The Geneva Papers on Risk and Insurance, 22 (No. 82, January 1997) 413-425 The EU Proposal for a Council Directive on Export Credit Insurance: A Critical Evaluation by David Camino and Clara Cardone * 1. Introduction Export financial flows, whether direct or insured, are vital for the smooth functioning of the international trading system and all major exporting countries, including most Euro- pean economies, have established national schemes to assist and protect exporters by provi- ding financial and insurance facilities and reduce both the costs and risk involved in expor- ting. Assessing the effectiveness of these export promotion services is, however, a complex issue. Government reports have suggested uncertainty about support program effects on user firms and have highlighted the lack of clear evaluation criteria for such programs1. Even some doubts have arisen about the costs of such policies and the significance of the benefits obtained. Furthermore, some countries have viewed with growing concern the fun- ding and public involvement in export finance as a new form of unfair competition in the international markets. The EU Commission, concerned about the cost to national budgets of export credit insurance public policies (more than ECU 7 billion of losses for the EU country members in the last three years)2 has, after some hesitation, made up its mind concerning the harmo- nization of state-supported export credit insurance programs in the EU. Designed to facilitate cooperation among the insurance agencies in the EU, the propo- sed Directive would establish common principles for medium- and long- term export credit insurance guarantees and premiums. In doing so, it gives national regulatory authorities and insurance credit agencies room of maneuver on official supported export insurance policies, as Member States are very reluctant to give up what they consider part of their foreign policy (Commission, 1994 p.2). The aim of this paper will be then to assess the role of export insurance systems in the European Union at the light of the proposal for a Council Directive (1994) on harmoniza- tion of the export insurance main provisions. We will argue that the incentives induced by * Universidad Carlos III de Madrid and Fundación MAPFRE Estudios Madrid. 1 See Seringhaus EH. Rolf and Rosson, Philip (1990). 2 See Commission of the European Communities (1994, p.2) for the Proposal for a Council Direc- tive on harmonization of the main provisions concerning export credit insurance for transaction with medium- and long-term cover. 413