Nov 17, 1984

U.S. GEARING UP FOR BATTLE WITH EEC OVER EXPORT CREDITS.

BRUSSELS, NOVEMBER 15 (IPS-IFDA/YOJANA SHARMA) -- The United States is gearing up for a battle with the European Community over mixed export credits, generally used to subsidise the import by developing countries of manufactured goods and machinery.-

U.S. deputy secretary of the treasury Tim Mc Namar said in Brussels Wednesday the United States is determined to kill the use of mixed credits, which are a mixture of regular credits and government aid, often from development budgets.-

He said they merely compensate uncompetitive EEC industries to enable them to secure Third World markets.-

Mc Namar said the EEC and the United States must find a workable solution when they need to discuss export credits within the Organisation for Economic Cooperation and Development (OECD) December 10.-

"If we don’t find a solution it will be a very unpleasant situation", Mc Namar said.-

But France, in a meeting of EEC Finance Ministers Tuesday, refused to grant the EEC a negotiating mandate for the December meeting, which is aimed at bringing more "strict discipline" into export credits. France says the system is strict enough.-

U.S. sources say France granted some 68 percent of all the mixed credits granted by the OECD last year.-

OECD countries like France have been heavily subsidising export credits to boost trade and save flagging industries from closures.-

But the United States has been pushing for the elimination of the aid element from credits, saying it leads to unfair competition.-

Failing that it wants the aid component to be reduced to under a quarter of the total credit.-

This, it says, would force countries trying to win export contracts on the strength of high grant credits to dip into their own funds.-

Under the present OECD arrangement, the aid element must be at least one-fifth, and other OECD members must be notified of an aid element under 25 per cent so that they can come forward with counteroffers.-

But according to a recent letter to EEC vice-president Wilhelm Haferkamp, U.S. Treasury Secretary Donald Regan said Washington wants prior notification if the aid element is under 50 per cent, diplomats said.-

This would give the United States, which is often more competitive, the opportunity to undercut deals offered by other countries in situations where the U.S. product would be more competitive, even without the aid component.-

EEC sources say the effect of this would be to undermine the mixed export credits system, the overall U.S. goal.-

The EEC Executive Commission wanted a mandate to negotiate more transparent procedures by improving prior notifications above the 25 percent aid threshold and a clearer definition of "tied credit aid", but this was blocked by France.-

Mc Namar said the United States is disappointed at the French stand. He said he is sympathetically considering U.S. farmers' demands to raise export subsidies on farm goods if the EEC failed to reduce its use of mixed export credits.-

EEC Finance Ministers will meet again before December 10 in another attempt to thrash out a common position.-