Financing Global Destruction
As more people join the campaign against the World Trade Organization (WTO) and other agents of corporate globalization, they should be aware of equally destructive entities that lurk practically unnoticed in their own countries.
Like the WTO, export credit agencies (ECAs) pursue a corporate agenda, operate in secret, trample on human rights, and ravage the environment. The difference is that ECAs use billions of public dollars to do so.
ECAs are government agencies that promote corporate exports and investments broad. By providing taxpayer-backed loans, guarantees, and insurance, they enable companies to penetrate foreign markets and secure new investments in developing countries and emerging economies.
Collectively, ECAs are the world's largest public finance institution, subsidizing more than ten percent of world trade. In 1997, ECAs approved $105 billion in new loans and guarantees half of them for large infrastructure projects in developing countries.
ECAs have no policies requiring public disclosure or environmental impact assessments. They make decisions in secret, using advisory boards comprised entirely of businesspeople, many of whom are connected with companies that benefit from ECA guarantees.
In fact, few are even concerned with the economic viability of the activities they sponsor and, according to Transparency International, frequently support projects associated with large-scale corruption and mismanagement.
As a result, projects rejected by international development banks and bilateral aid agencies on the grounds that they are environmentally, socially, and/or economically unsustainable are being underwritten by ECAs using taxpayers' money.
The most horrific example of this is the Three Gorges Dam on China's Yangtze River. The world's largest hydroelectic project is also widely viewed as its most environmentally and socially destructive. The dam will forcibly displace 2 million people and submerge arable land and archaeological sites. Within 50 years, sediment is expected to fill much of the reservoir, impairing power production, impeding navigation, and increasing the risk of a catastrophic collapse.
After the World Bank and the US Export-Import (Ex-Im) Bank refused to support the project, the standards-challenged ECAs of Germany Switzerland, Japan, Sweden, Canada, and France scrambled to provide hundreds of millions of dollars to help their country's companies build the dam.
The Ex-lm Bank has joined other ECAs in supporting Turkey's environmentally destructive Ilisu hydroelectric dam with $850 million in export credits and guarantees. The Ilisu will forcibly displace more than 15,000 (principally Kurdish) refugees, flood 52 villages and 15 towns (including a protected medieval site), and enable Turkey to block the flow of the Tigris River to Iraq, further enflaming regional tensions. The project violates World Bank guidelines and core provisions of a key UN convention on water.
ECAs are particularly eager to help developing countries build nuclear power stations. The ECGD (Britain's equivalent to the Ex-Im Bank) has backed two plants in China, and Canada's ECD is backing the sale of Candu nuclear reactors to Korea, Romania, and China--despite the fact that seven Candu models were shut down in Ontario for safety reasons. In March, Germany's EGA, known as Hermes, approved credit guarantees for three atomic power stations overseas.
These same governments are allowing their ECAs to finance the construction of coal-fired powerplants and oil and gas projects in developing and former-Communist countries--while simultaneously acknowledging the need to reduce greenhouse gases.
Between 1992 and 1998, Ex-Im and the government-backed Overseas Private Investment Corporation provided $23.2 billion for coal, oil and gas projects.
The ECGD is backing the construction of four coal-fired power plants in China and an enormous coal-fired plant in India. And Japan's JEXIM provided a $64 million loan to finance Brazil's Urucu Gas and Oil Project, which involves constructing a processing plant, two 500-km pipelines, and service roads running the length of the pipelines in the heart of the Amazonian rainforest.
The Japanese, US, and German ECAs have offered $3.9 billion in loans and guarantees for the massive Paiton coal plant complex in Java, Indonesia, which the Wall Street Journal reported in December 1998 is riddled with corruption.
In every instance, renewable energy options were ignored, making developing countries more dependent on fossil fuels at a time when the world needs to take rapid steps to end its dependence on them.
The only beneficiaries of ECAs are large corporations, for whom they effectively serve as giant welfare providers--thus exposing the supposed superior efficiency of the global "free trade" economy as a hollow sham.
To avoid the risks involved in operating overseas, corporations obtain insurance from an EGA, which guarantees to pay them for the costs of the exported goods or the services if the importer defaults or the project fails. The ECA passes these costs on to the government of the importing country, adding to its foreign debt. In fact, one-quarter of developing countries' total external debt and over half of their government debt is now owed to ECAs, causing a huge drain on scarce resources.
For nearly three years, a group of about 140 non-governmental organizations has been campaigning for radical ECA reform. They've called for greater transparency and public participation in decisionmaking, mandatory independently prepared environmental and social impact assessments, and screening procedures to prohibit harmful projects. They've also urged governments to adopt common environmental and social standards for all ECAs within two years.
The leaders of the G-8 countries have agreed to some of these reforms, and have called on members of the Organization for Economic Cooperation and Development (OECD) to negotiate common environmental standards by June 2001. Progress has been extremely slow, however, and with little pressure for real change, there is a serious risk that the OECD talks will break down.
ECAs are among the last bastions of publicly sponsored corporate misrule. It is high time that this gross misuse of public resources is brought to an end.
Simon Retallack is deputy editor of the Ecologist's special issues. This article is excerpted from a report in the June 2000 Ecologist based on research by ECA-watch, the Corner House, Environmental Defense Fund, and Friends of the Earth UK.
© Earth Island Journal, Winter 2000-2001