Further Developing Government Export Protection

Port in Hamburg ©Monikawl

The risks in international trade are increasing. In addition to economic risks, there are also political uncertainties. Rising nationalism, protectionism, and Brexit are just a few examples. This makes it all the more important for the state to safeguard exports so that German industry can continue to compete internationally. In order for export guarantees to remain attractive, it must be continually adapted to new market conditions.

In order to be able to carry out export business, companies need reliable financing and protection for their export business. The export credit guarantees of the Federal Government, the so-called Hermes Coverage, are therefore an important component of German foreign trade promotion. The safeguards protect German companies against economic and political risks. 

Export Credit Guarantees Granted by the German Government in 2018

According to the Federal Ministry of Economics and Energy (BMWi), the Federal Government secured German exports worth 19.8 billion euros with state export credit guarantees against payment defaults in 2019. Exports to emerging and developing countries accounted for 74.3 percent of this total. There was a significant increase in the volume of cover for deliveries and services to Africa, which increased by a good two-thirds from 1.1 billion euros to 1.8 billion euros.

Avoiding Distortion of Competition

For the export credit agencies of the OECD member states, the requirements of the OECD Consensus are decisive. In this agreement, the OECD states have agreed on uniform minimum standards for payments and credit periods in order to ensure a level playing field in the field of export credit insurance. Due to the increasing number of international competitors, German companies are coming under increasing pressure. Asian competitors not bound by OECD guidelines are increasing their competitiveness through high government subsidies and financing credits. But even within the OECD, there is a "race to the bottom" for financing conditions that do not comply with OECD rules. This risk of ruinous subsidy competition must be limited. The BDI is therefore committed to modernising the OECD Consensus, the only way to create a level playing field. This must reflect the realities of the market.

Small Tickets

“Hermes coverage” is intended above all to help small and medium-sized enterprises to open up new markets, especially in emerging and developing countries. But the road to Hermes coverage is long and complex. The Federal Government has reacted to this by developing click & cover, which enables standardised transactions and financing to be digitally covered quickly and easily. However, the financing of so-called "small tickets," for contract values of less than five million euros, remains a challenge. It is therefore important that credit institutions offer "small tickets" so that SMEs can also finance foreign projects with smaller volumes.

BDI Recommendations

  • State export protection must be regularly reviewed for changes in the world market. The instrument must be practical, close to the market, flexible and simple for companies.
  • The OECD must modernise its regulations, with the aim that competition among exporters is based on the price and quality of products, and not on the extent of government support.