Dáil Éireann - Volume 434 - 07 October, 1993

Adjournment Debate. - Export Credit Insurance.

Mr. Rabbitte: I understand the Cabinet, at its meeting today, decided to reintroduce export credit insurance for beef exports to Iran. While easy headlines have been inspired by lawyers' fees at the Beef Tribunal, this hugely controversial issue which was such a major issue before the tribunal has received very little analysis to date. Now that the Government has made its decision, there is a need to look at the economic rationale for awarding the benefit of export credit insurance to a third country, specifically, in this case, Iran.

What are the benefits which are conferred on a national economy through the provision of subsidised credit insurance to exporters? Exports that fall into this category of ECIS are uninsurable credit risks or risks that are only insurable at enormous cost. If the Government offers export credit insurance to Iran at low cost, what benefits to the national economy are thereby obtained and to whom to these benefits accrue?

In the specific case of beef, which is a product covered by EC intervention arrangements, the benefit to the national economy secured through having export credit insurance subsidies can be no greater than the excess of the Iranian price, inclusive of EC export refunds, and the floor price available in Europe. The exporter does not require State subsidised ECIS to get the floor price available in Europe. For example, if we take it that the Iranian price is £120 per tonne and the European floor price is £100 per tonne, it follows that the benefit to the national economy cannot exceed £20. In fact, it will be less than that because transport and other costs have to be taken into account. Therefore it is misleading [602] of the Government to argue by way of reference to gross value of exports to third countries achieved as a result of export credit insurance since this greatly exaggerates the national economic benefit of such schemes.

There may be an impact on the trading margins of the exporting companies which would be likely to improve their profitability but in economic terms that is not the same as increasing output or employment. In the case of commodity-type food exports, these are constrained by, for example, the availability of domestic supply. We saw the recent dramatic example of beef being sourced outside the State to fill contracts and the Irish taxpayer taking the full risk for UK suppliers. This must not be allowed to happen again.

The cost of providing export credit insurance is not immediately apparent. The State incurs a risk which may not be easy to quantify and charges a premium which everyone knows to be less than the commercial market would seek. In principle, the cost of an export credit insurance scheme is equal to the level of premiums which a commercial insurer would charge, less the amounts actually charged. Has the Government established what the London premium would be to cover these contracts, and if the London market is not quoting for such contracts at the moment, why does the Government consider it wise to reintroduce such cover given the extent of risk to the Irish taxpayer.

Minister for Tourism and Trade (Mr. McCreevy): I thank the Deputy for raising this issue. I believe the House is the appropriate place to set out the facts. This issue has been bandied about in the media in the past couple of weeks, giving rise to a misconception which I would like to clear up.

There has been much talk about the restoration of export credit insurance cover for Iran. We have not been off cover for Iran. Therefore, the question of restoration does not arise.

In the past few years the Iranian market has been closed to sales of Irish [603] beef. This was because of the BSE scare. We were satisfied that there was no BSE risk in so far as our beef was concerned, but I suppose the Iranians were being extra careful and did not distinguish between us and other countries. We made many attempts at ministerial and official levels to persuade the Iranians that Irish beef carried no health risk. These efforts have only recently succeeded and this led to a number of applications being made to my Department for export credit insurance. It was clear that these exports would be of tremendous benefit to Ireland. We had just reopened the market and it was obviously important that success on the veterinary issues should be followed up by sales which would prove our contention that our beef is safe.

There was also the attraction that the exports were of boneless beef, far more beneficial than the export of live animals or the putting of beef into intervention. However, the provision of cover for this beef would also increase our exposure on the market. I had to balance this against the possible downside. We had reports of [604] some difficulties in the market. I decided that the best course would be to take the matter to Government, given that the issues were of concern to many of my ministerial colleagues.

As the Deputy is no doubt aware, the Government considered the issue today and decided on the terms which should be offered to exporters. I believe what is on offered to exporters is realistic but not overgenerous in the current circumstances of the market. The terms would be more onerous than when beef was last exported to Iran but I think it appropriate that the sector should carry a fair proportion of the risk. My Department is advising the companies concerned of the terms.

An Leas-Cheann Comhairle: Deputies Andrew Boylan and Tony Gregory were selected to raise matters on the Adjournment but the Deputies subsequently withdrew their matters at the request of the Minister for Education who is indisposed.

The Dáil adjourned at 4.10 p.m. until 2.30 p.m. on Tuesday, 12 October 1993.