The Japanese Export Insurance Arrangements: Promotion or Subsidisation?

11 Pages Posted: 4 Feb 2005

See all articles by Jai S. Mah

Jai S. Mah

Dankook University - Faculty of Business and Economics

Chris Milner

University of Nottingham - School of Economics

Abstract

Japan has promoted its exports by reducing the risks accompanying overseas sales through short-term facilities for exporters. Short-term export insurance schemes operated in line with rules on minimum premia are not prohibited according to current international trade rules. The insured amount of underwriting has however grown steadily and the balance of accounts of export insurance has deteriorated over a sustained, 'long-term' period. The Japanese government has supported the system by reinforcing its financial base. In the 1980s and 1990s, the amount of claims was almost three times higher than premium incomes. Although the Japanese government may have subsidised exporters through the export insurance system, such subsidisation is notionally at least in accordance with the current regulations of the global trading system. The multilateral trading system has included export insurances at premium rates inadequate for covering the long-term operating costs and losses of the programmes in the list of export subsidies. The current Members of the WTO are obliged to abide by the Agreement on Subsidies and Countervailing Measures which comprises the illustrative list of export subsidies. However, the Agreement also stipulates that export insurances consistent with the interest rate provisions of the OECD Arrangement should not be considered as an export subsidy. Therefore, provision of export insurances not prohibited by the WTO regulations may be considered by developing countries undergoing trade deficits as a means of export promotion. Japan has done similarly for the past half century.

Suggested Citation

Mah, Jai S. and Milner, Chris, The Japanese Export Insurance Arrangements: Promotion or Subsidisation?. The World Economy, Vol. 28, No. 2, pp. 231-241, February 2005. Available at SSRN: https://ssrn.com/abstract=660668

Jai S. Mah

Dankook University - Faculty of Business and Economics

Seoul 140-714
Korea

Chris Milner (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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