The WTO, the International Chamber of Commerce (ICC) and B20 Saudi Arabia issued a joint statement on 9 July pointing to the diminishing availability of trade finance. Warning that gaps between trade finance supply and demand could seriously impede the ability of trade to support post COVID-19 economic recovery, they are urging private and public-sector actors to work together to address shortages.
The joint call for action, which highlights the importance of cross-border trade in driving economic recovery from the downturn caused by the COVID-19 pandemic, has its origins in a WTO Trade Dialogues meeting with the private sector in May, where concerns about trade finance featured prominently.
Trade finance is a critical element in re-igniting world-wide growth in imports and exports, the statement reiterates. Since the need for trade finance is estimated to be between USD 2 trillion and USD 5 trillion, meeting this demand and addressing the shortfall will be challenging. There is serious concern that the growing gap between demand and supply will particularly affect micro, small and medium-sized enterprises (MSMEs) and businesses in developing countries, with important implications for jobs and incomes.
The call to action welcomed a recent joint pledge by the heads of the WTO and six multilateral development banks to monitor and address trade finance gaps, particularly for developing countries and small businesses.
The WTO, the ICC and B20 Saudi Arabia also welcomed the measures taken to stabilize trade finance markets. They urged the private and public sectors to work together to bring about a rapid transition to paperless trading, including e-documents in the processing of trade finance transactions. In addition, the statement called for an exchange of views on how regulatory authorities can help ease constraints on the provision of trade finance. It also proposed increased risk sharing to support trade finance and the extension of development bank schemes to provide risk mitigation.
WTO Director-General Roberto Azevêdo said:
“Failing to address the trade finance shortfall will seriously undermine ongoing efforts to give trade the boost it needs to help global economic recovery. I very much welcome the private sector’s push to work jointly with the public sector in addressing the gaps. This initiative complements the WTO’s recent initiative, together with multilateral development banks, to highlight the importance of supporting trade finance amid the ongoing health and economic crises.”
The joint statement emphasizes that timely interventions are vital to ensure MSMEs in particular have continued access to trade finance as a means of weathering the present crisis.