Discuss this articleShare your views with other visitors, and read what they have to say
Brazil has suggested that the WTO Working Group on Trade, Debt and Finance look into ways to mitigate the impacts of the global credit crunch on trade financing.
Brazil argued that “vagaries and lack of or insufficient regulation in other regimes, in particular the monetary and financial systems, unequivocally affect trade.” Developing country exporters seeking short-term financing to cover shipping costs and risks are already feeling the knock-on effects of the credit crisis as commercial banks have tightened lending criteria, or have simply run out of funds. At the same time, trade finance facilitation programmes established by some regional development banks are not large enough to cover exporters’ needs.
The main role of trade financing is to ensure that the exporter gets paid in full once the goods have been delivered and accepted although the buyer does not pay the bill immediately. In a 2007 WTO working paper, Marc Auboin noted that “more than 90 percent of trade transactions involve some form of credit, insurance or guarantee. [...] Producers and traders in developing or least-developed countries need to have access to affordable flows of trade financing and insurance to be able to import and export, and hence integrate in world trade.”
Brazil also raised concern about the potential impacts of the current financial instability on the implementation of the revised Basel Capital Accord, which sets out minimum capital and risk management requirements for the use of banking regulators. According the Brazil, the new accord removes an inherent bias in favour of entities from OECD countries, but its application may be delayed due to the financial crisis.
Brazil suggested that the working group discuss these questions, and invited the WTO secretariat to contact “relevant stakeholders, including private banks, in order to assess the real impact of the credit crunch on trade finance and look for alternatives to mitigate the problem.”
2 responses to “Trade Finance”
Add a comment
Enter your details and a comment below, then click Submit Comment. We’ll review and publish the best comments.
[...] is the original post [...]
[...] Source [...]