Export Credits
The OECD Consensus, which is binding on all OECD countries, sets common minimum standards for the inclusion of local costs for export credits that are supported by a state export credit agency or with public funding.
Over the past decades, the OECD Consensus has turned into a competitive disadvantage for construction exporters from OECD countries vis-à-vis their competitors from outside the OECD area because it prevents contractors to use the optimal balance between national, foreign and local costs in case of support by an OECD export credit agency.
OECD Consensus does not reflect reality in international construction export
The nature of the construction business in the 21st century requires with very few exceptions local production. Building and civil works substantially differ from the export of capital goods and it is indispensable to source locally to a maximum extent instead of artificially sourcing inputs in third countries due to OECD restrictions on local costs. Nowadays, construction exporters from the OECD region need to be in a position to partner with local construction companies, either as joint venture partners or as subcontractors, and to rely on the local labour force and local construction equipment in order to stay competitive.
EIC Position on OECD Local Cost rule
EIC holds that the systematics of the OECD Consensus’ Local Costs rule adheres primarily to the sphere of capital goods for which the export contract value can be defined easily as the local cost component is an ancillary element of the export contract. In case of construction export services, however, the distribution between export contract value und local costs is reverse to the extent that the local cost component is the most significant part of the total contract value. Against that background, it could well be argued that:
Construction Services should be exempt from the OECD Consensus altogether; or
The Local Costs definition should apply strictly to ancillary goods or services; or
The different treatment of foreign content and Local Costs is outdated and should be replaced by a consistent regime on third-country content to be regulated and administrated by each individual OECD member.
EIC proposes to change the rule that official support provided for local costs shall not exceed 30 percent of the export contract value to 50 percent and to further establish a Sector Understanding on Construction Services.