The main purpose of the Bill is to offer certain additional incentives to exporters to explore possibilities in dollar markets by bringing into operation schemes of insurance against certain risks which are inseparable from the export trade. I do not suppose it is necessary to speak at any length to convince the House that it is desirable that we should expand our export trade to dollar markets. Apart from balance of payments considerations which enter into the question, preliminary exploration of possibilities in these markets has shown them to be quite substantial, and we are anxious to encourage people to go after them, at least to the extent of providing for them the same facilities as exporters in most other countries enjoy.
We have not had here an export credit guarantee system similar to that operated in Britain over a number of years and, in effect, one of the primary purposes of the Bill is to permit such a system to be brought into operation. We set up an organisation called Córas Tráchtála, Teo., to supervise generally the extension of dollar exports and to take all practical measures to that end, including the making of proposals for legislation. That organisation consulted with a group of Irish insurance companies and arranged that the group would initiate a scheme of insurance against ordinary commercial risks incurred by exporters to dollar markets. The risks which that group of insurance companies will cover are those which normally arise in business, that is to say, the risk that the purchasers will not pay or will delay payment, involving the exporter in loss and similar commercial risks. It would not be appropriate for private insurance companies to insure exporters against what are called political risks. Consequently, it has been arranged to have a scheme of insurance against political risks carried out by this group of six insurance companies and underwritten by the Minister for Industry and Commerce, and the main purpose of the Bill is to empower the Minister to initiate such a scheme with that group of insurance companies and bring it into operation.
Political risks, apart from the obvious ones—the danger of war, civil commotion, violent upheavals, preventing the movement of goods or payment for them—are those which arise out of Government action, can celling of import licences, non-renewal of import licences, custom duty variation, imposition of restrictions by Governments on the transfer of funds and similar contingencies of that kind. The scheme may possibly cover, although I do not want this to be taken as definite, the danger of currency depreciation. The aim will be to offer to exporters to dollar markets complete coverage against commercial risks, carried by insurance companies on their own behalf as an ordinary business venture, and against political risks in which the insurance companies will act as agents for the Minister for Industry and Commerce and the Minister will receive the premium income subject to deductions to cover administrative expenses. Under the British Export Credit Scheme there was for a long period of years a substantial accretion of income, the amount secured through premiums exceeding the annual payments. But I notice that in the last few weeks, a Supplementary Estimate was introduced in the British Parliament to make good amounts lost by British importers because of restrictions on payments imposed by one country. That situation does not necessarily involve permanent loss and repayment may be secured sometime, but the private firms involved in the business are being recouped the amounts involved out of the British Export Credit Guarantee Fund.
The practice in Britain has been to vary the premium rate for insurance against political risks, according to the assessment of the risk involved. The scheme will be administered by the Minister for Industry and Commerce as appears in the Bill and he will have responsibility for the details of the scheme. In practice, however, Córas Tráchtála will advise him. Under the arrangement there will be brought into operation a system of insurance against risk which may be incurred by exporters to dollar areas similar to that which exists in most other countries.
It is proposed to go further than that and operate also a joint venture insurance which I propose to explain. A firm proposing to explore possibilities in any dollar market would naturally have to contemplate a rather long-term programme which might involve losses during the first two, three or four years in market development, and the possible recoupment of these losses by the growth of trade in later periods. Most Irish firms limited in size as they are would hesitate to undertake expenditure on market development in these circumstances, because there might be no certainty that the possibilities they saw would ever in fact be realised, and they would have to face the danger that the expenditure which they incurred in market development would never be recovered if the market did not eventually materialise.
It is proposed therefore to operate through Córas Tráchtála a joint venture scheme under which Córas Tráchtála will insure persons undertaking long term market development schemes against ultimate loss in consideration of the payment of premiums. Córas Tráchtála will be something more than insurers in cases of that kind and will have to be satisfied that the particular project in which it is being asked to join is a sound one. It is far more likely that action under that scheme will be taken on the initiative of Córas Tráchtála rather than on the initiative of private firms. Córas Tráchtála have been carrying out market research and have employed expert American market consultants. If they themselves decide that there are possibilities for a particular line of goods, they can approach Irish firms and interest them in this possibility and they can inform them of this joint venture arrangement as well as direct their attention to the prospect of profitable trade.
It would be perhaps unwise for me to attempt to speculate as to the types of goods in respect of which possibilities in the dollar markets are deemed to exist. From the preliminary investigation carried out by Córas Tráchtála a number of commodities were picked out for investigation and a team of American experts was employed to report upon these commodities. The report covered not merely market conditions in America but also changes in production technique, packing and other arrangements necessary in this country. A summary of that report will be published in a few days; the report I understand is in print and will be available shortly for Senators. It indicates commodities in respect of which Córas Tráchtála thought initially there was a dollar market available, and Senators will be able to see the extent to which the American experts agreed or disagreed with the view of Córas Tráchtála. Córas Tráchtála has already undertaken, in conjunction with firms, the sending of trial consignments, some of which proved to be very satisfactory and others less satisfactory, but it is only by experimentation and trial that definite possibilities can be discovered.
It is intended that both these insurance schemes, that is the giving of insurance cover against political risks and the joint venture scheme will be confined for the present to dollar markets. The Bill does not say so but empowers the Minister to operate these schemes generally. It may be that later on the schemes will be extended to other markets. It is thought desirable that they should now be confined to dollar markets in the belief that if they prove to be practicable there they can easily be extended to cover other markets as well. The term dollar markets covers not only the U.S.A. but all countries in respect of which payment of goods must be made in dollars. In fact, as I informed the Dáil, Córas Tráchtála are investigating possibilities in the Canadian market and a survey of that market has just been made. Córas Tráchtála considers that the prospects there are quite good and arrangements are being made for displays of Irish goods in Montreal in connection with the St. Patrick's Day arrangements and also for displays of goods at the Toronto International Fair in June.
The position that will exist after this Bill passes, and the schemes which are contemplated come into operation, is that anybody who proposes to export goods to these dollar markets can if the contract is a long term one link in Córas Tráchtála as a partner in their enterprise prepared to carry part of the losses if they should arise.
There is one other change which the Bill proposes to make. Under the 1936 Act foreign insurance companies were excluded from operating here unless they were established here on the date on which the Act was introduced. The position at the present time is that there is no power to give licences to new foreign companies to engage in insurance business in this country.
In recent years a number of Irish companies have extended their business to external markets and are deriving a substantial premium from those countries in respect of various classes of insurance. In some cases, however, they found that they were prohibited from doing business in some foreign countries because the Governments of those countries refused them permission on the grounds that companies registered in those countries were not permitted to do business here. The Association of Irish Insurance Companies approached the Government to have the law amended so as to permit the granting of licences to foreign companies to do business here under reciprocal arrangements where the Irish companies were satisfied that it would be in their interests to grant that permission to operate here. It is intended in all such cases to consult with the Irish insurance companies on this matter of giving licences to foreign companies to operate.
