Ian Pearson MP

BRITISH EXPORTERS ASSOCIATION

Trade is the backbone of the global economy and it has expanded massively over the past 50 years as a result of the gradual removal of trade barriers and the progressive introduction of new technologies.

Not surprisingly, most of this surge has taken place in the industrialised world. But production patterns are changing rapidly and we must be ready to face ever tougher competition, in particular from the powerful economies developing in China and India, and from the greater integration of Brazil and Russia into the global economy.

The imminent trade talks in Hong Kong offer the chance to extend the prosperity that comes with trade throughout the developing world. We must tear down the barriers to trade which have kept out products from the developing world for far too long. It must also give these countries the flexibility they need to ensure that any liberalisation of their markets is in line with their national development priorities. This approach will not only benefit developing countries – but by securing better value products, including imports – it will be good for the British economy too.

Many of you will know I was delighted to be offered the job of Trade Minister since it gives me the chance, which I am seizing with both hands, to play a lead role in promoting UK exports. This job takes me all over the world and you can be sure that I am banging the drum for UK exporters wherever I go.

I recognise that the Export Credits Guarantee Department (ECGD) has a vital role to play in supporting exporters, and thus the wider UK economy. And I know that when ECGD support is required, it really is needed. The Governments’ commitment to ECGD has been underlined by the way in which we’ve supported it through further operational changes over recent months.

Change at ECGD has sometimes been a talking point and we should be clear what is driving further change. You will know that ECGD has experienced a downturn in its business levels in the last few years. This is not unique to ECGD, but is also the case for a number of other export credit agencies’ business, but not all.

ECGD’s business levels are very dependent on the needs of the relatively small number of companies that operate within the capital goods and associated service sectors, selling in markets where export credit agency support is required to complement private sector sources of finance. Furthermore, today’s benign global risk environment, with buoyant liquidity conditions in international capital markets, historically low long-term interest rates, and positive investor appetite for the emerging market asset class, has meant that the banks and private sector insurance providers are able to meet the needs of exporters when they might otherwise approach ECGD for support.

And this is as it should be: it is essential that ECGD should complement, not compete, with the commercial market.

Providing such a niche service by stepping into the areas where the market lacks appetite, at the highly professional standards exporters require, is by no means straightforward. However, I know that ECGD’s management team recognises the challenges it faces and is rising to them.

The Government is fully behind ECGD’s efforts to get its cost base in line with its predicted future income and to secure continuously improved efficiency. Implementation of its cost and efficiency plan should be completed by March of next year. ECGD is working hard to achieve this goal while remaining sensitive to the needs of its most important resource- its staff. It will provide a solid foundation for the Department to move forward as a leaner organisation, more focused on customers’ requirements and more able to meet the demands of an ever-changing risk environment.

ECGD launched itself as a Pilot Trading Fund in April this year and it is already benefiting from greater operational autonomy now that the Treasury has taken a step back from cover and pricing decisions, which, in practice, means that customers can expect speedier decision-making and greater clarity from ECGD.

I know that there has been a debate in the past about whether ECGD should re-introduce a Bond Support Scheme and that my predecessor, Mike O’Brien, decided not to do so in 2003. I have asked officials to consider the Association’s recent paper setting out the case for making such a product available. I have an open mind, but to justify exposing taxpayers to additional risk we must see evidence that the commercial bonding market is failing credit-worthy companies and that any scheme could be funded to meet ECGD’s financial objectives.

Another area of ECGD policy in which the British Exporters Association has been pressing for change is ECGD’s foreign content regime. Reflecting its greater operational autonomy, ECGD is now in a position to set its own rules concerning the amount of foreign content it can support. A consultation on this issue, to be launched shortly, will provide you all with the opportunity to tell ECGD what changes you think should be made.

It is important that we should listen carefully and weigh-up all the arguments in considering what ECGD can, or should, do in respect of changes to its product range. For example, following consultation, ECGD recently took the decision to retain the standby arrangements for short-term reinsurance.

I am keen that ECGD creates a greater awareness of its products on the part of banks, insurance markets and, particularly, SMEs. It is in partnership with organizations such as the British Exporters Association that this can happen. ECGD hopes to spread the word about the services it provides.

I should also mention an issue which has caused much vexed public debate over the past couple of years. Bribery and corruption is always wrong. And any suggestion that ECGD is indirectly supporting such activities misrepresents the Government’s and ECGD’s determination to combat it. ECGD recently published an Interim Response to the public consultation on its anti-bribery and corruption procedures conducted earlier this year.

This Interim Response confirmed that ECGD has come to a settled view on the underlying principles in this area including that the department should never be kept in the dark when there is a chance that its being so could leave it picking up the tab for corrupt activity. But we also announced a further short consultation on how we give effect to this principle in the most practical way.

This further round of consultation will also ensure that ECGD has the benefit of consultees' views on important practical details before final decisions are made. I would urge you to take up the opportunity to submit representations which set out your detailed views. I am eager that we should ensure that procedures are robust in their effect on bribery and corruption whilst being as workable as possible.

Finally on ECGD, I want to face squarely concerns expressed in some quarters that ECGD is uncompetitive by comparison to other export credit agencies and that its cover and pricing policies are putting its customers at a disadvantage.

ECGD is bound, quite properly, by some strict financial objectives. But to put things in perspective ECGD only prices for sovereign risk above minimum OECD benchmark rates in four markets considered important for project business: Indonesia, Iran, the Philippines and Saudi Arabia. And ECGD has extended the amount of cover available on a number of other key markets on which it already has large exposures, including in addition to those four markets, South Africa. Moreover, you should remember that ECGD gives 100% guarantees on its finance products, unlike many export credit agencies.

I do want to see a “level playing field” and the UK is pushing, using our current chairing of the G8 and our presidency of the EU, to advance this agenda. This work includes prescribing that premium rates should be fully reflective of both sovereign and, where present, corporate risks, and reaching agreement on the need for greater transparency and consistency in financial reporting standards.

As I know that you have a strong interest in the future of UK Trade & Investment (UKTI) I will say a little about the work that it is doing.

I know some are anxious that certain changes we have undertaken might undermine export performance at a time when firms are facing strong international competition.

Neither UKTI nor indeed Government claims to be able to alter macro-economic factors to increase UK exports on its own. However, it can help at the micro level, by helping individual companies develop their business internationally, and by attracting high quality inward investment. Collectively, this can have positive knock-on effects to the economy as a whole.

UKTI’s aim is to target support at the UK companies who need it most: principally new exporters, where market failure is most acute. However, established exporters will continue to benefit from assistance and advice, including political support through their global overseas network.

Trade Missions are a good example of effective targeting. Support is now more focussed on those companies which are new exporters and taking part in overseas exhibitions; established exporters going to events in India and China as markets that are new to them; and the organisation of overseas missions and seminars to promote UK sectors to an international audience.

We must look to deliver a better and more targeted service, which provides better value to the taxpayer. This means moving more of our resources closer to the customer and rationalising and revitalising the trade services framework to ensure greater clarity and coherence for customers.

I know that a number of Trade associations have expressed concerns about changes being proposed. I will continue to meet with them and exporting companies and keep our policy under review.

UKTI is going in the right direction. It is facing changes and challenges. But it is important to know that UKTI’s strategy is customer driven and about putting our resources where they can make most difference.

Finally, I would like to move on to say a few words on the recent trade issues with the US and China.

I remain keen to see a negotiated solution to the Airbus/Boeing trade dispute and fully support Peter Mandelson's efforts. However, if a balanced solution cannot be found, the EU will robustly defend its support for Airbus in the World Trade Organisation.
In terms of the China textiles issue, growing pains from China's integration into the world trading system are inevitable. I firmly believe that the EU must rise to these economic challenges, by moving up the value chain. Protectionism is not the answer.

Ladies and gentlemen, may I end by proposing a toast to the continued success of the British Exporters Association.