Export Credit Agencies and the Privilege of Wealth in Global Value Chain Participation

ABSTRACT Public export credit agencies (ECAs) facilitate global trade by offering insurance to protect against the risk of non‐payment, provided minimum local content was produced. With the rise of global value chains (GVCs), exports often contain limited national content, and some ECAs argue that ‘national interest’ is more important. We examine how ECAs have responded through assessing the flexibility of policies to promote GVC participation. Qualitative evidence indicates ECAs pursue GVC participation, job creation and increased country competitiveness, often decreasing national content requirements to facilitate GVC participation. Our quantitative analysis provides converging evidence and suggests especially ECAs from countries with greater levels of income and competitiveness adopt more flexible policies. Their privilege of wealth results in a superior credit rating and allows richer countries to offer better‐priced financing. Thus, lower income countries are at a double disadvantage: less able to lower national content requirements and thus less likely to take advantage of or upgrade in GVCs, further entrenching inequalities between them and higher‐income countries. Long‐term, we suggest lower income countries should pursue collaborative arrangements so their ECAs can provide more sophisticated offerings and enter GVCs strategically. Short term, counter‐guarantee cover from international or regional bodies can make funding from lower income countries more competitive.