.than in  same Canada's.  Central  Canadian  increases  international Canadian  billion  greater.  the  In  the  from a p p r o x i m a t e l y $20  greater  by  despite  world markets.  over  billion for  Canada,  developing  billion  be a c c o u n t e d  competitive  United  of  of  351$  284$.  that  increased  a figure  by  by  31,  totally  e x p o r t s o f d e v e l o p e d n a t i o n s i n c r e a s e d by 3 2 2 $ e x p o r t s o f t h e members o f t h e EEC i n c r e a s e d by 3 3 2 $ J a p a n e s e e x p o r t s i n c r e a s e d by 4 2 8 $  activity,is  increased  be  have  2) 3) 4)  these  exports  Canada's  year  rate  worth  that  total  fully  the  is  recorded  Approximately with  the  indicates  this  world  will  the  1)  petroleum. is  I  glance  were  then  of  activities  importers.  in  it  the  importance  exports  analyzing  250$  growth  six  financed by  The  discussing  economy w i l l  than  However,  increased  the  when  Bank.  Appendix  acceptable. rates  study  Canadian  foreign  I  increased At  the  conclude  the  Table  this  the World  to  patterns  in  of  exports. this  the  indicate  sub-  price that  of Canada  markets.  exports  go  to  developed  importer  of  Canadian  nations,  goods.  105  Canada's per  exports  year.  nations trade  of  Central  are  for  to  vehicles  and  the  financing  EDC.  While  because year  Table  annual  under  all  the  exports  period and  States.  under  are  not  ending  to  the  by  in  the  by  of  signed  by  t h e r e f o r e , appears  of  the  goods  Auto  the to  eligible  should of  be  motor should  Further,  less EDC  be  exports  export  are  Pact  EDC.  1974,  these  Canadian  Exports  the  31,  that  States  Canada-U.S.  developing  I970's.  capital United  billion  the  indicates  figure.  December  t h a n $3  provisions  the  financed  guarantees  It,  X  volume  Canadian  a more m e a n i n g f u l  they  agreements  United  true  less  occupied  dramatically  the  produced  are  market, i s  America.  changed  certain  nations  this  for  at  parts  fourteen  financing in  of  arrive  be e x c l u d e d  South  not  financing,  deducted  of  outlines  eligible  facility  such  the  XI  developing  share  and  have  Table  credit  the  The major  patterns  which  to  than  1$ o f  involved  in  in  order  purchasers  to  exclude  i all  capital  equipment  Table have  increased  a 237$ total  XI  signings million  of to  This  financing  of  Canada's  on EDC  to  provide  supported  creased  to  These  by EDC  eligible in  export  1968 t o  same  six  increased figures  States. capital  comparable  capital  financing.  United  $1,848 to  equipment billion  that  year  exports  in  recorded  for  p e r i o d , EDC's  annual  from a p p r o x i m a t e l y  indicate  equipment  that  an  exports  m  1968,  only  credit,  while  by  2.8$  1974 t h e  $22  increasing  are of  1974,  relying  eligible  exports  figure  had  from  1961-  35.7$ All  1974 were  |n t h a t  eligible the  is  agreements  $659 m i l l i o n .  the  that  growth  exports.  volume  were  indicates  to  f r o m $779 m i l l i o n  increase. Canadian  exports  of  the  examined  to  signed  financing  develop  a better  agreements  of  understanding  EDC of  the  types  in-  106  TABLE X CANADA' S  EXPORT TRADE BY  R E G I O N , COUNTRY OR AREA  MILLIONS OF U.S.  EXPORTED  ECONOMIES  U.S.A. As i a Europe Oceania Rounding DEVELOPING ECONOMIES A f r i ca C. & S. As i a Middle  %  AMOUNT  32,783.4  20,177.8  29,200.4  89. 1  21 , 8 0 2 . 4 2,328.0 4,838.0 379.9 -147.9  66.5 7. 1 14.8 1.2 -0.5  6.8  2,925.7  8.9  0.7  325.5 1,477.5 874.3  1 .0 4.5 2.7 0.7  90. 1  90.5  18,182.3  10,578.3  65.4  777.0 3,025.0 235.2 35.8  4.8 18.7 1.5 0. 1  14,114.3 70.0 4.9 996.9 2 , 9 0 5 . 2 14.4 197.6 1 .0 -31.7 -0.2  1,260.8  7.8  1,373.2  108.5 688.4  0.7 4.3  145.0 756.4  395.5 65.3  2.4 0.4  0.3  ——  244.0 4.4  3.2  657.3  2.0  32,783.4  100.0  East  Oceania  3. 1  ——  393.2 75.7 2.9  272.8  1.8  622.3  3.8 2.0  11  PLANNED  16,184.9  TOTAL  SOURCE:  AMOUNT  14,651.3  Amer i c a  CENTRALLY ECONOMIES  %  16,184.9  T H E WORLD  1974  1972  1970  TO  AMOUNT  DEVELOPED  DOLLARS  100.0  United  Nations,  Yearbook  Volume  I,  by C o u n t r y ,  Trade  of  20,177.8  100.0  International 1975,  p.  192.  Trade  Statistics  1974,  TABLE XI CANADA'S EXPORTS OF OTHER MANUFACTURED GOODS MILLIONS OF DOLLARS  TOTAL EXPORTS LESS EXPORTS TO THE U.S.A. CONSISTING OF: MOTOR VEHICLES AND PARTS AIRCRAFT AND PARTS OTHER PRODUCTS EXPORTS PRIMARILY ELIGIBLE FOR EDC SUPPORT LESS EXPORTS CONSISTING OF: MOTOR VEHICLES AND PARTS AIRCRAFT AND PARTS OTHER PRODUCTS ROUND 1NG  1968  1970  1972  1974  4809  6260  8224  10826  30 1 19  2501 286 1243  3290 239 1653  4484 313 2109  5373 320 3285  15648 1 158 8290  779  1078  1318  1848  5023  217 83 477  230 155 934  2  247 140 675 16  282 1 13 1432 21  976 491 3518 38  13624  16185  20178  32783  35.3 5.7 2.8  38.7 6.7 9.3  40.8 6.5 21.5  33.0 5.6 35.7  100  283  659  (1)  TOTAL  BALANCE TOTAL EXPORTS ALL COMMODITIES 1. 2. 5 >  AS A % OF TOTAL EXPORTS AS A % OF TOTAL EXPORTS AS A fo OF 2  22(E)  EDC FINANCING AGREEMENTS SIGNED  SOURCE:  Bank of Canada Review, October,  82770 36.4 6. 1 21.2 1064  1975, p. SI26  (E) = estimate  o  108  of  products  trade The  pattern  results  indicate $2  main  groups  of  of  for The  53$ of  all  financed  times  These  latter  total  and make  analysis  on t h e  primarily  the  exported  by  country  a project  LDCs.  Ships nations  were  not  Table  to  to  the  financed again  shows  that  ships  and  hand,  a value  the  for  of  same  total  XIII,  are  that to  exports.  greater  plants  exported  and  the  over  the  opposite  three 75$  developing of  that  America  to  the  the  received  nations.  in A f r i c a  exports just  South  developing  LDCs  that  An  which  were  the  X!l  all  projects.  only  It  they  Canadian  not  rank  group  are  LDCs  reverse  the  power of  power is  types  in  of  In  the  nearly Asia.  the  not of  developed plants.  rankings  really  may  its  products  but  plants  accurate  products the  developing  goods,  generating  salesman on  nations  The  capital  represent  high of  to  types  these  nations  eager  the major  electric  conventional  because  did  exports  sought  in  developing  desired  are  the  and T a b l e  indicates  exactly  exported  once  industrial  the the  the  interested  assumption to  of  other  scale  goods  as  XII  generating  in C e n t r a l  exports  are  with  also  is  exports  if  exports.  primarily  large  goods  as  rankings  Canadian  consisted nations,  large  of  determine  exports.  nations  category,  as  The  were  financed  goods  analysis  to  in T a b l e  electric  capital  Canadian  group  projects  distribution  developing  the  three  for  market  and  presented  The  financed  total  select  commercial  products.  This  recorded  this  t h e EDC  industrial  and  of  by  analysis,  ships,  group  nations.  for  this  million  this  supported  holds  that  than  of  being  were  types have  priority in which  to  being  of  sold  products a  list. the  developing  recipients.  indicates  that  the  activities  of  t h e EDC  follow  TABLE XII EXPORT DEVELOPMENT COROORATION LONG TERM FINANCING AGREEMENTS SIGNEO JANUARY I, 1971-DECEMBER 31, 1974 MILLIONS OF CANADIAN DOLLARS EXPORTED COMODITY /  IMPORTER  DEVELOPED NATIONS AMOUNT  TRANSPORTATION  EQUIPMENT  Aircraft Rai1 roads Ships ELECTRIC POWER PROJECTS Conventional Generating Nuclear Generating INDUSTRIAL  i  COMMAND ECONOMIES AMOUNT  Greater than $2 Mi 11 ion Less than $2 Mi 11 ion Mineral Development  AMOUNT  %  (71.3)  (79.9)  (62.3)  (359.1)  (26.9)  (640.5)  (36.7)  22.3 10.4 168.8  7.9 3.7 59.7  55.9 24.0  43.6 18.7  131.7 72.5 154.9  9.9 5.4 1 1.6  (15.6)  —  8.8 8.0 19.9  (44.3)  — '  154.0 138.8 347.7  (369.4)  (27.7)  (413.7)  (23.7)  44.3  15.6  238.4  17.9 9.8  282.7 131.0  16.2 7.5  (37.2)  (13.1)  (44.6)  (34.8)  (295.4)  (22.1)  (377.2)  (21.6)  37.2  13. 1  42.5  —  232.9  —  33.2 1.6  17.5 0.5 4. 1  312.6 8.8 55.8  17.9 0.5 3.2  «_  (125.9)  (9:4)  (125.9)  (7.2)  mmmm  (185.0)  (13.9)  (185.0)  (10.6)  RELENDING FACILITY ALL OTHERS  (3.7) 283.0  Export  %  (201.5)  TELECOMMUNICATIONS  SOURCE:  Development C o r p o r a t i o n ,  TOTAL  AMOUNT  131.0  PROJECTS  TOTAL  DEVELOPING NATIONS  Annual  100.0 Reports  128.2  (2.9) 100.0  6.7 55.8  (0.2)  —  (3.9)  1334.0  100.0  1745.6  (0.2) 100.0  TABLE XIII EXPORT DEVELOPMENT CORPORATION LONG TERM FINANCING AGREEMENTS SIGNED JANUARY I, 1971-DECEMBER 31, 1974 MILLIONS OF CANADIAN DOLLARS EXPORTED COMODITY /  IMPORTER  TRANSPORTATION EQUIPMENT Aircraft Rai Iroads Ships ELECTRIC POWER PROJECTS Conventional Generating Nuclear Generating INDUSTRIAL PROJECTS Greater than $2 M i l l i o n Less than $2 Mi 11 ion Mineral Development TELECOMMUNICATIONS RELENDING FACILITY ALL OTHERS NOT ELSEWHERE CLASSIFIED TOTAL SOURCE:  DEVELOPED NATIONS  COMMAND ECONOMIES  DEVELOPING NATIONS  AMOUNT  • *  AMOUNT  AMOUNT  (201.5)  (31.5)  (79.9)  22.3 10.4 168.8  14.5 7.5 48.6  55.9 24.0  40.3 6.9  (44.3)  (10.7)  —  44.3  15.7  —  — — —  (9.9)  (44.6)  1 1.9  42.5 2. 1  —  —  (37.2) 37.2  —  ,  — — —  — — — — —  283.0  16.2  Export Development C o r p o r a t i o n , Annual Reports  .  — . — —  (3.7) 128.2  TOTAL  %  %  AMOUNT  (359.1)  (56.1)  (640.5)  ( 100.0)  131.7 72.5 154.9  85.5 52.2 44.5  154.0 138.8 347.7  (100.0) (100.0) (100.0)  (369.4)  (89.3)  (413.7)  (100.0)  238.4 131.0  84.3 100.0  282.7 131.0  (100.0) (100.0)  (11.8)  (295.4)  (78.3)  (377.2)  (100.0)  13.6 23.9  232.9 6.7 55.8  74.5 76.2 100.0  312.6 8.8 55.8  (100.0) (100.0) (100.0)  (125.9)  (100.0)  (125.9)  (100.0)  (185.0)  (100.0)  (185.0)  (100.0)  (0.2)  (5.1)  (3.9)  (100.0)  (12.5)  —  — — —  (94.9) 7.3  1334.0  76.5  1745.6  111  the of  activities the Export  of t h e World Import  not  t o be i n v o l v e d  its  market  part of  in  exports  than  Bank.  that  thinking. of  The f a c t  railroad  cognizant  also  indicate  have  been more  that  either  Table  exporters  of  subsidiaries  degree,  by A m e r i c a n  the world How  increased more  taxes  efficient  Canadian  component.  scarce in  Canadian  are these  levels  of  products  their  capital  American  equipment  that  increased  include  a  a misaI I o c a t i o n  Canada's  estimate  exports  of a for  technological  as w e l l  capital  subsidiaries.  employment,  the development  a high  some  equipment  equipment  resources,  or the o f f s h o r e  are  the  Canadian  productive as  the major  and t h e o p p o r t u n i t y  with  costs  could  equipment  show t h a t  appears  include  sector  identifiable  Statistics  of  It  o r a r e c o n t r o I Ied, t o  government,  industrial  resources,  will  through  financed  proportion  equipment  and t e l e c o m m u n i c a t i o n  The b e n e f i t s  to develop  the domestic Using  their  therefore,  by e x p o r t i n g  of Canadian  natural  either  for a l l  The r e a d i l y  misaI I o c a t i o n  have  and t e l e c o m m u n i c a t i o n s  railroad  larger  countries.  than  chapter  of  o f t h e EDC  type  It,  economy?  companies  in t h i s  a  a greater  this  investors.  market  play  of  corporations  of  should  the developing  it  claims  the structure  the o f f i c e r s  of American  important  the Canadian  that  activites  t h e EDC  EDC s u p p o r t e d  producers  railroad  American manufacturers service  finance  in s e l l i n g  XV l a t e r  role  do t h e  and t e l e c o m m u n i c a t i o n s  of  the Canadian  that  finance  suggest  the needs  than  the fact  that  equipment  successful  counterparts. Canadian  of  closely  development  d i d t h e E x i m Bank m i g h t  a r e more  to  Despite  in a development  indicates  its  Bank more  possible  including of  labour  capital  and raised  markets.  that  100 m a n - y e a r s  of  I 12  TABLE SELECTED  COMMODITY /  CANADIAN EXPORTS BY COMMODITY FOR YEARS MILLIONS OF DOLLARS IMPORTER U . S . A .  AIRCRAFT  Complete With Engines  XIV  Engines  And P a r t s  1972-74  OTHER D E V ' D NATIONS  A L L OTHER NATIONS  965.6  171.5  186.3  17.5  58.4  I 10.I  TOTAL  1323.4  186.0  948.1  I 13.I  76.2  1137.4  257.6  120.8  176.7  555.1  46.8  —  140.3  187.1  24.6  —  23.6  48.2  S H I P S , BOATS AND PARTS  186.2  120.8  12.8  319.8  TELECOMMUNI CAT IONS EQUIPMENT  442.6  103.3  231.5  777.4  RAILROADS  Eng i n e s  and RoI Ii ng  Stock Track  Material  PULP AND PAPER INDUSTRIAL EQUIPMENT  24.6  NAVIGATIONAL EQUIPMENT AND PARTS  96.4  SOURCE:  Statistics  Canada,  —  36.5  Exports-Merchandise  44.8  69.4  14.4  147.3  Trade,  1972-74,  1975, p.  22-34  I 13 direct by  employment  the EDC,  were  we can  i n December industries  to  conclude  1974 was  that  EDC's  manufacturing Canadians  sector.  Over shipping  vessels  financed  by  long  term  accounted  have  firms. annual  the  value  in  force  1974.  year, be  If  it  said  in  creating  with  follows  to  the  be  Canadian  employment  year  a total  and  of  of the  of  the  by  for  second  shipments  of  and  ending goods  of  types  Large  in  types  industrial of  shipbuilding  Trade  exports  equipment  various  t h e EDC.  this  industry  period  of  Statistics  boats  Netherlands. of  scale  $347.7 m i l l i o n  primary  ships  large  capital  sale  into  exports world  1974,  of  International  shipbuilding  five  types  the w o r l d ' s  world 1.6$  in  were r a n k e d  exporters  Sweden  total  of  of  Nations  Norway,  In  full  could  ended  the  entered  million  and  The C a n a d i a n  average  been  United  Canada,  were  manufacturing  workers  the  contracts  labour  man-years  in  involving  to  not  in  period  one  equipment.  sixty  that  $312.6  of  EDC  period  first  is  72%  for  total  of  year  agreements  producers  million  the  Canada  for  1.8  of  employment  Canadian  of  credit.  Germany,  workers.  of  employed  $659 m i l l i o n  export  the  Canadian  of  by EDC  primary  Japan,  In  vessels  financed  overstated.  ranked  EDC  totalling  According  be  contract  man-years  employed  3.7%  fourteen  financing  supported  direct  The v a l u e  are  the  container  projects  to  the  was  million  1974 when $659 m i l l i o n  total  activity  creating  appears  in  million  each worker  for  e a c h $1  approximately  financing  responsible  that  The  9.1  employed  for  66,000  t h e EDC.  we assume t h a t  the  created  signed,approximateIy  attributable  of  are  in  ranked  of  of  December  31,  by  publication,  five  nations  capital  fourteenth.''  consists  produced  nations.  1973 were  These  type  products  approximately 1974,  these  the  sixty  f j  r m  s  was  I 14  about  $300 mi I I i o n .  building by  construction  the Export  h i g h when to  all  MacMillan  an  that  Bloedel  by  All  under  of  this  employed  by way  of  the  This  government  yards  which  Ltd.,  supported  the  (STAP).  industry  approximately  Corporation.  shipbuilding  Program  at  being  Development  Canadian  directed  is  considering  Assistance  in  Therefore,  25$ of  Canadian  export  credit  figure  also the  only  a  15,062  comparison,  surprisingly  17$  Shipbuilding  government  offered  appears  offers  ship-  subsidy  Temporary  support  is  being  workers  in  1973.  employed  24,000  1 3  workers  1973. The  shipbuilding deal  of  credit For  industry  the to  importance  instance,  obtaining Varnima President got  the  is  literature  compete in  the  export  also  states  1971, D a v i e  that  of  Shipbuilding,  partly  but  mainly  a hurry  the  Japanese  Limited,  as  question.  one must  Takis  the  of  Ltd.  was  80,000 company.  the  "a  Greek  shipyards  were  Canadian  a  offer  extended  great  other  successful  factors. in  DWT t a n k e r s In  stated  various  the  While  overlook  Veliotis,  customer  and E u r o p e a n  must  not  three  a Greek  a result  because  supporting  each n a t i o n  to manufacture  Agency  programs,  to  in  Shipbuilding  Shipping Davie  credit  subject  internationally,  contract  contract  -  of  1972, that  for the  Davie  government  assistance  s h i p o w n e r , was fully  booked  in and  14 could  not  statement, this  meet it  s a l e , was  the  appears of  Canada in  the  required  production  EDC's  limited does of  not  delivery  dates".  $43.5 m i l l i o n  loan,  In  view  of  granted  to  Mr.  Veliotis'  support  value. appear  ships.  to  enjoy  T h e most  a comparative  important  advantage  requirements  of  the  I 15  industry ready of  latest  Canada,  as  have  EDC  any  in  must  direct  lie  of  a  in  of  large the  of  Sweden  65.8%  and  of  the  manufacturing  consists  of  the  1973,  the  industry  credit.  related  industry by  than  However,  value  In to  that  t h e EDC.  is  same  $34.8  realistic  to  exporters,  economy the  225  and  by  the  exports  million  the the  state,  go  firms  total export  located  of  goods  valued  signed by  production United  production credit  therefore,  In  financing  were  the  produce  industry.  supported  to  U.S.A.,  however  the  a  equipment  produced  equipment  with  Germany,  firms,  all  more  the Canadian  communication  two-thirds  under  The  exporter  annual  support  the  largest  produced  of  of  eleventh major  workers  $105 m i l l i o n  Department  than  35$ o f  of  is  greater  approximately  for  annual  then  are  approximately  year  does  industry?  were J a p a n ,  goods  Why  facility  to  was  eligible It  five  Some s e v e n t e e n of  nations,  the  this  production  approximately is  the  Canada's of  oceans.  support.  telecommunications  A%> of  to  benefits  as  The  world's  of  the  understanding  areas.  independence  employed 43,000  6  approximately  Therefore  Canada.  total  $899 m i l l i o n . '  the  exports,  industry  50%  support  ranked  Kingdom.'"'  about  the E D C — l e s s  world  these  financing  government's  United  central  of  steel;  a good  shipbuilding  the  of  and  the  program  national  was  to  grant  and  that  iron  force;  access  any  the  equipment.  total  in  and  and  Canada  primarily  agreements  belief  cost  major  in  degree  the F e d e r a l  1973,  low  labour  world's  through  employment  costs  of  and  advantages  telecommunications  total  at  the  and Commerce  such  In of  to  government  offering  terms  technology;  special  Trade  a supply  a specialized  marine  Industry,  answer  to  of  compared  the F e d e r a l of  access  availability  the  not  arc:  by  export is  exported  States.' of  this  granted  that  roughly  7  I 16  33$ o f  total  financing  exports  in  facilities Canada  this  industry  offered  ranks  as  by  one  the  of  are  being  supported  by  the  EDC.  the  top  five  nations  in  the  exports  18 of  aircraft  and  railway  parts  manufacturing  firms  which  The major  in  vehicles.  industry  1973 had  producers  an  in  The C a n a d i a n  consists  annual  the  of  approximately  value  industry  aircraft  of  are  production  p r i m a r i Iy  and  one of  aircraft  hundred  $538  Iocated  million.  in  Central 19  Canada.  Eleven  73$ of  this  market  and  EDC's  type is,  of  Canadian  The  74$i o f  equipment  signings are  the  total  is  involving  $38.5 m i l l i o n ,  value  of  exported to  realistically  aircraft  not  eligible  the  export  or  manufacturing  27.5$  industry  production.  the  United  States  for  export  credit.  of  of  annual  aircraft  total  or  eligible  employs  about  26,000  workers. A simiIar  industry with  capital  annual  components  production.  produce  therefore,  average  aircraft  firms  indicates  the major  8,000 workers  ana I y s i s that  the  producers are  of  Canadian  industry  being  employed  the  has  located  in  the  an  in  railway  oIigopoIostic  central  industry  rolling  which  structure  Canada. has  an  stock  Less  than  annual  output  20 of  approximately  the  average  annual  In 25-35$ to  of  These 5.5$  four of  Canadian 1971  to  eligible  summary,  the  nations  $350 m i l l i o n .  p r o d u c t s , of  other  than  industries  all  workers  economy. 1974  this  the  exports brief  these  employed  involved  of  this  approximately  group  groups  of  are  supported  than  100,000  signed  of  indicates  by  by  of  products.  that  loans  workers  or  sector  financing  manufactured  35$  between  i n d u s t r i e s, wh i ch a r e  the manufacturing  EDC's  products  for  four  less in  supports  analysis  U.S.A.,  employ  47.3$  EDC  this  granted  exported  by t h e  approximately of  the  agreements same g r o u p  from of  :  EDC.  117  industries.  These  allocation of  of  facts  resources  the Export  a government  can  case  may  of  of  Government's  therefore, may  EDC's in  support  order  which to the  to  its  may  strategy  is  if  financing  firms  allowing a more  and d e v e l o p  persued  of  the  w h i c h have  are  have all  users  in O n t a r i o  had  domiciled  of  sales  of  EDC's  and Q u e b e c , Exports  the  which a few  is  these  the  a  small  than  a  diffusion  The  EDC  certain  industries.  key  to  expand  production.  resources  innovation,  their  facilities  Without  it  is  is  resulting  appear large  not  for  in  to  volume  firms.  financing  the  EDC's  Canada.  XII  producers.  successful  industrialized by  in T a b l e  knowing  possible  Table  note of  that  goods has  Seventeen  facility region  It  are  of  financing  are  from  capital XV  utilizing  The C o r p o r a t i o n  seven  term  benefits  in  In  new  Corporation  dollar  in Quebec.  long  sector.  industries.  interesting  greatest  for  which  a relatively  of  of  by  Corporation.  It  supported  industrial  by  been most  EDC. the  level  methods  effort  industries  allocation  industries  of  biased activites  strategy  small  facility,  these  of  optimal  many  optimal  optimal  facility  which  and  be  the  an  through  c h a r a c t e r i z e d by  $746 m i l l i o n  ment  a concentration  and  financing  largest  industrial  of  twenty  by EDC  its  All intensive  firms  diversify  financing  activity  financing  different  stimulate  an  from the  a fairly  two  be n e a r e r  being  that  least  to  achieve  determine  the  may  effort  through  be a t t e m p t i n g  to  at  be t h a t  industries  indicate  resulting  are  attempt  it  to  Corporation.  there  number the  is  Development  However,  Canada's  appear  lists  the  the  seven  financed financed of  the  twenty  domiciled  Canada. must  could  provide  be a r g u e d  employthat  TABLE XV EXPORT DEVELOPMENT CORPORATION FIRMS V/HICH HAVE USED FINANCE F A C I L I T Y JANUARY  1  MAR INE  2  DAVIE  INDUSTRIES  3  NORTHERN  MLW V ' O R T H ! N G T O N  5  MONTREAL Or  ELECTRIC  HLRTER  GTE AUTOMATIC  8  DIESEL  9  DOMINION  LTD.  STEEL  C E CAHADA L T D .  I I  SA9C0CK  12  THE  13  FERRCO  OF AND  WILCOX  HAVILLANO  14  WRIGHT E N G I N E E R I N G  15  H.A.  16  CANADIAN  17  OCUGLAS  AIRCRAFT  18  COLLINS  RADIO  20  CANADIAN  AND  ATOMIC  LTD.  OTHER  GENERAL  LTD.  MOTORS  CORP.  CANADA  CANADA  LTD.  LTD.  LTD. OF  CANADA  137.9  7.3  98. 1  5.2  LOCOMOTIVES  QUEBEC  U.S.A.  89.2  4. 7  NUCLEAR POWER PLANT  QUEBEC QUEBEC QUEBEC  CANADIAN  83.5  4.4  U.S.A.  82.5  4.4  U.S.A. U.S.A. CANADIAN  80.0  4.2  69. 1  3.7  66.0  3.5  QUEBEC  U.S.A.  44.3  2.3  ONTAR10  U.S.A.  43.5  2.3  ONTAR10  CANADIAN  41.2  2.2  ONTAR10  CANADIAN  40.4  2. 1  B.C.  CANADIAN  38.4  2.0 2.0  LOCOMOTIVES RAILS AND T I E S GENERATORS STEAM GENERATORS S T E E L MILL  LTD.  CO.  OF  COMPANY  LTD.  CANADA  OF  ENGINEERING  COMMERCIAL  175.0  CANADIAN CANADIAN  MINING EQUIPMENT CO.  CANADA  LTD. LTD.  SUPERHEATER  LTD.  CORPORATION  EQUIPMENT  PULP AND PAPER MILL  B.C.  CANADIAN  NUCLEAR POWER AIRCRAFT COMPONENTS  ONTARIO  U.S.A.  34.7  1.8  ONTAR 10  U.S.A.  31.3  1.7  MICROWAVE SYSTEMS  ONTAR 10  U.S.A.  30.3  1.6  GENERATORS  QUEBEC  U.S.A.  28.6  1.5  AIRCRAFT  ONTAR10  CANADIAN  28.5  1.5  A L L OTHERS NOT ELSEWHERE C L A S S I F I E D TOTAL  Export  Development  Corporation.  Annual  ONTAR10 NOVA SCOTIA  37.6  ARE NOT DESIGNATED  SOURCE:  •9.3  CANADIAN  QUEBEC QUEBEC  LTD.  ELECTRIC  <  QUEBEC  AIRCRAFT COMPONENTS  LTD.  MILLION)  SHIPS  FOREST COMPLEX TELECOMMUNICATIONS  EXPORTERS  CANADA  COAL  AMOUNT  OWNERSHIP  SHIPS TELECOMMUNICATIONS ENERGY  LTD.  GENERAL  COMBUSTION  AND  AIRCRAFT  ENGINEERING  SIMONS  LTD.  ELECTRIC  DIVISION  /O  ds  MLW I N D U S T R I E S  LTD.  7  AND  LTD-. AND  ENGINEERING  CANADA  . STABLER  CO.  LOCAT1 ON  ($  LTD.  LTD.  OF THE EDC  DECEMBER 3 1 , 1 9 7 4  PRODUCT  LIMITED  SHIPBUILDING  4  19  1961, -  FIRM  RANK  6  I,  -  Reports  •  454.2  24. 1  151.9  8.2  1886.2  100.0  the  regions  are  the M a r i t i m e s ,  in  turn,  have  Defenders  of  directly base is  in  one  also  of  may  "trickle  regions  Canadian  proceeds  were  from EDC's  be q u i c k issue  Rather,  to  of they  argument  that  receiving  Export  in  of  Mr.  amongst  376  companies  that  function would  depressed  their  indirect  industrial  help  which  President  the  on A p r i l  in  not  They  various  before  by E D C , more  is  industrial  J . McAvity,  testifying  financed  the  developing  deal  regions,  EDC  claim  the  and E c o n o m i c A f f a i r s  contract  divided  help  example,  Association,  that  bases  facility.  Expansion.  while  a great  For  financing  would  down"  are  These  developing  Economic  direct  industrial  reply  Regional  little  their  Columbia.  of  to measure.  one  British  policy  on F i n a n c e T r a d e  that in  develop  benefit  Canada.  be r e c e i v i n g  the  Committee  of  to  and  would  the  Department  be d i f f i c u l t  stated  little  policies  regions  the  stimulus  the P r a i r i e s  received  the  use  the  the  concerned with  sectors,  of  need  EDC's  all  regions  can  which  standing 3,  1973,  than  80$ of  Canada  spread  the  gross  across  22 five  provinces.  Honourable  A.  The M i n i s t e r  Gillespie,  November  14,  involves  upwards  1974,  200  Industry,  testifying  observed  of  of  that  before  the  Canadian  Trade  the  export  suppliers  and C o m m e r c e ,  same C o m m i t t e e  of  a nuclear  with  the  on  power  value  the  of  plant  contracts  23 ranging  as  low  refute,  it  would  contractors the  total  as  is  $500. be  value  the of  use  remainder ownership  interesting  domiciled of  One-half greatest  While  of  of  EDC's  are and  the  in  to  financing  subsidiaries degree  of  Canada  they  twenty  arguments  know what  Central  contract the  these  are  and  what  facility,  are  American must  of  the  percentage  to sub-  .  of  supplying. firms,  control  difficult  percentage  largest  of  are  not  i.e.  owned  those  making  by C a n a d i a n s  corporations. be o v e r l o o k e d .  The  the while  issue  Consider  120  the  case  of  subsidiary  Northern of  Bell  Electric  Canada,  owned.  However,  when  easy  see  the  to  Electric's  that  policies A more  some  in  1937 a f t e r  may  be  As  Electric,  considers of  Limited.  who  is  a  wholly-owned  shown as  being  c o n t r o I s - B e I I Canada  influence  Canadians  have  Canadian-  it  is  over  Northern  firms  provides  limited. analysis  of  the  largest  user  information. industries  he p u r c h a s e d  dollars,  a shipbuilding  dredging  fleet.  shipbuilding  Northern  degree  detailed  enlightening Marine  one  Company  Over  from the  yard  the  contracts  L i m i t e d was  from  federal  located  years, the  established  government,  in S o r e l ,  the  firm  federal  by J o s e p h  Quebec,  prospered  and  by  government.  for  Simard  one a  million  large  obtaining  Joseph  Simard  24 had of  close the  ties  with  f i r m was  the  sold  to  federal the  Liberal  General  party.  Eventually,  Investment  Corporation  a w h o l l y owned c o r p o r a t i o n of t h e g o v e r n m e n t o f In m i d - 1 9 7 5 - , t h e G e n e r a l I n v e s t m e n t C o r p o r a t i o n in Marine  Industries  Industries Andree  is  held  Simard,  the  Limited  to  by C l a u d e wife  of  86%.  The  Simard,  of  Quebec, ,  the P r o v i n c e of Quebec. increased its ownership  remaining  a Minister  Quebec p r e m i e r  control  in  Robert  interest  in  the Quebec  Bourassa,  25  Marine  government,  and  the  26 Caisse  de D e p o t The  Industries  et  Simard  Ltd.  Simard  of  Corporation.  Canadian  is  the  Broadcasting  Industries  family  through  Arthur the  Placement  the  du  Quebec.  continues General  Chairman Laurent  of  L t d . on A u g u s t In 1975, M a r i n e  retain  Investment  GIC  Picard,  Corporation,  to  and  an  interest  Corporation  Jean Simard  the  assumed  former the  is  a  Marine  (GIC). vice-president  President  Presidency  in  of of  the Marine  27  I, 1975. Industries  Ltd.  and  several  other  companies  121  and  individuals  certain three  were  government  companies,  company agreed  charged  dredging  Marine  with  contracts.  Industries  c o n t r o l l e d by S i m a r d to  pay  irregularities It  is  a c o m p e t i t o r $400,000  connection  alleged  Ltd., J.P.  interests,  in  Porter  Co.  and McNamara  for  submitting  that  in  1971  Ltd.,  Corp.  an  with  a  Ltd.  had  artificially 28  high  bid  to  deepen the  In Ltd.,  by  mid-1975,  MLW W o r t h i n g t o n  facility)  and  a holding  The  goal  of  St. an  attempt  Ltd.  (the  Bombardier company,  this  Lawrence  Ltd.  Les  channel  was  fourth  into  was  to  the  largest  user  create  In  early  of  to  de J . Armand  to  Me  d'Orleans.  amalgamate  a conglomerate  Entreprises  conglomerate  made  off  Marine  EDC's  be  finance  controlled  Bombardier  a strong  Industries  heavy  Ltee.  equipment  29 manufacturing  group  in Quebec.  gamation an  was c a l l e d . o f f .30 agreement. The  Ltd.  total  by EDC. credit,  If  to  Marine  the  sales  from  these  would  recorded?  following  If  the  firm's  this  is  f i r m r e c o r d e d a net  GIC  could  and  table  that  would net  assumption  Industries  the  when B o m b a r d i e r  indicates  1 9 7 1 - 7 4 were  sales  1976,  not  financed  with  have  been 4 0 $  c o r r e c t , the  significant deficit  4 1 . 4 $ of  not  Marine  export  of  because $9.9  less  value  over  of  that  amal-  come  than EDC four  to  Industries  credit  have m a t e r i a l i z e d w i t h o u t  income is  proposed  provided  t'his that export year  credit  period  million.  MARINE INDUSTRIES L I M I T E D (mi I Ii ons o f d o l l a r s ) YEAR  SALES  1971  58.3  NET  INCOME  (3.3)  EDC CONTRACTS SIGNED IN THAT YEAR 86.0  1972  137.4  1973  119.6  1974  SOURCE:  1-9 (10.0)  107.5  1.5  24.0  422.8  (9.9)  175.0  The F i n a n c i a l  Post,  and T h e E x p o r t The dustrial  firm's  the  words  of  the  that  sales  by  orders Davie  the  EDC.  second  This  Canada  In  to  of  1974,  1980 and  Even  is  if  f i r m were operate  at  lengthy  p.  largest  of  credit  must  the  that in  customers be  appreciated  officer's  greater  than  of  by  f i r m would  statements  Canadian  export  shipbuilding  provided  market  t h e EDC  to  still  have  capacity.  a major  the  it  officials  1979 and  finding  prevalence  removed, the  Ltd.,  is  by  94.  in-  reported  until  are  international  near  Post  process,  the  supporting  supported  While  ships  for  the  Shipbuilding user  "we  3  the  in  booked  officers  allowing  that  fully  Canadian  in  further  beyond". ' a  for  is  credit  the F i n a n c i a l  was  company's  demand  this  I,  export  role  capacity  possible  1975, V o l  the  arrangements  quite  Industrials  C o r p o r a t i o n , Annua I R e p o r t s .  a ship  capacity.  sufficient  been  of  world  support  seems  in  of  Development  Ltd.  the  interest  productive  support  of  building  indicate  it  one  Survey  be o v e r s t a t e d  shipbuilding  expressing  credit  that  Industries  the  that  view  p r o d u c t i o n may  of M a r i n e  65.0  eastern  export  firm,  until  r e c e n t l y , was  Steamship  Lines  L i m i t e d , which  credit  a wholly in  Canadian facilities  owned  turn  is  firm, of  subsidiary  owned  and  has  the of  c o n t r o I Ied  32 by t h e Power of  Corporation  is  one  Canada's  by  a Canadian,  encompasses said  that  he has  Canada  industrial  Paul  both  of  the  Desmarais. Canadian  telephone  Ltd.  giants 3 3  The  private  that  The is  both  sphere and  conversations  of  the at  power  Corporation  owned and  influence  public  least  controlled  of  Desmarais  sectors.  twice  a week  It  is  with  123  Premier  Robert  Bourassa  Prime M i n i s t e r Island  have  the  the  senior  ways  private  some  Paul  Martin  Britain,  Ltd.  of 3  7  of  sector.  the  out  policy  son  of  their  These  Bill  CDC,  Teron,  the  "bright  is  son  of  the  president  and M a u r i c e  Paul  Strong  the  Cabinet,  acted  as  and  Jean-Luc Pepin,  party seek  of  a consultant  head  to  of  to  for  in  Nations, Commissioner  Hampson,  the  Mackasey,  Board  Lines  was  on  been a c q u i r e d  by  38 the  Board  of  Directors  Davie Canada the  of  Canada  Shipbuilding  Steamship  assets  of  Lines  Geo.  T.  in  Steamship  Ltd.  appears  t h e mid  I960's.  Davie  and  Sons  Lines to  have  In  Ltd.,  Limited.  1968,  Davie  a shipyard  purchased  in L a u z o n ,  from  39 Canadian  Vickers.  money  1967.  in  available,  so  Geo. T .  Financial the  navie  results  consolidated  and for  Sons L t d . Davie  financial  was  reportedly  Shipbuilding  statements  of  are  its  losinq  not  parent, 40  Canada  Steamship  analysis period that  indicates  were  the  Lines that  financed  credit  Ltd. \8%  (CSL) of  CSL's  by t h e EDC  facility  was  have  the  gross  export key  been u s e d sales  credit  factor  in  as  a proxy.  in  the  four  facilities. generating  If  The year we  these  to  president  while  Steamship  the A n t i - i n f I a t i o n  the  John  the U n i t e d  Canada  of  federal  operate  High  links One  included  Bryce  3 5  link  from the  Anthony  PetroCan.  that  Finance.  considerable  Canada's  CMHC,  of  in Ottawa.  have  ambassador  Anticosti  communications  away  shakers"  with  Minister  carry  who want  Sr.,  to  influence  hiring  Martin  of  of  officials  officials  Canada's  trips  then Deputy  to  by  young  discussions  fishing  Liberal  appears  link  young  Rae,  J r . , the  on  d e c i s i o n making a  frequent  channels  federal  such  Saul  guests  "the  Desmarais  6  he a c h i e v e s  Rae,  the  3  the  he has  R'eisman,  words,  and  traffic".  government  of  Newman's  that His  3  Corporation  two-way with  Trudeau. ^  i n c l u d e d Simon  In Power  and  assume sales,  124 and  that  we c a n net  t h e y would  conclude  income was  not  have  b e e n made w i t h o u t  in  that  four  that  directly  year  attributable  period  to  the  this  facility,  $ 1 4 . 7 mi I I i o n  availability  of  then  of  CSL's  EDC  export  credit.  CANADA STEAMSHIP L I N E S L I M I T E D (mi I I i o n s o f dollars) YEAR  GROSS  REVENUE  NET  INCOME  EDC  CONTRACTS SIGNED IN THAT YEAR  1971  143.2  10.9  1972  170.0  13.7  1973  242.8  24.5  30.4  1974  223.5  34. I 83.2  64.0 137.9  779.5 SOURCE:  Financial p.  the  is  firm  millions  refitting pub l i e  also  that  Bonaventure. of  Survey  153 and A n n u a l  It was  Post,  interesting  performed  was  dollars. complete.  Industrials  Reports  the  The r e f i t t i n g of  of  of  43.5  of  to  note  refit this  Export  of  Development  the  Davie  the  aircraft  vessel  The v e s s e l  was  The  episode  entire  1975, V o l u m e  was  Corporation.  Shipbuilding carrier  undertaken  scrapped  Two,  shortly  caused  HMCS  at  a  after  a stir  in  Ltd.  cost the  Canada's  sector. In  to  develop  to  cost  the  early  a nickel  I 9 7 0 ' s The  ore  $100 m i l l i o n  body  in  and $ 6 8 . 2 5  International  Guatemala. million  of  The the  Nickel  Company  decided  entire  project  was  cost  was  financed  by  41 various million,  international the  EDC  public  agreed  to  financing  provide  agencies.  $17.25 m i l l i o n  Of for  this the  $68.25  purchase  125  of  Canadian  mining  equipment  various  subsidiaries,  mining,  would  the of  Canadian  appear  Explotaciones by  of  t o be a  logical  after  does  not get  the s t a r t  first  of  S-A.  its  is  of  EEMI  of o p e r a t i o n ,  in  exporter.  its  The i d e n t i t y  firm  (EEMI)  also  pays  but does  is  no  the  Guatemalan  ten  years  taxes  for  until  income  pay $23,000  Y  owned 7 0 $  However,  the equity  of  The d e v e l o p e r  i m p o r t e r was E x p l o r a c i o n e s  Guatemala. of  INCO and  international  not c l e a r .  This  30$ share  operations.  ten years  Canadian  and s u b s e q u e n t  Izabal,  services.  expertise  f o r the project  in Guatemala Minerals  their  INCO and 3 0 $ by t h e g o v e r n m e n t  government  the  because  exporters  the p r o j e c t  and e n g i n e e r i n g  per year  in  roya11 i es. The  o r e body wi I I be d e v e l o p e d  employ  only  1977.  In e f f e c t ,  industrial  771 G u a t e m a l a n  the p r o j e c t  base.  In  fact,  may w e l l  appear  who  muItinationaIs  aids  t o have  The main the is  1700 d i r e c t  work  a profile  benefit  about  $75 m i l l i o n  Indonesia. while  If  of  in d e v e l o p i n g shareholders  was f i n a n c e d  such of  foreign  of  in  some  resources INCO's  created.  However,  1971 INCO r e d u c e d  its  American"  of  LDCs.  activity this  is  benefit  its  Sudbury  1973, a s i m i I a r  project  INCO s u b s i d i a r y  international  activities public  Do a l l  benefit  Canada  the " u g l y  financing  Canadian  ore bodies.  of  in  Guatemala's  the p r o j e c t ,  to that  In  and w i l l  operation  to develop  by EDC f o r an  and o t h e r  INCO r e c e i v e  in f u l l  the natural  to develop  of p r o v i d i n g  is  to f i n a n c e  employment that  an open p i t m i n e  little  5,000 w o r k e r s .  i t s mining  t h e wisdom  it  similar  t o Canada  INCO c o n t i n u e s  curtailing  question  by some  do  in e x p l o i t i n g  man-years  force  will  when  by h e l p i n g  r e d u c e d when one c o n s i d e r s  plant of  workers  as  in Canada, funds  ore  or  bodies  one w o u l d  to a i d  Canadians  in  INCO  just  from the use of p u b l i c  the funds  126 in  this  are  manner?  the  Direct  compensations  employment  in  by p o s s i b l e  comparative  the  ore  of  foreign such  EDC  of  some $ 2 . 8  in  order  based  can  by  battery  INCO f o u n d  certainly  purchase  all  low  to  Canada the  suffers.  What  employment  through  induced  exploiting  benefits  to  Canada  a corporation  financing  INCO's ESB  total  raise  to  data,  cost  1974 o f the  downstream  whether  viable. in  certainly  clear.  question  Of  necessary  such  at  requires  producer.  it  greater  advantages  not  a project  its  of  Without  are  billion  t o make  evidenced  cost  bodies?  financing  One  terms  in Canada  only  from p u b l i c  financial  price  $50 m i l l i o n  a  of  assets  sources  strength  Incorporated,  purchase  with  is  large  U.S.  $233.8  through  million  external  f a c i I i t i es. A  further  subsidiaries of  of  the Export  look  Canadian  of  banks  to  participate  banks  do,  long  term  the  EDC  in  as  financing  banks  reported that  in FY  has  financing in  the  with  last  capital  providing is  amongst  been t h e  U.S.  manufacturers  are  in Canada  such  in  banks  discloses  One  shown  of  transactions  Corporation.  credit  however,  Canadian  equipment of  export  EDC's  chartered  Development  features  of  at  of  The  of  for  increasing  and  1975,  c h a r t e r e d banks  in  The  new  were  the  involvement  Canadian the  the  Canadian  participate  gradually the  noticeable  exports.  credit  international  borrowers  reluctance  t h e EDC.  equipment export  the  t h e most  chapter,  that  capital  President  involved  42 in  twenty  however  long  was  term f i n a n c i n g  only  signed  financing  is  below  far  largest  that  Canadian  projects.  $200 m i l l i o n , agreements. of  the  banks  U.S.  are  or  less  The than  The Canadian banks,  very  in  18$ o f bank  spite  powerful,  banks'  participation  the  total  of  participation  of  the  fact  that  stable  and  active  in  the level the the  five  TABLE EXPORT SELECTED  CAPITAL  XVI  DEVELOPMENT  EQUIPMENT EXPORTS MILLIONS OF  BORROWER  COUNTRY  Bahamas  Cayman  Islands  Li beri a  Commerce  C a n a d i a n I m p e r i a l Bank o f T r u s t C o . (Cayman) L t d .  Commerce  Ogden  Inc.  Saguenay  1ndones i a  PT  Transport  Ottawa T r a n s p o r t  International  FINANCED BY THE EDC  DOLLARS  PRODUCTS  C a n a d i a n I m p e r i a l Bank o f T r u s t C o . (Bahamas) L t d .  and Ogden  CORPORATION  Nickel  Inc.  Indonesia  Components A i rcraft  for  Components Ai r c r a f t  for  United  Bank o f M o n t r e a l (Bahamas Caribbean) Limited Kingdom  Venezue1 a  The Cunard Limi ted BNS  Steam-Ship  International  and  16 S . A .  Mining  Equipment  and  Parts  from 1974  1.2  1.2  6 months De1ivery  20 S . A .  from  Jan  1977  10,  16 S . A . Nov.  AMOUNT F1NANC1  21,  32.0  17.3  from 1974  18.0  2 3 9 , 0 0 0 DWT P r o d u c t Carrier Vessels  16 S.A. 6 months A f t e r De1ivery  30.4  Aircraft  10 S . A . from M a r c h 1, 1973  28.5  20 S . A . from J u l y 15, 1977  17.3  Mining  EEMI  and  Services  TERMS  20 S . A . from Nov. 2 0 , 1974  After  Spare  Ltd.  20 S . A . Dec31,  2 3 9 , 0 0 0 DWT O i l  Spare  and R e l a t e d Guatema1 a  DC-IO-30  CL-215 A i r c r a f t  Company  (Bahamas)  DC-IO-30  Tankers  Engineering Spa i n  REPAYMENT  FINANCED  Parts  Services  Equipment  145.9 SOURCE:  Export  Development  C o r p o r a t i o n , Annual  Reports  international banks last  and  bank  Canadian  banks  a transaction  the  year  failure  becomes are  This  1972.  In  borrowers  Defence  in V e n e z u e l a .  As  necessary  account  new a i r c r a f t . goods  the  without  the  departments's  from  such  a  this  parliamentary  31,  found  have  a market  been could  since  annual  of  year,  of is  In  r e d u c e d by  considering  issued  Department  did  not  have  receivable  purchase  some  sells  additional effect,  the  for  aircraft  the  department  Commons.  the  report  used  needed to  purchase  by  the  carry  to  1975.  Canada  not  to  the  that  annual  surplus  afford  the  to Venezuela  borrower  be u s e d  budget  aircraft  fiscal  government  House  finds  General  for  itself  while  in  e x p e c t e d , the  DND  when any  the  that  that  finance.  Corporation's  During  ago,  be e x p l a i n e d  1972 t h e A u d i t o r  cannot  case,  approval  EDC  a contract  aircraft  were  purchase  of  then  the  the  (CCC),  and to  however, of  Corporation  Canadair,  granted  when one  used  Canadian  considers  failures  export  some  Development  arise  of  of  the  surplus goods  therefore,  amount  of  the  earnings  sale.  In  Commercial  sale  report.  earned  that  with  the  and DND  approval  intriguing  of  years  bank  perhaps  Normally,  funds  eleven  can  might  w h i c h would  had  practice  (DND)  funds  when one  cost  ended December  National  puzzling  attitude  low  Export  of  the  of  involving  auditor's  in  occured s o m e . f i f t y  system  unusual  the  is  e v e n more  a qualified  the  banks  unity-banking  position  in  The d i f f e r e n c e  the American  Canadian  American The  area.  DND managed  transaction. a  federal  the Venezuelans  surplus  by CCC  for  aircraft  DND.  on t h e  It  Crown on  the  arranged  behalf.  for  EDC  avoid  need  for  Corporation,  its  p r o d u c e new a i r c r a f t  sold  to  the  grounds  the to  Canadair The  to  finance  that  if  it  Canadian  negotiate  CCC.  agreed  for  was  surplus  did  Venezuela's not  f i n a n c e the s a l e  of the used a i r c r a f t , Canadair would not have  obtained  the c o n t r a c t to produce the $28.5 m i l l i o n worth of new a i r c r a f t by DIMD.  T h e r e f o r e , EDC argued t h a t  a Canadian  part  of the Bank of Nova S c o t i a ' s  role  could perhaps  in the  financing  i d e n t i t y of the Venezuelan purchaser of the  not c l e a r , the borrower was BNS  field.  in e f f e c t ,  export. While the  is  they were,  purchased  International  leasing  (Bahamas) L t d . , a  corporate s t r u c t u r e .  The Bank's  be e x p l a i n e d by t h e i r d e s i r e to e n t e r the  At p r e s e n t , the Bank Act r e s t r i c t s field  banks'  ability  in the domestic market, but of  Bank Act does not apply to a bank's a c t i v i t y  outside  of N a t i o n a l  the necessary  funds  to  course,  out to the Venezuelan f i r m .  The a i r c r a f t As the  Nova S c o t i a would  f i e l d as the  i n d i r e c t l y be in the  In both the argued that  leasing  INCO case and the DND case  leased  The Bank of result  l i t t l e to EDC's c r e d i b i l i t y  for  its  it  can c l e a r l y be  i n t e r p r e t a t i o n of the  c o n t r a v e n t i o n of the A c t .  add  existence.  borrowing  investment.  the EDC f o l l o w e d a reasonable  and avoided d i r e c t  The  lease payments were made to the loan.  capital  Canada's  could then have been  Bank, the funds would be used to repay the EDC  of a very small  operate  from the  Defence and paid f o r the purchase by  from EDC.  leasing  of Canada.  Bank c o u l d , t h e r e f o r e , have purchased the used a i r c r a f t Department  aircraft  law  However, such manoeuvers  in terms of the s t a t e d  objectives  130  FOOTNOTES  CHAPTER  1.  Section  2.  Export  3.  Ibid,  4.  Export  5.  Export  6.  Canada,  10 ( I ) ,  Export  Development pp.  IV  Development  Corporation,  Act.  1975 A n n u a l  Report,  Development  C o r p o r a t i o n , Annual C o r p o r a t i o n , Annual  Parliament,  House  of  Commons,  Report, Report,  Standing  1973, 1974,  November  8.  Canada,  21,  1974,  Parliament,  p.  House  of  Ibid,  November  21,  10.  Export  Development  11.  United  Nations, Volume  12.  Statistics  1974,  Commons,  Yearbook 2,  Trade  Canada,  Loc.  of  Standing  Report,  International  by C o m m o d i t y ,  Annual  13. on F i n a n c e ,  P r o c e e d i n g s and Queen's P r i n t e r ,  Committee  on F i n a n c e ,  Proceedings  and  16:23.  C o r p o r a t i o n , Annual  and R e p a i r , 13.  p.  p.  9.  13:19.  T r a d e and E c o n o m i c A f f a i r s , M i n u t e s of E v i d e n c e on A p r i l 17, 1973, p. 1 1 : 1 7 . 9.  p.  Committee  T r a d e and E c o n o m i c A f f a i r s , M i n u t e s of E v i d e n c e on November 14, 1974, O t t a w a , 1974, p. II:23. Ibid,  21.  21-2  Development  7.  p.  Census  Publication  of  Trade  1975,  1973,  p.  9.  Statistics  1974,  p.694.  Manufacturers,  Number 4 2 - 2 0 6 ,  Shipbuilding  April  1974,  p.  4.  cit.  14.  ,  'Spur  1972,  p.  Nations,  to  Shipbuilding  Urged',  The P r o v i n c e , August  13.  15.  United  Op.  cit,  p.  679.  16.  S t a t i s t i c s C a n a d a , Annual Census of M a n u f a c t u r e s , Communications E q u i p m e n t M a n u f a c t u r e s , P u b l i c a t i o n Number 4 3 - 2 0 6 , A u g u s t 1975, p. 4 .  15,  131  FOOTNOTES  17.  Statistics  Canada,  p. 18.  United  19.  Statistics  Merchandise  Nations,  Op.  cit,  Statistics  Parts  1974,  Canada,  Census  p.  22.  Canada,  23.  Ibid,  24.  Newman,  25.  Ibid,  November  Census  p.  8 6 $ of 1975,  2  9  __, p.  p.  }  July  and  Manufactures,  Railroad  Number  Report  Marine, p.  Grouping',  Shepherd,  42-211,  1973, p.  9.  C o m m i t t e e on F i n a n c e P r o c e e d i n g s and '  Toronto, McClelland  and  Buys  40$ of  ,  H ,  The V a n c o u v e r 'SGF  MLW,  Raised  Globe  Sun,  July  Holdings  and Mai I,  29,  to  July  24,  B3.  cit,  Quitting  p.  CBC", The Vancouver  'Que.  Eyes  29,  1975,  Industry p.  'Shipbuilding  Financial  Sun,  May  31,  1975,  197. Grouping',  Post,  32.  Newman,  Op.c i t ,  chart  33.  Newman,  O p . c i t , p. 5 5 . an i n t e r e s t i n g  The V a n c o u v e r  Sun,  19. "  B o o t h , Amy, ' P l a n n e r s ' G l u e F a i l s The F i n a n c i a l P o s t , A p r i l  31.  and  42-203.  11:6.  Industry  19.  "Picard I.  Op. _  .  30.  1974,  ,'Que.Eyes  Newman,  of  Publication  C o r p o r a t i o n , Annual  14,  Aircraft Number  196.  1975,  28.  Pub I i c a t i o n  P e t e r C , The C a n a d i a n E s t a b l i s h m e n t , S t e w a r t L i m i t e d , 1975, p p . 1 9 5 - 6 .  26.  27.  Manufactures,  P a r l i a m e n t , House o f Commons, S t a n d i n g T r a d e and E c o n o m i c A f f a i r s , M i n u t e s o f E v i d e n c e on A p r i l 3 , 1973, p. 7 : 1 2 .  p.  1974,  4.  Annual  Development  of  Manufactures,  R o l I i n g Stock Industry, S e p t e m b e r 1 9 7 3 , p. 4. Export  1970-72, August  p.686.  Canada, Annual  ApriI  21.  Trade,  32.  Aircraft 20.  Export  CONTINUED  Subsidy  Nov.  2,  t o S t i c k Two G i a n t s 17, 1 9 7 6 . , p. B - 7 . Brings  1974,  between pages  p.  Flood  of  Together',  Orders  to  Canada',  T-7.  64-5.  T h e e n t i r e c h a p t e r f r o m page 4 9 - 8 6 d i s c u s s i o n on P a u l Desmarais.  provides  132  FOOTNOTES  34.  Newman,  Op.  cit,  P- 57-8.  35.  Newman,  Op.  ^ t ,  P- 59.  36.  Newman,  Op.  cit,  P- 57.  37.  Newman,  Op.  cit,  P. 57-8.  38.  Financial  39.  Rolfe,  Post,  Survey  of  Industrials  J . , 'Quebec Shipyard Slipway',  40.  Financial  41.  This  Post,  section  Globe  Survey  relies  CONTINUED  Sale  upon  Vol.  Underlines  and Mai I, of  1975,  May  Industrials testimony  17,  before  42.  Export  Development  p.  Vol. the  F i n a n c e , T r a d e and E c o n o m i c A f f a i r s November 21, 1974, p p . 11:6-26.  p.  Some F i r m s  1968,  1975,  2,  2,  p.  Standing  76-3,  on  Extinction  89.  on November  C o r p o r a t i o n , News R e l e a s e ,  153.  153. Committee 14  on  and  February  19,  1976.  CHAPTER  V  FINANCING THE C A P I T A L NEEDS OF T H E EXPORT  In in  recent  increase Federal $253.6 that  order  years, its  the  million  the  Canadian  at  the  end  of The  Government  Canada  in  $25.0  as  in  past  Corporation  is  is  has  five  net  in  to  permitted  to  been  Fund  have  forced  (CRF)  of  increased  on D e c .  additional  recorded  31,  funds  to the  from  1974. by  In  borrowing  term borrowings  outstanding  is  the  the  sole  stockholder  $55.0 m i l l i o n  Minister  of  has  increased  No d i v i d e n d s  have  The  the  equity  Finance,  surplus.  were $ 5 3 . 5 m i l l i o n  in  in  has  paid  Corporation's  on December from  capital.  31,  1975.  $4.8 m i l l i o n  been d e c l a r e d  or  in paid  years.  a federal  pay  being  million.  a capital  income  1975.  Crown to  a rate marginally  required  through  Canada  short  contributed  form of  annual  total  $35.0  earnings  $12.8 m i l l i o n  Being  at  the  retained  The C o r p o r a t i o n ' s  Fund  such,  Government,  million  the  of  raised  has  Revenue  $74-4.0 m i l l i o n  has  The  to  CORPORATION  rates  Corporation  payable  to  addition,the  to  Corporation  growth  Consolidated  1969 t o  money m a r k e t .  and,  and  the  loans  31,  phenomenal  1974 amounted  In  reserves  the  the  Development  from  Total  on D e c .  in  during  Export  Government.  Corporation  finance  borrowings  same p e r i o d  1970,  to  DEVELOPMENT  meet  Corporation,  borrow  above its  the  funds rate  capital  133  the Export  from which  the the  Development  Consolidated federal  requirements.  Revenue  government  Through  this  type  134  of  financing  a more  arrangement  favorable  directly  to  subsidy  is  insurance  the  in  program  decade In  the  1974,  net  the  the  Federal equ i t y  not  for  Government  $700 m i l l i o n  same  financial  the  fiscal  financial  obtain  on t h e  range.  In  were  annual early  to  were  the  that  at  go  no  public  export  borrowings  credit  years  of  from the  the  CRF  present  $100-125 m i l l i o n  In  additional  to  that  the  funds  taxpayer.'  approximately  $255 m i l l i o n . an  and  term  forced  claims  Canadian  the  increased  contributed  it  activity  Corporation's  had  if  intermediate  The C o r p o r a t i o n  borrowings  Government's  a year  needs  year  the  some  of  would  prefer  from  requirements  federal the  that  less  total  1963-69  have  ended M a r c h  requirements  pared  range.  $150 m i l l i o n .  The  addition,  in  1975  $30 m i l l i o n  in  the  form  of  requirements  were  less  31,  endeavours.  Chairman  of  borrow  Eurodollar  a  lot  market,  In  productive  Corporations  EDC of  the  reviewed  such  Revenue  recently  money U.S.  as  in  the  foreign  1970  onward  b i I Ii on p e r  these  annum.  government's  total  an  attempt  to  its  various  programs  The the  Federal EDC  Fund.  announced  various  $2  federal  has  President  to  the  government  Crown  From  nearly  e x c e e d e d $5 b i l l i o n .  Consolidated  prepared  inclusive.  1976,  from the  and  financial  averaged  on b o r r o w i n g s  the  borrow  cap i t a I.  than  cash  the  1975 were  The F e d e r a l  In  could  to  financing  million  net  able  a charge  borrowings  borrowings  it  its  I960's  EDC's  is  markets.  in  is  $20-40  annual  than  capital  involved  In were  rate  EDC  reduce  its and  Government  reduce  their  reliance  John A MacDonald, that  offshore  bond m a r k e t  the  Corporation  markets  and  the  the is  including  Petrodollar  2 market.  Mr.  MacDonald  Finance  Department's  hopes concern  that over  such our  borrowings rate  of  will  growth.  "reduce  the  They w i l l  remain  135  simply  as  expected  our to  banker  be  issued  How g r e a t become?  In  reasonable earnings, bulk  of  theory, rate  of  not  a  cover  any  level  field  do,  signings  future  increase  by  Development  applications In  utilizing a cash past  for  will  contracts  a standard  cash  for  the  The  create  long  is  of  term  export  annual  the  term  for  each  for type  to  of  future,  in  field  and  long  Aitken,  term cash  forecast  would  continue  for  the  and  Canada's  Export  Commerce,  trade  responsive  do  provide  Corporation's  about  be v e r y  financing  should  the  Industry,Trade  commodity flow  a cash  a simple has  Corporation  standard  activity  The  to  position  all  assistance.  agreements the  term  department  responsible  concern  retained  insurance  agreements  how s e r i o u s  near  signed  This  EDC  long  Hugh T .  to  a  loans,  collected  on t h e  financing  financing  the  in  likely  depreciation.  credit  the  the EDC,  His  determine in  of  of  its  is  released.  finance  as  premia  a drain  Minister  to  such  is  needs  existing  from  The M i n i s t e r  4  Jamieson.  model  flow.  arise  Increases  annual  forecasting  expenses  profits.  to  face  in  of  prospectus  report  cash  be a b l e  repayment  needs  president  annual  should  expenses  imperative  long  trying  total  cash  10-15$ a y e a r .  it  1975 a n n u a l  operating  of  Donald  the  problem.  former  makes  Corporation  from  activity  Corporation  Honourable  its  from non-cash  in  The C o r p o r a t i o n ' s  Corporation's  however,  that  virtually  Corporation  of  The  the  the  the  resources.  to  the  flow  claims,  a reasonable financing  cash  after  are  Corporation's Increases  resort."  shortly  and  activity. create  last  growth  reserves  the  of  to  been would  flow  forecasting developed. analyze  each market  would  problem  then  method In  all  area  the  theory,  of to  be a p p l i e d  the determine  to  all  136  future  agreements  market  area.  resulted  involving  Unfortunately,  in f a i l u r e .  EDC was t h e p r i m e three by  years,  cause  an a v e r a g e  The statistically cash  of  each  three  of t h e past  respectively. disbursements agreements  have  signed  after  activity.  should  three  that  forecast  of the  used  The  by t h e  five  by 10$ p e r annum  years.  in each  disbursements  been $ 1 9 8 ,  because  while not  years.  t o t h e method  indicates  signed  of t h e magnitude  f o r each of t h e past  have  were  chapter,  in t h e next  according  by t h e  in  $308 and $ 4 8 7  disbursements the flows  with  million  actual  resulting  from  t o 1971 a r e n o t i n c l u d e d .  analyzes Most  the cash  of the c a p i t a l period.  forecasting  method  for a l l contracts,  inflows  resulting  equipment  T h e mean  from t h e  exports  repayment  period  h a s , t h e r e f o r e , assumed with  repayment  being  financed  is 9.5  a nine  year  t o commence t h e y e a r  signing.  obtains  method,  XVII  of these  amortization  period  Table and  years  prior  XVIII  The cash  repayment  three  Table  signed  have  areas.  in t h i s  to increase  a r e not meaningful  a lengthy  years.  years.  face  a r e used  are forecast  Comparisons  Table financing  will  a model  agreements  an i n d i c a t i o n  particular  in each of t h e past  in a l l market  developed  are disbursed  signings  signings  the next  does  the Corporation  Actual  of c o n t r a c t s  financing  of p r o d u c t s  to that such  of f o r t y - o n e  provide  Exim Bank.  to develop  F o r example,  sound,  agreements  product  of f a i l u r e .  method  financing  of  number  forecasting  flows  The E D C ' s  type  attempts  The small  t h e EDC f o r a l l t y p e s  net  that  XVIII  also  a net cash  the net cash  combines  the cash  receipts  requirement'position.  Through  outflow  f o r each  of t h e past  and d i s b u r s e m e n t s the use of  three  years  this  would  have  TABLE XVII EXPORT DEVELOPMENT CORPORATION PROJECTEO CASH DISBURSEMENTS FOR THE THREE YEARS ENDING DECEMBER 31, MILLIONS OF DOLLARS DISBURSEMENTS FROM  1971  Signings  1978  1972  1973  1974  1975  34  102  68  51  44  28  85  57  42  37  45  134  89  67  58  66  198  132  99  86  581  1 14  341  227  170  852  125  375  250  138  1972 S i g n i n g s 1973 S i g n i n g s 1974 S i g n i n g s  -  1975 S i g n i n g s 1976 S i g n i n g s  1977  1976  1971  2  249 393  1978 S i g n i n g s (34)  TOTAL UNDISBURSED FUNDS NOTES: 1)  2)  (130)  (198) 631.4  (308) 930.3  (487)  (702)  (897)  1500.0  1913.0  2076.0  Disbursements are assumed to be made over 5 years as f o l l o w s : [2% of s i g n i n g s are assumed to be c a n c e l l e d . Signings  TOTAL DISBURSED 299  1977 S i g n i n g s  from 1976 onward are assumed to grow at an annual r a t e of  1056.  DISBURSED IN FUTURE f  — —• —  CANCELLATIONS  TOTAL  41.0  340.0  34.3  283.8  52.4  .  445.4  78.3  659.3  148  135.0  1135.0  750  350  150.0  1250.0  413  551  659  165.0  1375.0  151  151  1 180  181.0  1512.0  (837.0)  (7000.0]  (1070)  10$, 30$, 20%,  1978  (3826)  15*, 13*.  (2337)  TABLE XVI I| EXPORT DEVELOPMENT CORPORATION PROJECTED CASH RECEIPTS AND NET CASH FLOWS FOR THE THREE YEARS ENDING DECEMBER 31, MILLIONS OF DOLLARS RECEIPTS 1FROM CONTRACTS  SIGNED PRIOR TO  1971  1971  55  SIGNED IN 1971  1972  1973  1974  1975  1976  1977  1978  TOTAL REC'D  55  55  55  55  55  55  55  440  30  30  30  30  30  30  30  25  25  25  25  25  25  39  39  39  58  58 100  SIGNED IN 1972 SIGNED IN 1973  39  SIGNED IN 1974 S1GNED  1978  IN 1975  SIGNED IN 1976  TO BE RECEIVED IN FUTURE  TOTAL NET SIGNINGS  1 15  555  210  89  299  150  99  249  39  195  198  393  58  58  232  349  581  100  100  300  700  1000  1 10  1 10  220  880  1100  121  121  1089  1210  —  1313  1331  SIGNED IN 1977 S1 GNED IN 1978 TOTAL RECEIPTS NET PROJECTED CASH FLOW (Total Disbursements Obtained from Table XVII)  (55)  (85)  (MO)  (149)  (207)  (307)  21  (45)  (88)  (159)  (280)  (395)  ,  (417)  (538)  (1868)  (4850)  (6718)  (480)  (532)  (1958)  2513  (282)  -  NOTES j j Repayment of loans i s assumed to be made equa 1 1 yover a nine year lag from the date of s i g n i n g .  year p e r i o d ,  with a one  bJ  TABLE XIX EXPORT DEVELOPMENT CORPORATION FINANCING REQUIREMENTS OVER THE PERIOD JAN. I, -ACTUAL RESULTS  1  ITEM  PERIOD FROM  1971-DEC. 3 1 ,  1.  1978 FORECAST 1977  1 1978  1250.0  1375.0  1512.0  1250.0  1375.0  1512.0  1 1976  1972  1973  1974  1975  789.5 104.0  283.3  445.4  502.2 157. 1  885.0 250.0  893.5  283.3  445.4  659.3  1135.0  47.5  63.3  86.7  152.8  150.0  165.0  181.0  537. 1  169.3  143.8  269.6  344.8  702.0  897.0  1070.0  1961-1971 1.  Signed  Agreements  C o r p o r a t i o n ' s Account Government's Account  2. 3.  LESS Cancellations Disbursements to Cdn. Exporters  4.  Undisbursed Financing  356.4  66.5  238.3  303.0  497.6  398.0  313.0  261.0  5.  Cumulative Undisbursed Financing  356.4  422.9  661.2  964.2  1461.8  1859.8  2172.8  2433.8  6.  Repayments by Foreign Borrowers  152.3  31.9  48.6  66.9  307.0  417.0  538.0  7.  Net Annual Cash Flow ( 6 - 3 )  8.  Net Annual Borrowing  9.  Net Borrowing  10.  Net  II.  Total Loans Outstanding  12.  Total Loans  Increase  SOURCE:'Export  (384.8)  from Gov't  from P r i v a t e Sector . in Equity  (137.4)  382.7  96.6  121.9  -  45.0  (29.1)  -  40.0  from Gov't  o / s from P r i v a t e  Sector  (95.2)  382.7  479.3  -  Development C o r p o r a t i o n , Annual  45.0  Reports  10.0  81.1  (202.7)  (263.7)  (395.0)  (480.0)  (532.0)  143.4  264.5  100.0  100.0  100.0  (19.9)  300.0  400.0  450.0  19.5  -  601.2  744.6  15.9  35.4  -  30.0 1009.1 15.5  1109.1 315.5  1209.1 715.5  1309.1 1165.5  140  been $ 8 8 , 159 and 280 m i l l i o n as  shown on T a b l e  million The  XIX ( t h e t o t a l  in 1973; $162.9 m i l l i o n  flows  have  to Table  cash  requirements,  8 , 9 and 1 0 ) , were  i n 1 9 7 4 ; and $ 2 6 4 . 6 m i l l i o n t o be u s e f u l  $92.8 i n 1975.  in f o r e c a s t i n g  the net  XVII  undisbursed  financing  contracts  should  e q u a l l e d $ 6 3 1 . 4 mi I I i o n i n 1 9 7 3 , $ 9 3 0 . 3 mi I I i o n i n 1974 and $ 1 , 5 0 0 . 0  million  i n 1975. T h e a c t u a l  million  respectively.  forecasting  the past  a r e used  three  years. The  will  increase  years.  to f o r e c a s t  results  financing.  outstanding  debt  less  than  financing views borrow  contracts  future.  base  will  Despite  t h e next  of n e a r l y  by t h e E D C ' s  also  obtained needs  three  of  of the C o r p o r a t i o n  in Tables  needs  years  XVII and  of t h e C o r p o r a t i o n as w i l l  earlier  debt.  liability  the t o t a l  that  capital  of  a total  the Corporation  F u r t h e r , by t h e end  with These  regard  to  figures  the Corporation future.  structure  t o be s u b s t a n t i a l l y  the i n t e n t i o n  in  o f t h e EDC f o r t h e n e x t  in the not too d i s t a n t  have  t o be u s e f u l  years,  $2.5 b i l l i o n .  an a c c e p t a b l e  and $ 1 , 4 6 1 . 8  1 9 7 8 , t h e EDC w i I I have  Four  chairman  $964.2  requirements  in o u t s t a n d i n g  a contingent  a " l o t of money"  appears  the cash  By t h e end o f  have  To m a i n t a i n equity  over  $800 m i l l i o n  expressed  the c a p i t a l  that  $661.2,  financing.  The r e s u l t s  o f $ 2 . 5 b i I Ii o n .  1 9 7 8 , EDC w i l l  also  the c a p i t a l  indicate  steadily  undisbursed  were,  of undisbursed  XIX o u t l i n e s  fifteen  XVIII  figures  The technique  the l e v e l s  Table  of  items  The a c t u a l  of the EOC. According  had  of  technique, t h e r e f o r e , appears  cash  for  respectively.  support the will  need t o  6  the Corporation's  increased  the Corporation  undisbursed  in the near  to r e l y  more  heavily  14!  on  the  private  public raise  c a p i t a l markets  funds w i l l some of At  the  have to be  large  Canadian c a p i t a l market and possible  This situation  U.S.  f o r the  EDC  internationally margin on  differential the  EDC  may  If that be  can  not,  export  credit  be  Either  situation  cost  to grant export They are type of  offshore  in the  Corporation's The  large  rate  an  operating  indefinitely  to a t t r a c t  at which EDC  internationally  domestic  interest  o p e r a t i n g margin on  rate  It w i l l  i t s funds at  to c o n t i n u e  interest  to the  problem of  c a p i t a l which could be lies  and  future c a p i t a l .  EDC's p o r t f o l i o  i s prepared competitive  to  offer  rate?  C o r p o r a t i o n and/or  In the  p a s t , the  c r e d i t which had  investment.  In  trying  used to  to  the  1975,  the  approximately 20$.  locate  a  facility  Canadian banks have been a term of  large  support Canadian  in i n t r o d u c i n g a r e d i s c o u n t  s l o w l y being encouraged to  agreements was  obtained  lend  expected  in the  the  equipment manufacturer.  equipment exports Canadian banks.  to  c r e a t e s problems f o r the  solution  supply of  interest  higher than the  Canadian c a p i t a l The  the  i t to  between  E u r o d o l l a r markets.  — i . e . the  the  i f more  enable  exists  to borrow funds  have to o f f e r a h i g h e r  reduced, or w i l l  and  be m a i n t a i n e d .  will  least  differential  enable EDC  however, be  event t r a n s p i r e s ,  to at  than could be  competitive rate  its portfolio will  i t appears as  require.  interest  the  will  in EDC  it will  markets at a more f a v o r a b l e r a t e market.  future,  invested  debt c a p i t a l  present, a  undoubtedly be  in the  capital  for  the  reluctant  g r e a t e r than f i v e  years.  increase t h e i r p a r t i c i p a t i o n  banks' share of The  g r e a t e r degree of bank p a r t i c i p a t i o n . i n  entire export  total  signed  could  be  in t h i s financing  problem of g e t t i n g credit  low  a  given a  142 substantial  boost  At  through  present  the  dollar  statutory  Treasury  bills,  day  only  investments  reserve its  facility  monetary  is  loans  qualify  primarily  policy.  The  while  usually  billion.  $0.2  Treasury liquid,  usually  strength that  of  the  Treasury  Treasury total  amount  varies  with  and  January  I,  f r o m November same p e r i o d present  $6  b iI Ii o n .  market  rolled portion that  over of  2-4  for  Bills  ratio The  banks by  secondary was  January  reserve by 2%  banks'  total  of  Treasury  Bills  really times  long  that  a year,  it  this  debt  be s h i f t e d  a Treasury  Bill  market  of  to say  $3-4  are  of  is  extremely  in  Canada.  The  investors  requirement. between  usually  For  example,  December  I,  of T r e a s u r y  by $626 mi I I i o n .  i ncreased  is  billion  Bills In  thi s  approximately  of  borrowing  reasonable suitable  1974  by $ 4 5 9 mi I Ii o n .  portion  Government  a more  holdings  investors  these  a substantial  appears  implement  ensures  outstanding  term F e d e r a l  to  feature  holdings  1975 d e c r e a s e d  the  The  Bank  of  are  182 d a y s .  the  holdings  fact  or  reserves.  portfolio  They  and  Canada's  the  loan  principal  each  their  secondary  Bill  The  of  of  91  The  Canada  liquidity  reduced  chartered  day  of  reserves  Treasury  a term of  held  of  instrument.  yield.  chartered  Bank  facility.  secondary  primary  their  the  5.5%  reserves.  banks' of  hold  form of  the  Bank  view is  by  a rediscount  to  excess  a unique  low  in the  1974 t o  the  a  Treasury  1975.  the  In Bill  the  reserve  used  coupled with  have  changes  secondary  are  the  seconday  total  issued  issuer  are  of  the  At  being  Bills  Bills  the  bills  in  and  as  of  required  chartered  e x c e e d $3 b i l l i o n , about  are  deposits  day  which  introduction  banks  Canadian  to  the  to  Treasury  which  suggest  maturity.  must  the  that It  is  be m a i n t a i n e d  is a appreciated in  143  order  for  t h e Bank Assume  The  proposed  credit  to  Eligible of  Canada  that  credit  greater  offered  exporters,  the  credits  be  by  Bank  England  of  insured  investments loans year the  falling  amount  reserve. this  would  three  Bank  of  to  of  the  Exports  to  the  or  To  a maturity be  U.S.A.  beyond  not  any the  be  that  all  to  the  reserve of  any  a three -  years,  an  eligible  be e l i g i b l e  being  of  portion  with  credit  such  that  five  as  export terms  secondary  credits  classified would  similar  export  obligations  require that  would all  of  of  billion.  investments.  term debt  control  Eligible  for  types  reserve  A requirement  policy.  r e d u c e d by $2  a portion  would  credit  is  certain  long  years.  18 m o n t h s  loan would  allow  include  Canada  export  with  d e s i r e d monetary  secondary  Corporation  than  due w i t h i n loans  only  the  market  would  be c o n s i d e r e d .  related  For  Bill  eligible  the EDC.  could  as  term.  as  Development  a term of  implement  facility  be d e s i g n a t e d export  to  the T r e a s u r y  rediscount  the Export  with  of  one-half  for  five of  secondary support  under  program. The  accomplished  i n t r o d u c t i o n of through  The concerned  with  the proposed  the  upcoming  revision  rediscount  facility  would  the  promotion  of  Canadian  rediscount of  offer  the  facility  Bank  advantages  exports.  could  Act. for  all  The b e n e f i t s  groups would  include:  I)  be  C a n a d i a n e x p o r t e r s w o u l d be a b l e t o a r r a n g e e x p o r t c r e d i t through t h e i r l o c a l banks. The small Canadian e x p o r t e r , as w e l l as t h e p r o d u c e r l o c a t e d o u t s i d e of C e n t r a l C a n a d a w o u l d have g r e a t e r a c c e s s t o e x p o r t credit. The i n t e r e s t r a t e o f f e r e d f o r c r e d i t to s u p p o r t C a n a d i a n e x p o r t s w o u l d be c o m p e t i t i v e w i t h t h a t o f f e r e d by o t h e r n a t i o n s  the Export Development C o r p o r a t i o n would have an assured low c o s t source of c a p i t a l funds to f i n a n c e i t s a c t i v i t i e s over the next three years at l e a s t . The C o r p o r a t i o n would not have to be as concerned about i t s c a p i t a l s t r u c t u r e . The i n c r e a s e d bank p a r t i c i p a t i o n in export c r e d i t would be welcomed. A p o r t i o n of the r o u t i n e attached to p r o c e s s i n g the c r e d i t a p p l i c a t i o n could be a s s i g n e d to the banks as i s the case in the U.S.A. and the U.K. the c h a r t e r e d banks would merely be s h i f t i n g from one c l a s s of r i s k l e s s a s s e t to another type of the same a s s e t . The f a c i l i t y would enable the banks to become more a c t i v e in the f i e l d of export c r e d i t without being o v e r l y concerned about the term. This exogenous s t i m u l u s could w e l l have the i n d i r e c t m u l t i p l i e r e f f e c t of pushing the banks into g r e a t e r p a r t i c i p a t i o n in export financing. No matter what t h e i r i n i t i a l c o n s e r v a t i v e a v e r s i o n to such b u s i n e s s , i t s a t t r a c t i o n as a s u b s t i t u t e r e s e r v e v e h i c l e would f o r c e them to gear up with the necessary e v a l u a t i v e and p r o c e s s i n g capabilities. The a v a i l a b i l i t y of such i n t e r n a l r e s o u r c e s , the t a t t e r ' s probable commitment to i n c r e a s i n g t h e i r own r a i s o n d ' e t r e , coupled with a reasonable l e v e l of success in r e d i s c o u n t i n g b u s i n e s s would a l l tend to s t i m u l a t e the banks to become i n v o l v e d in f u r t h e r f o r e i g n c r e d i t b u s i n e s s on t h e i r own account-presumably to the g r e a t e r b e n e f i t of Canadian exports and i n v e s t o r s abroad the Canadian p u b l i c would b e n e f i t by the reduced need to i n c r e a s e t h e i r investment in EDC. As d i s c u s s e d p r e v i o u s l y , the p u b l i c would a l s o b e n e f i t from the encouragement of the development of more e f f i c i e n t f i n a n c i n g f o r export markets the Federal Government's primary b e n e f i t would be in the e l i m i n a t i o n of i t s need to concern i t s e l f about p r o v i d i n g the necessary funds to support the EDC's a c t i v i t i e s . The cost of f i n a n c i n g the $2 b i l l i o n removed from the T r e a s u r y B i l l market would be a once and  145  f o r a l l i n c r e a s e o f 1-2$.' T h i s c o s t c o u l d a l s o be r e d u c e d by a p a r t i a l and p o s s i b l y s h o r t t e r m i n c r e a s e in r e s e r v e r e q u i r e m e n t s to " e n c o u r a g e " banks to p a r t i c i p a t e in the new s y s t e m . The s h i f t i n g . o f the s t r u c t u r e o f t h e g o v e r n m e n t ' s d e b t c o u l d h a v e an e f f e c t on t h e t e r m s t r u c t u r e o f interest r a t e s in Canada. The F e d e r a l Government's a t t e m p t s t o r a i s e an a d d i t i o n a l ;$2 b i l l i o n in t h e c a p i t a l m a r k e t may c a u s e upward p r e s s u r e on l o n g t e r m i n t e r e s t r a t e s . A d e t a i l e d d i s c u s s i o n of t h i s p o i n t , h o w e v e r , i s b e y o n d t h e s c o p e of t h i s study.  In  summary,  of  the Export  of  the  next  continue  to  forecast  the  Development  three  greatly  cash  The  A  needs  chapter  has  Corporation  years.  increase.  a rediscount would  this  level  simple of  the  of  shown t h a t will  continue  undisbursed  forecasting  was  developed.  benefit  all  market  Soch  to  and a  participants.  cash  requirements  increase  financing  technique  Corporation  facility  the  was  will  designed  a proposal relending  in  to  each also to  establish  facility  which  146  FOOTNOTES  CHAPTER  V  C a n a d a , P a r l i a m e n t , House o f Commons, S t a n d i n g C o m m i t t e e T r a d e and E c o n o m i c A f f a i r s , M i n U t g g OT P r o c e e f l I i n g s on A p r i I I J , i Q / J , p. I 1:14 and Export  Development ,  "Gov't  The Vancouver  C o r p o r a t i o n , Annual Export Sun,  Company January  Report  Plans 15,  to  1976.  1974,  p.  4  Borrow Funds From A b r o a d " , p.  33  3.  Loc.  4.  C a n a d a , P a r l i a m e n t , House of Commons, S t a n d i n g C o m m i t t e e T r a d e and E c o n o m i c A f f a i r s . M i n u t e s o f P r o c e e d i n g s on December 10, 1974, p. 16:23  5.  Export-Import  6.  on F i n a n c e . and E v i d e n c e  cit.  Bank,  , "Gov't The V a n c o u v e r  Annual Export Sun,  Report Company  January  1975,  p.  23  Plans  to  Borrow Funds  15,  1976,  p.  33  on F i n a n c e , and E v i d e n c e  From A b r o a d " ,  CHAPTER  VI  CONCLUSIONS  This the  Export  of  In  facts  the  will  have  been p r e s e n t e d .  of  agency, the  promote  exports  examine  the  the the  by  the  use  achieve  policy  for  t h e EDC  section  once  changing to  again  three  of  and  of  of  look  export  in  in  of  national  Section  III  used  II  the  I  and to  will national  offer  trade.  to  Canada  three  will  number  Section  and  by C a n a d a  Canadian in  the  the  export  policies  Section  of  chapter,  attempt  States  by  credit  rest  an  the  used  finance  the  concluding  credit.  t h e m e c h a n i sms  function  Corporation.  United  the mechanisms  at  this  Canada's  the  effectively  a considerable  summarized  export  goals.  and  study In  how  primary  differences  and  the  its  Development  promote  GOALS OF EXPORT  All  be  examining  Canada  this  Kingdom,  of  their  will  Export  the U n i t e d  through  of  operations  similarities  specifically  POLICY  study  effectiveness  recommendations  I.  the  criticize  used  will  between  figures  summarize  to  trade  achieves  chapters  granting  agencies  Corporation  five  findings  mechanisms  concerned with  first  constructively credit  been  and d e v e l o p i n g  and  the major  has  Development  facilitating world.  study  and The  some more final  wor I d e n v i r b n m e n t .  CREDIT GRANTING AGENCIES  national  export  147  credit  granting  agencies,  the  148  ECGD, the  same b a s i c  nation. in  the  They sale  exporter  goal, each  of  who  t h e E x i m Bank namely,  strive  capital  is  quality  and  package  offered  is  the  by  the  Table  XII.  also  volume and  all  three  development  finance  is  of  Committee  on F i n a n c e , T r a d e  be o f  benefit  to  While uses  commercial The  and  approach  slightly permits  of  that  the  credit  is  in  not  try  market  through  fact  is  the  best  in  a  to  terms  study  particular  ensure  of  have  limiting  terms  of  factor  that  an  price,  the  equipment  export  clearly are  not  LDCs.  shown  financing  to  in  promoting  produced  credit  shown  This  is  purchased  of  a developing  before  on A p r i l  17,  the  for  the  former  the  Standing  1973  exports  country  and  concern  in- a s t a t e m e n t b y  Canadian  the  concerned with  lack  evidence  by  i n T a b l e VI  overly  and E c o n o m i c A f f a i r s  though  w h i c h we f i n a n c e  will  country."' agencies  have  different  approach  in  the  same b a s i c  trying  goal,  to  support  the  are  willing  to  each  one  exports  of  industries.  the  agencies  political  towards  independent  their  capital  three  from t h a t  of  Hugh T . A i t k e n , g i v i n g  project  manufacturing All  exports  compete  facing  oriented  all  a slightly  their  is  a viable  this  agencies  agencies  probably  President  hopefully  EDC.  of  This  problems  aim  to  financed  finance  "Our  that The  in  the  the world  able  development  stated,  ensure  in  nations.  However,  the  promote  reviewed  purchaser.  nations  developing  the EDC,  equipment.  A substantial industrialized  to  to  competitive  service  and  risks  export  taken  in  this  of  credit  in Canada  insurance  study  doing  business  insurance and  brokers  the  in  in the  United  located  the  underwrite  world  United  States  Kingdom.  throughout  market  the  the place.  varies  The U.S. country  system to  149  take  applications  and  Exim Bank.  submitted also  In  is  in  and  policy  that  While  there  In what the to  different private  provide  ensure other  allows off  export  types the  finance  to  which  the  encourage  of  and  the  the  needs  of  of  the  approach  Insurance  private  offer  relatively the  industry"  export  credit  The B r i t i s h  institutions, needed to  export Bank  of  export  bank  credit  Association  insurance  a specific small  types  what  ensure  of  could the  type  exporter. insurance  be  termed  facilities  credit,  changing  to  supplement  it  domestic  system  willing  comparable  is  export  private  exports. that  not  a  guarantees, In  order  facility  years,  insulate  some-  exclusively  offered  facility  five  helps  credit  designed  provide the  also  almost  a rediscount  beyond  take  the ECGD's  to  rediscount  terms  but  by  British  offers  nations  relies  supported  This  offer  three  system  is  England  to  all  support  credit.  banks  from  is  be  simiIar.  The A m e r i c a n capital  agencies  and  credit  for  and A m e r i c a n  competition  British  point  of  international  field  of  a group  FCIA  must  The U.S.  Credit  in  British  nations,  t h e EDC.  differences  approach.  any  of  the  applications  the F o r e i g n  consisting  of  Bank.  financial  that  certain  cut  the  all  t h e ECGD o r  structure  very  on b e h a l f  are minor  the^ " o l i g o p o l i s t i c are  insurance  nations,  insurer,  t o meet  offered,  provided  the  the B r i t i s h  designed  two  either  the Exim  Both  policies  to  credit  other  a partnership  companies  of  export  the  directly  differs  (FCIA)  for  not  by for  only  the the  to  normal cost  of  conditions. to  compete w i t h  credit.  capital  private  T h e E x i m Bank  flows.  Through  tries  the  on  150  participation the  financing  commercial  very  its  guarantee  in  attracting  private  all  participation  equipment  The  the  often  applications  which  then  local  financial  limit  of  that  eligible  export  liquidity  loan  commercial  made  in  not  equipment. of  taken  institution granted agency  offered  may  it  by  the  the  British.  position  of  the  banking  granting  the  that  the  Bank  as  well  The p r e l i m i n a r y  the American  tries  local  to  capital Exim  Bank's  the Exim  Bank.  financial  Bank.  limit  contract.  the  with  U.S.  In  some  under  institution cases  the  the  discretionary  In  facility  the American  banks  can  system.  to  not  Exim  loan  is  the  Bank's  program  not  system,  be u s e d  Further,  obtain  discount  which  as  the  to  improve  American indication  prior  to  it  (the  also  is  differs  prepared  as  the  to  from  support  purchase  commitment  both  of  procedure  the  used is  British  leasing  U.S.  also  and  Canadian  of  U.S.  capital  a unique  feature  system.  Canadian on  of  been  loan.  approach  Exim  equipment  bank the  the  credit,  a rediscount  commercial  bank)  Exim  finance  American  one  has  and  Bank.  the  commercial  of  the  the  of  the  of  dealings by  to  facility  Bank  E x i m Bank  value  the  approve  the Exim  the  through  direct  financing  flows  supplier  with  offers by  the  processed  directly  for  attention  the  any  and  eligible  The its  have  is  capital  of  financed  The A m e r i c a n systems  50%  which  are  capital  credit  requires  the  than  program,  programs  and  are  U.S.  as  that  less  lending  purchaser  do  approval  complete  system  its  communicates  The  the  of  to  exports,  facilities,  co-operative  exporter  Under  Both  the  bank  successful  exports.  program,  the  system  field  of  has,  until  direct  recently,  lending.  focused  Up u n t i l  nearly  1974,  all  EDC's  of  financing  facility  The  of  Board  criterion requires  was  used  Directors  for  EDC  has  to  support  now r e m o v e d  financing.  extended  terms,  relatively  Any  the  capital  according  to  large  notional  scale  $1  equipment  projects.  million  eligibility  transaction  international  that  standards,  is  now  2 eligible this  for  formal  being  EDC's  relaxation  directed  towards  support.  the  to  |t  v/iI I  still  result  remains  in  smaller  projects.  participation  principle  to  a greater T h e EDC  so  be  seen  however,  proportion  is  also  of  EDC  gradually  successfully  adopted  whether financing  moving  by  the  Exim  Bank. The facility; t h e EDC  Canadian  appIications  does  Canadian  system  not  direct  specifically  grant  the  would  commodities data  be  being  both  industries agencies, building  in  not  be  type  of  rediscount  submitted  directly  to  the  limits  commercial  does  Canadian  of  the  supported system  particular  to  have  any  national  without  a brief  these  and  the  designed  programs.  The  and  systems  Canadian of  the  aircraft  credit  comment  its  bulk  corporation;  banks  programs  export  necessitates  the the  not  any  exporter.  three  by  offer  on t h e lack  exclusion  support  industry  in  granting  of  type  relevant  from t h i s  indicate from  that  their  of  comparison.  certain  national  the  U.S.A.  and  ship-  both  Canada  and  the  Canada.  United  States  by  developing  South  system  receiving  Tables  the  lending  the American  are in  any  incomplete  on t h e B r i t i s h  However,  only  small  A comparison agencies  may  lending  for  does  America  VII  and  XIII  the m a j o r i t y  are  nations. the main  of In  indicate the  that  financed  both  cases  purchasers  of  for  exports  are  being  the  LDCs  of  Central  this  type  of  export.  purchased and  152  II.  EFFECTIVENESS  OF THE THREE  Now t h a t completed, determine basic  the  results  for  identified,—the credit;  ability  the  all  potential  the  to  use  of  exporters  can  gain  therefore,  finds  for  a normal  for  export  process  a normal  processes ECGD's  credit  guarantee The  increasing  rate  down.  of  equal on  to  export  for  loan.  not  The  time  application.  also  of  little  to.  of the  export banks  Bank  credit to  of  and  types  The  which  keeping  reclassify  is the  eligible  can  makes  have  an  firm, from  an  needed the  applying  application to  ECGD  appIications  England  large,  of  usually  from t h a t  attended  very  criteria,  process  be p r o m p t l y  the  activity.  different  speed w i t h  to  market,  the  bank.  that  the  all  been  or  T h e ECGD  firms  indicate  of  to  three  should  facility  supply  Most  different The  access  thus  r e q u i r e d to  significantly  to  generate  a commercial credit  have  have  to  Three  system,  exports.  credit.  effort  efficient  these  and  an  been  goals.  small  to  has  timeliness  an  very  of  system  and  In  British  with  export  applications  The a b i l i t y  basis  banking  relationship  would  the  the  credit;  processed.  in  policy  participants  the  in p r o m o t i n g  credit  the  of  are  system,  rediscount  both  its  opportunity  term  insurance  market  systems  condensed  effectiveness  cost  an  access  is  be  three  have  applying  type  will  system meets  all  the B r i t i s h  working  the  from the  British  extensive  of  participants,  be e f f e c t i v e  established  of  applications  theoretically The  be s a i d  study  the  relative  which  should  the  judging  speed w i t h of  of  comparison  how e f f e c t i v e l y e a c h  criteria  export  a brief  SYSTEMS  for  effective  in  interest export  credit  153  for  liquidity  system than  purposes  the  ability  The m a j o r suffer be as  from the  may  is  concept  suffer  that  very  of  all  export  by  that  program  one  of  to  to  a public  the  rates  cost  is  private helps  support  to  body  not  in  terms  of  that  it  can  The b a n k e r s  may  promotion  criteria,  the  of  in  equipment  Chapter  have  field  credit the  for  export  funds  at  the  indicates  access  to  the world  indicates  American  exports  export  kept  to  credit. the  an  and  internationally  of  The  private  The Exim  profit below  these  and  credit.  principle".  a rate  internationally  III,  equal  the mixing  of  with  processed  "blending  allows  British  were  of  is  not  American  discussed  The " b l e n d i n g "  an  the  is  two  competitive  and  Bank,  maximization that  charged  interest rate  iS  offered  exports.  The A m e r i c a n both  its  banking  The CFF a l o n g  concerned with  lend  that  of  the  exports.  the  necessary  institutions. ensure  use  overly to  and  throughout  export  financing the  bankers.  both promoting into  American  prepared  American  in  the  system  1500 a p p l i c a t i o n s  located  capital  generate  as  capital over  banks  through  of  to  notes.  aforementioned  of  effective  of  British  promoting  that  private  rediscount  the  financing  participation  principle, by  three  300  is  level  funds  being  the  in  important  exporters,  result.  fact  more  attitude  exporters  of  more  competitive  public  by  The  approved  The  of  a  participation  attracting  actually  British  effective  credit.  concept  the as  American  the  to  criticism  as  Judging system  undoubtedly  conservative  aggressive  exports  is  rediscount  increasing  the  facility  supply  of  appears funds  and  to in  be o f  limited  reducing  the  value  154  cost did it  of  export  credit.  not  require  might  be o f A  the  banks  greater  system  with  the  preliminary  time  in  However,  while  aircraft, One s u c h  advantages  rolling to  of  the  of  indicate  the  by  to  perhaps  credit  a technological  may  supporting  III.  of  the  While  production  goods  patterns,  an  of  the  of  heavy  them,  of  to  not  hand,  This  to  in  to  such  railroad  as  any  enjoy  large  degree  subsidiaries make  fact  appears  certain  t h e E x i m Bank  do  such  of  a great  why  of  financing,  appears  into  two-thirds  reasons.  private  comparative  as  in  other  the  by  a minimum.  manufacturing  than  supported nearly  turnaround  for  to  Canadian  equipment,  the EDC.  insight  used  a Iong  advantage.  obtain  States  the  products  advantage  equipment,  are  railroad  kept  industry  in  feature  the  comparative  the U n i t e d  other  produce  of  This  supports  industry  facilities  On t h e  more  applications  bank.  enjoys be  of  system  type  strategy,rather  trade  granting  is  export  corporate  U.S.  prior  for  that  capital  and  that  facility  are  flexible  procedure,ensures  financing  The  is  processing  the  financed.  study,  the  some  which  products  loans  enjoys  exports.  provide  purchased  such  the American  t h e E x i m Bank  such  were more  participating  inability  theories,may  normal  of  the  if  Chapter  corporations  use  as  U.S.  in  stock,  support  U.S.  the  in  designate  applications  t h e E x i m Bank  outlined  some  by  States  reason,  facility  commitment  appears  the U n i t e d  to  part  done  processing It  was  is  the  value.  substantial  American  which  If  deal  to  advantage  groups  of  not  follow  exports  are  LDCs.  The  Canadian  the  least  system,  effective  as of  judged the  by  three  the  criteria  systems  outlined  in m e e t i n g  its  in  this  policy  155  goals. small  two were export  Canada  for  less  than  out  are  of  not  a total  $1 m i l l i o n .  The  Canadian  system  readily  for  of  41  These  the  available  to  the  loan  agreements  signed,  smaller  agreements  involved  Douglas A i r c r a f t  Company  of  Ltd.  t h e EDC.  office  applications. Once  only  the  meets  once  processing  effective have  in  largest  banks  that  are  of  the  in  market,  a practice  ability  of  The shows t h a t  must  the be  efficient  submitted  been p r o c e s s e d  by E D C ' s  fact  that  Board  the  from E D C ' s  through  cost  of  effective of  the  used  corporation eroding analysis  its  this  processing  directly  by E D C ' s  of  central  Directors,  checking  Ottawa  regard  of  of  office  continue  operating  of  the  three-quarters  of  when  such  well  the  Canadian  also  flow  is  raised  offer  adds  may  are  in  has  fact,  the  considers as  some  Chapter  amounts the  the  Canada's  EDC's  problem.  in  EDC  that  of  The  been  of  new  private  past,  the  a competitive  interest  be  question.  commodities  exports  In  funds,  Corporation.  t h e EDC  margin,  exported  as  one  substantial  by to  public  down.  a cash  capital  extensively to  the  require  this  of  credit  created  will If  use  corporations  have  future. not  in  borrowers  activity  the  export  Canadian  corporation  the near  without  The  system,  among  capital  the  be a p p r o v e d  administered  the  overly  subsidiaries  V showed  have  for  time.  keeping  levels  provide  applications  a month.  is  foreign  increased  not  applications  Canadian  been  does  such  t h e y must  requirement  The  All  these  in Ottawa,  content  rate,  1975,  components  to  may  FY  aircraft  loan  which  In  facilities  of  of  to  financing  exporter.  only the  The EDC  subject  to  supported  purchased  by  by t h e  EDC LDCs.  156  This  pattern  exports, by  the  but  Exim  is is  just  similar  is  nations.  largest  ship  financing, export  III.  of  Canada's  trade  counter-pattern  presented  has  firms,  begins  to  in  received Canada  analyzing  building  credit  of  pattern  U.S.  for  trade  total  supported  the  both  have  the has  IV  shows t h a t  greatest few  which  doubts  amount  of  the  ship  support  advantages  as  compared  structure  of  two  corporate  of  some  Chapter  are major about  the  users  of  of  to  Canada's  EDC's  efficiency  of  Canada's  market.  RECOMMENDATIONS  the  Canadian  general  economy  Despite  supported  by  the  the  tone  of  of  the  the EDC's  fact  EDC's  that  study  activity  record  activities,  has  may  levels  Canada's  indicated  of  trade  not  that  be as  exports position  the  large  are  net as  value  at  first  being  deteriorated  1975. Chapter  place  is  operate This  in  Canada has  to  has  shown  The  as  showed The  that  will  been  a public and  effectively  study  that  ability  recently  facilitate  function  nations.  IV  deteriorating.  study  designed its  the  in w h i c h  After  one  believed.  in  which  one  The to  to  analysis  industry,  from the EDC, other  reverse  Bank. The  building  the  now  of  the  position  agency,  by P r i m e  the  Canada's  similar  Export trade,  agencies  concentrate  in  f r e e market  questioned  finance as  Canada's  in  world  system  to  Minster  does  not  other various  market  effectively  Trudeau.  Development  two  on o u t l i n i n g  the  Corporation,  perform industrialized mechanisims  157  which,  if  adopted,  effectively. efficient  The  export  to  the  credit  field  of  EDC  claims  to  be  study  show t h a t  therefore, facing  elements efforts sellers' secondary  such in  it  the  for  in  last  the  of  fields  export order  Pugwash,  finance.  be r e v i e w e d  and  clarified.  While  needs Perhaps  one  all  large be  of  the  the  formed  eligible  be g i v e n  sectors  of  a more  EDC the  debt  the  should,  on  of  a  similar  priority.  problem of  Canada's  concentrate  credit,  this  consisting  introduction  Canadian  of  servicing  coordinate  to  the  Corporation  results  agency  to  export  a high  the  with  First  The C o r p o r a t i o n  government  Second,  for  finance,  field.  leaving  credit.  V should  that  could  finance  facility,  more  two new m e a s u r e s  development  t h e L D C s and  to  development  and  of  t h e EDC of  Nova  that  Scotia  policies  performed  Sandspit, permit  on E D C ' s  part by  Canadian  should  the  of  the  insurance  t h e EDC  all or  new m a n d a t e  review  credit  insurance,  issue  substantial  this  should  export  t h e EDC  be  adopt  in  insurance,  a  should  is  export  the  trade  Canada.  definitely the  Canadian  Canadian rediscountto  the  The advantages  economy were  clearly  one of  outlined  chapter.  ensure  such  to  development  Chapter  credit to  lead  of  Armed w i t h officers  promote  credit  CIDA and EDC  reserve  to  field  development  a facility  the  in  EDC  should  in  export  nations.  need  the  Government  should  from both in  outlined  of  consider  these  market  Federal  objectives not  permit  recommendations  The regard  would  the  a new s o u r c e  facilities  being  and  finance.  should  export  adopt  exports, B.C.,  can  If  processing agents.  two  readily  of  The  In  are  the  was  of  First,  in  in credit  agents  to  implemented,  applications costs  in of  export  insurance  the  field  located  purchase  strategy the  financing,  o f f e r e d , both  they  Canadian  this  of  new m e a s u r e s .  whether  independent  behalf.  insurance  and  would  introducing  158  this  measure  include  their  services  and  EDC w o u l d  all  registered  to  ensure  export  credit  small  insurance.  business  ECGD and be  that  type  the Exim  flexible  of  enough  products  in  the  With the  Bank  receptive the of  to  demand  b e l o w 50%  be s i m i l a r Every  to  branch  of  the  one  operated chartered  a discretionary  limit  of  discretionary  new f i n a n c i n g export with  facility  credit.  the  issue With  The C a n a d i a n of  political  the  a more  decentralized  nation  to  with  be  served  authority  to  by  issue  only  so  capital  to  located  limit all  keep  the  to  may  a new  sell  and  their  the  in  and  no  adopt  the  the  its  export  offices. of  principle  of  public  Exim  Bank.  would  be  in w i t h Head  have  would  granted  the  Office.  to  access concern  This to itself  credit.  new f a c i l i t y Canada  the  much b e t t e r  longer  T o meet  new " f a c i l i t y  be t i e d by  facility  be much more  level  Canada  exporters  structure.  types  by  granted  reserve  equipment.  EDC's  could  would  patronage  special  exporter,  t h e EDC w o u l d  which  of  by  a  policies  undoubtedly  successfully  public  of  introduce  offered  exporters  contract.  bank  four  should  small  program  advantages  present  banks w i l l  strive  allow  corporate  training  place.  any  introduction  the  policies  the  Canadian  approval  would  the  of  credit  lending  of  fnr  a rediscount-secondary  of  of  every  branch's  of  and w o u l d  of  aware  corporation's  chartered  the value  a massive  more C a n a d i a n  export  finance  commission  corporation to  market  exports  eligible  participation  funds  the  were  needs  introduction  financing  for  the  a  undertake  the  the  encourage  Canada,  to  similar  While  serve  agents  agents  international the  of  have  policy  to  p o l i c y might  the  Second,  Bank.  specific  by  paying  the  is  simply  Functional insurance  EDC  should too  regional  policies  adopt  large  a  offices  and  approve  159  export  credit  applications  The  regional  offices  The  checking  of  the  view  should  of  provide the  capital  of  more  be w e l l  used  on  Canada's  trade.  in  of  terms  of  the  Canadian  way t o m a k i n g  The problems needs  opportunity  to  manufacturers  this  major  also  are  the  that  suppliers  of  I980's  by  approval.  be p e r f o r m e d  One has  only  enter  the  facility  of  to  financing This  leasing  similar  of the  all  the  of  these  export  and  Brazil  to  measures  credit  the  Corporation  in  Canada  with  and  more  granting  agency  aggressive  in world  markets.  the  large  domestic market.  could  be a  forecast  larger to  capital.  any  with  financing. businessman  serve  finance specifically  Canadian  the  peruse  such  Defence.  facilitate  be d e a l t  used  would  the  investment to  of  situations  c r e d i t market  LDCs w o u l d  to  is  export  National  upon d e v e l o p m e n t  content  in  equipped to  new f a c i l i t y  the  new s t r a t e g y  some g u i d a n c e  be b e t t e r  1985, J a p a n  foreign  to  guarantee  Department  become more  that and  could  by a s p e c i a l i z e d e x p o r t  realize  by  with  by t h e  and J a p a n e s e m a r k e t s ,  3  limits  desire  be a d o p t e d .  officers  T h e EDC w o u l d  their  lease  regard  should  British  Bratain  with  reference concentrating  the  of  a  introduction  Armed w i t h have  discretionary  Bank.  aircraft  its  efficient.  terms  efficient.  chartered banks'  strategy  equipment  With would  t h e m a r k e t p l a c e more  requirement  introduce  the C o r p o r a t i o n ' s sale  content  the  also  A firm  as  be g r a n t e d  one o f f e r e d by t h e E x i m  Canadian  make  offices. In  t h e EDC  would  the Canadian  by t h e r e g i o n a l  field  would  U.S.  At  market,  They  of  the  present,  the  seem t o  e c o n o m i c power  be one  would  fail  than  world's  4  Canadian  financial  paper  to  find  to  160  evidence An  of  article  for  the in  example,  trade  the  are  major  importers  of  September  "there  fairs—a  with  reluctance  or  27,  of  officials  as  goods  to  buy C a n a d i a n  Canadian  manufacturer  international 90  square  rented  trade  meters  4,193  early  I970's  Aircraft. her  past  meters  and  In  the  of  of  Canada's  business  to  has  agency those  is  to  be  hoped  community should cited  be in  could  the  last  of  in  are  In  took  at  contact  expressed so  get  6  Swiss  For the  far  a  one a total  of  suppliers  case  of  in by  avoid  led  direct  failed is  a  the  this  future,  a more the  paragraph.  in  export loan  the  of  to  STOL exploit  relatively  transportation market, to  International to  the  development  Ltd.  the  to  example,  reasons,  to  one  be a d d e d  has  off-the-road  only  that  to  in  suited  supported able  factors  Industries  ideally  The  making  to  firms  states,  wares  e v e n go  unable  fair,  position.  specializing  vehicles.  are  Canadian  of  a variety  extended  submersibles It  similar  EDC  their  Czechoslovakia".  involved  International  are  Post  views  will  abroad.  7  trade  for  Similar  5  they  to  a combination world  displaying  same German  space.  compete  the F i n a n c i a l  "Czechs  eleven  that  of  manufacturer  Foremost's  financing  At  however,  years  that  directly  to  German m a r k e t — o r  because  r e s e a r c h was  Foremost  the P i s c e s  Canadian  past  The v e h i c l e s  fifteen  state  in E u r o p e ,  square  Albertan  export  fair  Canada,  equipment.  sell  space.  position.  small  to  Canadian  who  the  Commerce".  in Europe  of  deterioration  of  of  companies  selling  Chambers  by C z e c h o s I o v a k i a n  manufacturers  1975 e d i t i o n  few C a n a d i a n  method  the  Canadian  but  support  the  Hydrodynamics  list. a more  efficient  aggressive export  r e c u r r e n c e of Canada  in  would  situations then  be  on  161  her way  IV.  to r e g a i n i n g a s t r o n g e r p o s i t i o n  EXPORT CREDIT IN THE  The finance are  i s very f i n e  and  trade.  WORLD ENVIRONMENT  d i s t i n c t i o n between export  l i k e l y to address  areas  in world  credit  a l l n a t i o n a l export  and  credit  development  granting  agencies  themselves to the c o o r d i n a t i o n of both  in order to f o s t e r  the development of  industrial  these  s e c t o r s in  n a t i o n s of the T h i r d World. The intensified oil  rising  the debt  producing  cost of energy over  the  last  s e r v i c i n g problem of the LDCs.  developing  two  years  has  The  twenty-four  n a t i o n s are f o r e c a s t to have a combined  non-  current  8 account will  deficit  of $30  billion  have to be obtained  in 1976.  Funds to f i n a n c e t h i s  from some source, and  the o p t i o n s a v a i l a b l e  t h i s group of n a t i o n s  i s g r a d u a l l y being reduced.  R e p u b l i c of Z a i r e had  to suspend payment on a $500 m i l l i o n  loan.  Other n a t i o n s r e p o r t e d l y f a c i n g  difficulties  In e a r l y  One  i n c l u d e Zambia, Ghana, A r g e n t i n a , B r a z i l  would hope that the  latter,  i n t e r e s t , would take the necessary n a t i o n s p l a y a more meaningful  role  and  in world  the  financial 9  Mexico. developed own  self-  developing  affairs.  p r o j e c t s t h a t the  industrialized  n a t i o n s have been e x p o r t i n g are n u c l e a r power p l a n t s .  Up  the U.S.  n a t i o n s such  had  a virtual  monopoly  Canada, West Germany and  in t h i s  field,  Japan a l l export  to  Eurocurrency  i f only for t h e i r  steps to help the  Among the more expensive  1976,  repayment problems or  Some of these n a t i o n s are the " b e t t e r " customers of the nations.  deficit  but now  n u c l e a r power  until  recently  faciIities.  as  162  The of  total  cost  of  t h e E x i m Bank  authorized has  for  will  is  the  amount  dollars  to  sale  are  are  nuclear  Buenos  Aires.'  who  was  indicates  that  six  two CANDU r e a c t o r s .  nuclear and  perhaps blast The  0  now t h e  In  the  The annual  such  past  projects  two  years  The t o t a l  value  Canadian  credit  the  has  the  for  i n May  1974,  safety  of  is  to  In  dollars  caused  ecological  the  report were  Canada of  these  two  purchasers  power  early  have  in  been  the spent  systems.''  beginning  in  minister  is  being  10 d a y s  a nuclear  of  the  visited  questioned  objections  a r e a would  Argentina's  within  foreign  the  be  proposed  point.  that  also  to  millions  knowledge  Canada's  case  I960's  over  taxpayer  nuclear  purposes?  Indian  i n New J e r s e y life  supplying  when one n o t e s  the  Canadian  slowly  a good  nuclear  nations.  are  other  questionable  of  the  benefits  to Argentina  the marine  cost  countries  be u s e d  constructed that  system  How do  then m i l l i o n s to  1971,  of  not  industrialized  claimed  large.  $259.3 m i l l i o n .  a CANDU R e a c t o r  facility  very  of  they?  will  Indian  the  sale  develop  it  intentions  is  $ 4 5 9 . 5 mi I Ii o n .  to  that  of  system  FY  Canadian  received—or ensure  power  more t h a n $ 8 0 0 m i l l i o n .  The of  for  a total  announced  contracts  a nuclear  in  power of  scientists  be d a m a g e d .  Since  trying  to  repair  the  damage  California  is  considering  a referendum  12 to  stop  construction  indicates  that  perhaps  should  carefully  before  future  beginning  units  the  are  suppliers  show  in  signs  costs  sold  recent  a new t r e n d to  more n u c l e a r  review the  Canada's indicate  of  to  sale  export of  more  plants.  This  of  power  and  the of  nuclear  benefits  developing  to  The  cooperation.  of  criticism  generating  society  as  a  facilities  whole  nations.  a CANDU r e a c t o r  credit.  type  to  exporting  Korea  does,  nations  The t o t a l  value  are of  however, slowly the  Korean  163  sale  is  being the  estimated  provided  Royal  to  by  Bank  the  and  EDC wiI I p r o v i d e  be  a group  secured  by  the ECGD's  British  exports.  The credit  has  to  of  $700 m i l l i o n  and  Canadian  the  Canadian will  of  the  international  in  each of  the  various  and m e t h o d s  of  Exim 8ank,  example,  now p r e p a r e d  export  to  complete  prepared  to  providing down  provide  local  to  project.  financing  finance  banks  headed  wi I I  the  Bank  The B r i t i s h  project  is  by Ltd.  provide  $50 m i l l i o n  cost  financing  to  and  financing. is  really  in  the  agencies  capital  "local  The J a p a n e s e  local  cost  to  an banks,  support  will  be  provided  field  of  export  striving  to  develop  equipment  offer  up  costs"  to  15$ o f  which  are  the Europeans In  effect,  a means  of  exports. the  value  necessary  are  the  The  also  practice  reducing  the  of  purchaser's  payment. France  and  protect  the  and  Netherlands  the  losses If  is  components  the  banks  competition  new t e c h n i q u e s  the  financing  by Hambros  exports.  of  the  Korea.  resulted  of  headed  provide cost  and  Canadian  banks  guarantee,  intense  for  of  British  support  The b a l a n c e of  of  a consortium  $ 3 0 0 mi I I i o n  $30 m i l l i o n  the R e p u b l i c  excess  EDC,  additional  by  in  exporter  occuring  guarantees  as  Italy against  are  a result  against exporter  prepared of  foreign  the  will  the  marketing  sphere.  The W o r l d  Bank  has  have  increased  also  agencies, world  already  changes currency  easily  also  a system  costs, to  the  to  to  Germany  guarantees  against  of  losses  extend  successful  guarantees France,  value  exchange  be a b l e  been  while  provide  in  of  in  foreign are  his  certain  currencies.  offered  activities  introducing  a  by into  joint  164  financing World of  technique  Bank  the  conjunction  country  developed export in  in  to  obtaining  credit in  the  used  five  the  register  This  times  claimed  to  bid  the  nations  can  methods. flows  of  as  the World  that  second  Each it  nation capital By  the  "aid"  the  LDC  on W o r l d  to  the  could  the have in  it  of  establish  be  assigned  outstanding  at  any  assume  some  the  last  method,  and  the  system  with  all  inherent  dangers  Colombia,  E x i m Bank are  a result,  the  in  U.S.  general  trade  LDCs  be  to  body,  amount Each  for  ensuring  maintained.  of  each  external  developed that  priority  the  such  needs of  time.  evolve,  their  Commission.  credit  higher  patterns.  increase  international  in  Bank  three  Pearson  a maximum  to  the Exim  would  the  all  began  of  by  a  been  one  likely will  and  had  LDCs by  responsibility  one most  the  certainly  technique  review  the  is  in  developed  point  were m e e t i n g  and  the  an  and  terms  competition  developed nations  funds  the  that  recommended  coordinate  national  historical  appears  growth  method, the  exports  its  disrupting  study  would  as  term  the  exporters  and  long  of  the  The U.S.  of  successful  Mexico  supplier,  needs  are  to  this  Brazil,  the  Interested  cooperation  would  turn  equipment  was  economic  latter  in  as  The  who  All  be no  after  contracts  \% f i g u r e  to  can  reviews  amount  suppliers  advance  There  process. Bank  method,they Bank,  of  would  first  in  dominant  this  the  a certain  However,  technique  support  By  the  concluding  By  agree  finance.  credit.  contracts.  projects  the  to  project  In  is  nations  for  international  finance  opposition  reluctant  larger  direction.  U.S.  provide  credit. of  development  developing  equipment  must  type  to  the  to  the  and  application  capital of  credit  the  an  agree  export  right  where  with  agencies  field.  step  then  portions  of  export  prepares  their  granting  conditions  areas  and  nations  credit  credit  to mix  its needs.  existing  debt  165  FOOTNOTES  CHAPTER  !•  C a n a d a , P a r l i a m e n t , House of Commons, S t a n d i n g C o m m i t t e e T r a d e and E c o n o m i c A f f a i r s , M i n u t e s o f P r o c e e d i n g s ApriI  13,  1973.  P.  Export  Development  3.  Craig,  Alexander, "Nuclear Post,  Jan.  C o r p o r a t i o n , Annual  10,  6.  27,  1975.  June  _, " D o e s  Solomon,  Hyman,  Post, Loc.  Craig,  Buy  13  be A l r i g h t " ,  the M u l t i n a t i o n a l p. 150  Canadian  for  1974, V o l .  Goods",  The F i n a n c i a l  Corporation",  Financial  More 47,  Canadian No.  6,  p.  Business",  Post,  Post.  Aug.  "Prospects  Slip  1976.  23, for  1975,  p.  Canad i an  59  T a k e Optimum A d v a n t a g e  February 21,  A.,  pp.  cit.  , "Nuclear Vancouver Loc. •  p.  of T r a d e  Fairs",  C-5  Poor N a t i o n s " ,  The F i n a n c i a l  p.34  cit.  ''•  12.  Must  1974.  DI  Canada  The F i n a n c i a l  10.  to p.  Report  p.6  _, " T h e C z e c h P l a n Business,  9.  1976.  , " T h e y Want Sept.  8.  Agreements  Z e n o f f , David B., ' T h e F u t u r e of E u r o m o n e y , S e p t e m b e r 1975.  5.  on F i n a n c e , and E v i d e n c e ,  I 1:16  2.  4.  VI  cit.  Sun.  p.  6  Power|ndustry ApriI  19,  1976.  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Baltimore,  John  Hopkin  University  172  APPENDIX  I TABLE I  WORLD TRADE BY REGION, VALUE  IN MILLIONS EXPORTS  COUNTRY OR OF  U.S.  DOLLARS  F.O.B. 1948  WORLD DEVELOPED  NATIONS  LESS DEVELOPED COUNTRIES CENTRALLY PLANNED ECONOMIES U.S.A. CANADA LDCs-AMERICA EUROPE EEC EFTA LDCs CENTRALLY PLANNED  ECONOMIES  SOUTH AFRICA LDCs-AFRICA JAPAN DEVELOPING MARKET ISREAL MIDDLE EAST OTHER  •  DEVELOPED MARKET ECONOMIES OCEANIA LDCs-OCEANIA  United Volume  1958  1968  1974  57500  108600  239700  842500  36600 17200 3700  71400 24900 12300  168700 43700 27300  542800 228800 70900  12545 3109  17755 5045  34191  7460  12602  97144 32784  9600  13850  48610  13740 3270 770  34380 6430 1 170  82830 15330 3350  274620 49360 13270  3200  10320  25230  64960  557  1096  2109  3030  4650  9690  38810  258  2877  12972  55536  1410 5200  139 4070 6420  602 8630 1 1 180  1737 93840 46180  520  1970  2080  5950  2130  2320  4320  12940  70  140  340  4977  ECONOMIES-ASIA  CENTRALLY PLANNED ECONOMIES-ASIA  :  AREA  Nations, I, T r a d e  Y e a r b o o k of By C o u n t r y .  International 1975. p . 17.  Trade ~~~  Statistics. '  1340 1974. 1  APPEND IX II EXPORT  DEVELOPMENT  CORPORATION  INFORMATION REQUIRED IN AN APPLICATION FOR SECTION 29 OR 31 FINANCING TO B E X P O R T  F I N A N C E  E S  U  B  M  I  T  T  E  D I V I S I O N , E X P O R T P  .  O  . Box  6  D I  NT  R  I  P  L  I  D E V E L O P M E N T 5  5  , O  T  T  A  W  C  A  T  E T  O  :  C O R P O R A T I O N , A 4  .  Commitments of long term export financing under Sections 29 or 31 of the Export Development A c t are given only on the basis of an application submitted by the Canadian prime exporter requiring long term financing to obtain a major order of capital equipment, a n d / o r engineering services for a sound transaction or project abroad. N o commitment of any kind can be given by the Export Development Corporation until full particulars of the transaction or project have been submitted. T h e Canadian exporter applies for the credit on behalf of the foreign borrower; therefore the application must include complete and detailed information which may be obtained only from the borrower. T h i s form is to be regarded as a guide to the information required and not as a questionnaire to be completed with brief answers. A n y additional relevant information not specifically called for under the listed headings should definitely be included in the application. 1  It is essential that satisfactory feasibility studies, tender specifications and/or other  reports be presented with the application to establish the technical and economic soundness of the transaction requiring financing. Detailed answers to the questions asked hereunder do not preclude E D C from requesting further information relating to the transaction at a later date.  GENERAL SUMMARY 1. Name of Exporter:  2.  (a)  H e a d Office address  (b)  Plant address  Name and address of prospective foreign buyer.  3. Outline of the project indicating the total cost, total foreign exchange cost and the amount of E D C financing requested.  List the major equipment, materials and services to be  supplied from Canada showing their dollar value.  INFORMATION CONCERNING EXPORTER 4 . Describe exporter's corporate history and operations, including subsidiaries,  affiliates,  major shareholders and parent company (if any.)  5 . If the exporter is a subsidiary, does it have complete freedom to initiate export business? If not ivliat manufacturing and/or selling limitations are placed on its. operations by the parent company? 6 . Attach audited financial and ancillary statements of exporter for the past five years. F o r each of the past five years list exporter's total domestic and export sales, domestic and export sales of equipment of the type requiring present financing. 7. O n the basis of existing plant capacity state in dollar value: a) maximum output, b) optimum output, c) normal output, d) present output, e) level of output if proposed project undertaken.  174 8. S h o w the n u m b e r o f e m p l o y e e s o f e x p o r t e r as of t h e latest a v a i l a b l e d a t e a n d as of a t least o n e y e a r a g o . G i v e e x p o r t e r ' s a v e r a g e a n n u a l e m p l o y m e n t o v e r t h e past five y e a r s . 9.  D e s c r i b e the e m p l o y m e n t  s i t u a t i o n i n t h e a r e a where p r o d u c t i o n facilities a r e l o c a t e d ,  g i v i n g t h e latest n u m b e r a n d p e r c e n t a g e o f u n e m p l o y e d , a n d for t h e last three y e a r s .  10. INFORMATION CONCERNING BORROWER (IF IN PRIVATE SECTOR) (a)  D e s c r i b e b o r r o w e r ' s c o r p o r a t e h i s t o r y a n d o p e r a t i o n s , i n c l u d i n g s u b s i d i a r i e s , affiliates, m a j o r s h a r e h o l d e r s a n d p a r e n t c o m p a n y (if a n y ) .  (b)  A t t a c h a u d i t e d f i n a n c i a l a n d a n c i l l a r y s t a t e m e n t s of b o r r o w e r for t h e p a s t five y e a r s , i n c l u d i n g d e t a i l s of p a y m e n t t e r m s a n d i n t e r e s t rates o f b o r r o w e r ' s p r e s e n t o u t s t a n d i n g debts.  (c)  A t t a c h borrower's (i)  balance sheet  (ii)  income  forecast:  statement  (iii) s t a t e m e n t o f source a n d a p p l i c a t i o n o f f u n d s i n c l u d i n g w o r k i n g c a p i t a l (iv) c a p i t a l e x p e n d i t u r e  schedule  ( N . B . : forecast s h o u l d c o v e r t h e p e r i o d o f c o n s t r u c t i o n a n d e x t e n d for a f u r t h e r p e r i o d o f a t least five (d)  years)  P r o v i d e details of a d d i t i o n a l e q u i t y a n d d e b t  financing  contemplated b y the borrower  d u r i n g t h e a b o v e forecast p e r i o d . (e)  If b o r r o w e r is u n d e r t a k i n g a n e w v e n t u r e , o r e n t e r i n g a n e w field of a c t i v i t y , i n c o m p l e t e d e t a i l p r o v i s i o n s w h i c h w i l l be m a d e for s u p p l y o f e x p e r i e n c e d  supply manage-  m e n t d u r i n g t h e first five y e a r s o f b o r r o w e r s p r o p o s e d o p e r a t i o n s . o  11. INFORMATION CONCERNING BORROWER (IF IN PUBLIC SECTOR) (a)  P r o v i d e t h e e x a c t n a m e of g o v e r n m e n t  department, agency or entity  that will be  a c t i n g as b o r r o w e r . (b)  If b o r r o w e r is a g o v e r n m e n t o w n e d o r c o n t r o l l e d a g e n c y o r e n t i t y , s u p p l y a c o p y o f t h e s t a t u t e o r decree e t c . e s t a b l i s h i n g t h e o r g a n i z a t i o n .  (c)  Does the central government  guarantee  the p a y m e n t  of all the borrower's  capital  debts? If n o t p r o v i d e the i n f o r m a t i o n r e q u e s t e d i n S e c t i o n 10(a) t o (d) i n c l u s i v e .  12. INFORMATION CONCERNING PROJECT D e s c r i b e t h e p r o j e c t f u l l y , g i v i n g d e t a i l e d i n f o r m a t i o n o n the f o l l o w i n g : (a)  n a t u r e of p r o j e c t  (b)  location  (c)  economic a n d technical  (d)  viability  (e)  national a n d regional importance i n the i m p o r t i n g c o u n t r y  (f)  f u r t h e r e n g i n e e r i n g before c o n s t r u c t i o n  (g)  w h e t h e r sale w i l l be o n a f.a.s. o r c.i.f. basis — if f.a.s., w i l l i n s u r a n c e c l a i m s be p a i d i n  soundness  C a n a d i a n or U . S . dollars?  commences  175  (A)  TIMING  S t a t e t h e a n t i c i p a t e d p e r i o d s a n d / o r d a t e s for t h e f o l l o w i n g w i t h reference t o the (a)  project:  completion a n d / o r start u p  (b)  construction period  (c)  d e l i v e r y p e r i o d of t h e e q u i p m e n t / m a t e r i a l a t site  (d)  p l a c i n g of o r d e r s  (e)  s i g n i n g of a c o m m e r c i a l  (B)  agreement.  COSTS  P r o v i d e d e t a i l s of p r o j e c t costs as f o l l o w s : (a)  t o t a l cost of p r o j e c t  (b)  l o c a l costs a n d h o w  (c)  foreign e x c h a n g e c o s t s ( C a n a d i a n )  (d)  foreign e x c h a n g e c o s t s ( N o n - C a n a d i a n ) a n d h o w  (e)  f o r e i g n a g e n t s c o m m i s s i o n , o t h e r c o m m i s s i o n s , fees a n d r o y a l t i e s (if a n y ) a n d  financed  financed how  financed (f)  e x p o r t e r ' s a n t i c i p a t e d n e t p r o f i t after i n c o m e taxes.  (C)  CANADIAN  C O N T E N T  S t a t e the o v e r a l l p e r c e n t a g e of C a n a d i a n c o n t e n t of the p r o j e c t c a l c u l a t e d a c c o r d i n g to E D C c r i t e r i a . I n d i c a t e the e q u i p m e n t , m a t e r i a l a n d / o r services to be s u p p l i e d b y t h e e x p o r t e r a n d b y h i s m a i n s u p p l i e r s , g i v i n g n a m e s of s u p p l i e r s , a n d d o l l a r v a l u e s .  F o r equipment or  m a t e r i a l s p u r c h a s e d i n C a n a d a i t s h o u l d be r e c o g n i z e d t h a t m o s t i t e m s h a v e n o n - C a n a d i a n c o n t e n t w h i c h s h o u l d be c o n s i d e r e d w h e n c o m p u t i n g the o v e r a l l C a n a d i a n c o n t e n t o f t h e project.  (D) T E R M S  OF  financing  FINANCING  REQUESTED  (a)  state  (b)  s u p p l y d e t a i l e d a n d verified i n f o r m a t i o n j u s t i f y i n g t h e  t e r m s r e q u i r e d for p r o j e c t  (c)  s t a t e n a m e of a g e n c y o r d e p a r t m e n t of g o v e r n m e n t w h i c h w i l l p r o v i d e g u a r a n t e e of  (d)  state n a m e of c e n t r a l b a n k , etc., w h i c h w i l l p r o v i d e g u a r a n t e e  w h a t is foreign c o m p e t i t i o n  financing  t e r m s r e q u e s t e d (i.e.  offering?)  p r i n c i p a l a n d interest of foreign  exchange  availability.  13. BENEFITS OF T H E PROJECT TO THE ECONOMY OF THE IMPORTING COUNTRY (a)  A s a r e s u l t o f t h i s p r o j e c t c o m i n g i n t o p r o d u c t i o n w h a t e c o n o m i c benefits importing  (b)  country  derive,  including employment,  use of  domestic  a d d i t i o n a l r e v e n u e to the g o v e r n m e n t a n d foreign e x c h a n g e  savings?  raw  will  the  materials,  If the i m p o r t i n g c o u n t r y has a N a t i o n a l D e v e l o p m e n t P l a n , a t t a c h a c o p y of the P l a n a n d g i v e the p r i o r i t y of t h i s p r o j e c t u n d e r the P l a n .  176  14. BENEFITS OF THE TRANSACTION'TO THE CANADIAN ECONOMY (a)  D e s c r i b e a n y special i n d u s t r i a l a d v a n t a g e s to be d e r i v e d from this t r a n s a c t i o n in t e r m s of u t i l i z a t i o n of l a b o u r force a n d p l a n t c a p a c i t y , o f assistance o r e n c o u r a g e m e n t in d e v e l o p i n g n e w designs o r lines of p r o d u c t i o n , a n d o f i n c r e a s i n g C a n a d i a n m a n u f a c t u r e of e q u i p m e n t o r c o m p o n e n t p a r t s .  (b)  S p e c i f y t h e e x p o r t t r a d e p r o m o t i o n benefits t h a t m a y be e x p e c t e d t o result f r o m t h i s transaction with regard to: (i)  direct market development  prospects  in the c o u n t r y  of purchase a n d i n the  general a r e a ; a n d (ii) (c)  c o n t i n u i n g m a r k e t for r e p l a c e m e n t p a r t s of C a n a d i a n o r i g i n .  W h a t w i l l be t h e d i r e c t a n d i n d i r e c t l a b o u r effects i n C a n a d a : (i)  for t h e a p p l i c a n t c o m p a n y  (ii)  for e a c h o f t h e m a i n a s s o c i a t e d firms a n d s u b - c o n t r a c t o r s ; a n d  (iii) f o r t h e t o t a l t r a n s a c t i o n  15. C E R T I F I C A T I O N Please c e r t i f y as f o l l o w s : W e c e r t i f y t h a t t h e r e p r e s e n t a t i o n s m a d e a n d facts s t a t e d b y us a r e t r u e , a n d t h a t we h a v e h a v e n o t m i s r e p r e s e n t e d o r o m i t t e d a n y m a t e r i a l fact w h i c h m i g h t h a v e a b e a r i n g o n t h i s a p p l i c a t i o n , a n d f u r t h e r c e r t i f y t h a t n o fees, c o m m i s s i o n s , g r a n t s , gifts o r p a y m e n t s o f a n y k i n d o t h e r t h a n those listed i n t h i s a p p l i c a t i o n h a v e been p a i d o r w i l l be p a i d t o a n y o n e i n C a n a d a o r a b r o a d i n c o n n e c t i o n w i t h t h i s t r a n s a c t i o n o r a p p l i c a t i o n for f i n a n c i n g .  Name of Company Signature  (TITLE)  6  Address  Date  FIN—01—8-69  19  


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