The World Trade Organization, International Chamber of Commerce, and B20 Saudi Arabia issued a joint statement warning that gaps between current trade finance supply and demand may impede trade’s ability to support COVID-19 recovery efforts.
The statement urges public and private actors to collaborate, and outlines four action areas where they can work together to help fill the gap.
The World Trade Organization (WTO), International Chamber of Commerce (ICC), and Business Twenty (B20) Saudi Arabia have issued a joint statement that shines a spotlight on “the diminishing availability of trade finance.”
The 9 July 2020 statement warns that gaps between current trade finance supply and demand may impede trade’s ability to support COVID-19 recovery efforts. The organizations emphasize that a return to trade-led growth relies on the creation of enabling conditions for businesses to import, export, and service international markets. Trade finance, the statement stresses, is a critical element of such an enabling environment.
The statement urges public and private actors to collaborate, and calls for action to address the trade finance shortage. The statement outlines four action areas where the public and private sectors should work together to help fill the gap:
- Enable a rapid transition to paperless trading;
- Exchange views on how regulatory authorities could help mitigate constraints to essential trade finance deployment;
- Share risk to support trade finance; and
- Scale development bank schemes to provide risk mitigation and liquidity for trade finance transactions.
Highlighting the scale of the finance gap, the statement points to an ICC estimate that projects that up to USD 5 trillion in financing may be required to support a rapid rebound in global trade flows. Acknowledging that the private sector is the main provider of trade finance, the statement also recognizes “the many positive emergency measures that many central banks, governments, development banks and regulators have taken since” the pandemic began. These actions, the statement notes, have helped stabilize trade finance markets.
The WTO, ICC, and B20 also welcome the joint statement issued on 1 July by heads of several multilateral development banks (MDBs), who highlighted recent financial commitments and pledged to increase action. However, more action is needed, and the WTO, ICC, and B20 express concern that the trade finance gap “will have a disproportionate effect” on micro-, small and medium-sized enterprises (MSMEs) and businesses in emerging economies and least developed countries (LDCs), which have been among the hardest hit by COVID-19.
According to WTO Director-General Roberto Azevêdo, while the statement complements other recent WTO initiatives to highlight the importance of supporting trade finance, especially amid the twin health and economic crises, “failing to address the trade finance shortfall will seriously undermine ongoing efforts to give trade the boost it needs to help global economic recovery.” The WTO press release also notes that that the statement and joint call for action have origins in a WTO Trade Dialogues meeting with private sector actors held in May 2020.