Restart Trade Finance: Rebooting the Engine
Summary
One of the reasons for the collapse of world trade is insufficient trade credit financing. The World Bank estimates that a fall in the supply of trade finance has contributed some 10% to 15% of the decrease in world trade since the second half of 2008. One clear lesson from the Asian financial crisis is that in periods prone to a lack of trust and transparency, and herd behavior, all actors -- including private banks, export credit agencies and regional development banks -- should pool their resources, as far as practicable. The trade finance 'package' proposed during the G20 London Summit responds in large measure to the criteria developed by the WTO Expert Group on Trade Finance. The WTO will continue to assess market developments, mobilize political energy and funding to restore the role of trade finance as the oil needed to keep the wheels of trade turning.
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Extract
Restart Trade Finance: Rebooting the Engine
1 Why does trade finance matter?
One of the reasons for the collapse of world trade is insufficient trade credit financing. The global market for trade finance (credit and insurance) was estimated to represent approximately 80% of 2008 trade flows, valued at US$15 trillion. The World Bank estimates that a fall in the supply of trade finance has contributed some 10% to 15% of the decrease in world trade since the second half of 2008.Despite the overall fall in trade transactions, quantitative and qualitative surveys confirm a general increase in trade credit prices, as banks demand risk premiums often far in excess of loans made ...See the full content of this document