Export Promotion Via Official Export Insurance

Proponents of free trade argue that export promotion distorts competition and undermines the multilateral trade system. In most countries export insurance is provided by the government and, consequently, is driven more by a broad range of policy objectives than purely insurance principles. This paper, however, shows that export promotion does not necessarily imply trade distortions and that most export destinations do not benefit from insurance premium subsidies. A significant policy implication of these findings is that the WTO and the EU are correct not to banish completely official export insurance.