Many of the challenges facing the world today require a coordinated response from countries for these to be adequately and appropriately addressed. This includes climate change, energy transition, war and terrorism, migration and displacement of people amongst many others. Few if any of these issues are caused by, nor impact, only one country alone. While their effect may be more pronounced in some locations than others, coordination and cooperation is ultimately required to address these issues properly and reduce the threat they bring. The same is necessarily true for the ongoing crisis related to the Covid-19 pandemic. Different countries have been impacted in different ways, but few have escaped unharmed – either from a public health or economic perspective.
Governments have responded in similar ways to each other, with lockdowns, social distancing, furloughing of workers and other ways of preserving capital and economic activity. However, the scale and pace of responses has varied significantly from country to county. Moreover, this action has often lacked cooperation and coordination with neighbouring states despite the unavoidable interconnectedness countries have with each other, particularly within trading blocs like the EU.
From as early as March of this year, we at ICISA have been calling specifically for close coordination of credit insurance guarantee schemes instituted in a number of countries, but particularly within the EU. In our public comment on early discussions about such arrangements, we noted:
“Cross-border business is a cornerstone of the internal market of the European Union and will be essential to its successful recovery from this crisis. Firms ranging from large multinational firms to the micro-enterprises are engaged in business between one or more member states. As a result, it is essential that approaches to support schemes within the European Union are closely coordinated and harmonised to avoid unnecessary and costly administrative burden and the possibility of arbitrage which differences in approaches across the EU may lead to.”
Four months later, and the core argument remains the same. Indeed, while the EU is a specific example, wider coordination with trading partners outside of the EU is also important to ensure clarity across markets. Similar points have been made by those in other sectors also. For example, in an op-ed in the Guardian on 28 May 2020, Chairman of the Royal Bank of Scotland, Howard Davies discussed the lack of coordination between countries on temporary measures related to banking rules and the challenge that authorities will face once the pandemic has passed:
“The priority should be to assess the changes…made during the crisis and to address those that have skewed the playing field. That will be a delicate exercise but it is essential if the global financial architecture painfully rebuilt after the last crisis is to be sustained.”
Multilateralism and international cooperation have long shaped the institutions and practices of trade and international relations, particularly during crises. However, it has been suggested recently that countries are less frequently adopting joined-up approaches on key issues and may be more interested in looking out for their own interests. While this is unlikely to be the key driver behind the decisions made by countries in response to the current crisis (where immediacy is the most likely cause of divergent approaches), it is important that coordination and cooperation is ramped-up as we look towards economic recovery and the lifting of restrictions. In this regard, it is interesting to note the results of a recent survey carried out by the European Council on Foreign Relations which looked at European attitudes to international cooperation during the Covid-19 pandemic. While pluralities of respondents across member states agreed that the EU has not lived up to its responsibility during the pandemic, or that it has been irrelevant, this does not carry over into attitudes towards cooperation itself. In fact the opposite is true, with significant majorities of respondents saying that the pandemic has shown the need for greater European cooperation – not less – and that there is a need for the EU to develop a more joined-up response to global challenges.
While it is unlikely many of the respondents were thinking specifically about trade credit insurance support schemes, the same principle applies to that level of response as to other areas of the economy. Indeed, as volumes of both domestic and international trade increase as economies begin to relax restrictions, the coordination called for by ICISA in March is still essential to ensuring that traders can operate in a more certain environment – thereby supporting and strengthening the recovery. Crucially, such coordination still remains possible even at this stage, and could be even more valuable by helping to avoid the unnecessary creation of cliff-edges as schemes eventually unwind.
Cooperation within the sector itself is also more important than ever so that best practice, important knowledge and key lessons learned can be shared across geographies. At ICISA, we have continued to facilitate such discussions throughout the pandemic and have been impressed with the level of engagement seen across the sector despite the difficult circumstances. This level of cooperation will be invaluable as the industry emerges out of the pandemic. The credit insurance sector learned a number of valuable lessons after the 2008-2009 financial crisis on how best to avoid widespread withdrawal of coverage during a sudden deep deterioration of credit risks. This is why action was taken quickly to call for the kinds of public support schemes mentioned above. However, in the wider insurance sector a similar lesson is being learned today about pandemic exclusions and the risks that emerge when customers do not understand what they are protected against.
While such issues have been less prevalent in credit insurance due to the nature of policies, the value of clear communication with customers and understanding their needs and expectations is always worth thinking about. Indeed, as debates rumble on about cyber affirmative cover within the industry, it’s clear that such lessons can be applied by firms in wider areas than just those related to the pandemic. Cooperation and coordination can help build consensus around best practice, as well as identifying potential solutions. This is particularly the case when we depend on others for our success – and that applies to issues whether within industries or between states.