RESTRICTED  
  
WT/WGTDF/M/39  
 
31 August 2020  
(20-5904) Page: 1/4 
Working Group on Trade, Debt and Finance    
 
 
REPORT OF THE MEETING OF 2 JULY 2020  
1.1.  The forty -first meeting of the Working Group on Trade, Debt and Finance (WGTDF) was held 
on 2 July 2020 under the Chairmanship of Ambassador Rashidi Said (Malaysia). The Chairman  
provided comments on recent meetings of the Expert Group on Trade Finance, held between 
February and May 2020 (WTO Documents WT/WGTDF/W/93, 95 and 96). He emphasized that since 
the beginning of the COVID -19 outbreak, the issue of trade finance had re -surfaced in a crisis mode. 
While the current crisis was not of a financial nature, it seemed that in many countries access to 
trade credit was becoming more difficult than before. In a crisis of this scale, it was not surprising 
that the perception of risk, in cluding that of non -payment of trade loans was at its highest. The 
question was whether, as the volumes of trade picked up, there would be enough trade finance for 
companies to fund their inputs or get anticipated payment for their exports. He asked for Me mber's 
views regarding their own challenges. He noted that the Director -General and the heads of six 
multilateral development banks had issued on 1 July 2020 a statement on supporting trade finance 
during the COVID -19 crisis. He asked the Secretariat to pr ovide background information on this 
statement and on recent discussions with trade finance providers.  
1.2.  The Secretariat  noted that previous economic and financial crises had also led to an increased 
perception of risk by trade finance lenders, with growing supply gaps as a result. Given the link 
between trade finance and trade, it was important to keep track of these gaps. For many years, the 
WTO had been working with experts from private banks, export credit agencies and multilateral 
development institution s to monitor the trade finance situation and implement joint initiatives when 
needed. Since the beginning of the COVID -19 outbreak, dominant international banks in trade 
finance markets had acknowledged that government -sponsored schemes (such as trade loan  
extension, repayment holidays, undertakings and credit guarantee schemes) had offered relief on 
the main routes of trade. Credit insurance schemes had been particularly important in supporting 
receivable finance and other forms of trade finance which were  used in supply chain trade. At the 
same time, international banks focused on "core" clients, notably the larger companies, avoiding 
"third party " commitments (syndicated trade loans and the like). "Country lending limits " had been 
reduced for countries in  which international banks anticipated a deterioration of the overall economic 
situation. Banks anticipated more failures from counterparties to pay their dues, in trade 
transactions; this could only increase risk aversion for the months to come. The most concerning 
situation was in least -developed countries.  
1.3.  In this context, multilateral development Banks (MDBs) implemented emergency support 
dedicated to trade finance and working capital with a priority in the least developed countries and 
of course for th e financing of essential imports and exports. The demand for the trade finance 
facilities of MDBs had traditionally been an indicator of market gaps. Such demand had increased 
significantly since the beginning of the COVID -19 crisis, by 110% for the Intern ational Finance 
Corporation (IFC), 80% for the Asian development Bank, and to a similar extent for the EBRD, the 
African Development Bank and the Islamic Development Bank, respectively. Requests for 
multilateral bank 's facilities had come from over 80 coun tries, showing the global extent of current 
problems. The heads of the WTO and six multilateral development banks had issued a joint 
statement in support of greater coordination in the emergency trade finance support. All relevant 
institutions had been inv ited to provide support to markets in this difficult period. The 
Director -General wished to play a convening and advocacy role in support of trade finance, as lack 
of trade finance could weigh on the ability of trade to drive the economic recovery from the  ongoing 
recession.  
1.4.  The Chairman  asked Members to provide their views and share their experience from a national 
or global standpoint.  WT/WGTDF/M/39  
 
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  1.5.  The representative of South Africa  acknowledged that current trade finance shortages impeded 
the imports of goods and med ical equipment necessary to fight the COVID -19 pandemic and the 
exports of essential goods in many countries. Trade finance difficulties underlined a whole range of 
intertwined legal (documentation issues) and financial issues (credit worthiness, roll -over of existing 
loans). South Africa's experience was consistent with the picture described by the Secretariat. The 
SME dimension was particularly important. SMEs had been affected by the slowdown in trade flows, 
disruptions in international and local supply chains, and the deterioration of the business sentiment. 
Local industries most affected were the telephony sector, automobile production, retail, mining, and 
tourism. The informal sector was also severely impacted.  
1.6.  In this period, governments had an import ant role to play for business to have equitable access 
to finance. South Africa worked through its Industrial Development Corporation, which had activated 
a distressed fund for SMEs facing challenges in repaying loans and dealing with debts during the 
COVID-19 period. Other categories of firms were not eligible for such support. A recent survey 
indicated that a majority of local firms did not see any immediate scope for improved access to 
finance. As a result, South Africa had to turn to international marke ts for borrowing. In this crisis, 
there were two aspects to be emphasized: first, international support during the crisis period; many 
emerging economies were in recession and had massive financing needs. It was estimated that they 
needed USD 2.5 trillion to go through the COVID -19 pandemic period. Thus, the post -pandemic 
period had to be considered. One should wonder what were the elements that could be thought of 
to have a more consistent, comprehensive framework for linking trade, development and finance . 
How could one achieve a trade -led recovery, that combined support to aggregate demand, structural 
policies, and policies reducing strategic vulnerabilities of individual countries ? In considering these 
question s, the WGTDF should consider in its field of  work how it could draw on the work of the G -20 
Trade and Investment Working Group, and other work by international organizations such as 
UNCTAD.  
1.7.  The representative of El Salvador  noted that the recovery from the negative impact of 
COVID -19 on national eco nomies, especially the smaller countries, would be long and difficult. The 
Salvadoran gross domestic product (GDP) was expected to contract between 6.5% and 8.5% in 
2020. The topic of the meeting was therefore relevant, as it helped identify measures that could be 
adopted to finance local companies, especially micro and small ones. The delegation of El Salvador 
had taken note of the communiqué from the multilateral development banks, notably in the specific 
case of the Inter -American Development Bank (IaDB) . It noted that the IaDB had been increasing 
support to smaller businesses, and it was likely that El Salvador businesses would resort to such 
sources of financing. A domestic economic recovery plan, which was worked out in consultation with 
the private se ctor, included support for micro, small and medium -sized companies for an 
approximate amount of USD 140 million, as well as the granting of credits for an amount of 
USD 350 million.  
1.8.  The representative of China  said that access to affordable finance was a m ajor challenge faced 
by all SMEs globally. Before the pandemic, as estimated by the Asian Development Bank, the global 
trade financing gap in 2019 stood at about US D 1.5 trillion. The latest report released by the 
International Chamber of Commerce showed t hat a possible US D 5 trillion of trade credit was needed 
to enable a rapid recovery from the COVID -19 crisis. The trade finance gap was mostly concentrated 
in developing and least -developed countries. Among these, 50% of MSMEs applications for trade 
financ ing had been rejected. A survey conducted by the Ministry of Commerce of China on over 
7,000 foreign trade enterprises found that, due to the pandemic, more than 90% of the surveyed 
enterprises had to postpone their overseas shipments and remittance collec tion. In general, these 
enterprises faced a greater risk of order cancellation or payment refusals from buyers. COVID -19 
had put pressure on the cashflow of SMEs, threatening their survival. It was therefore timely and 
helpful to exchange experiences on su pport to SME 's financing needs at this meeting. It helped share 
best practices. The delegation of China took note of the Joint Statement by the heads of multilateral 
development banks and the WTO on supporting trade finance during the COVID -19 crisis, as r eleased 
the previous day.  
1.9.  The representative took this opportunity to share with other Members some policy action taken 
in China. The central bank had cut reserve requirements for small and medium banks, such as rural 
commercial and cooperative banks, to e ncourage them to provide credits to SMEs. Financial 
institutions were also encouraged to make interim arrangements with SMEs suffering from 
temporary liquidity problems. Such arrangements included delaying repayments of loan and interest, 
as well as extend ing loan terms for reasonable periods of time. The process of approving SMEs ' WT/WGTDF/M/39  
 
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  applications for new loans was also accelerated. Meanwhile, more attention was paid to providing 
high-quality information services to enable SMEs identify and mitigate their tran saction risks. For 
instance, information platforms had been established to provide advisory, early -warning risk and 
credit information to SMEs. Commercial banks in China also increased the supply of trade finance 
facilities in favour of SMEs, including gua ranty schemes, supply chain finance, commercial factoring, 
and pledged account receivables. Also, new technology such as big data, cloud computing, and 
artificial intelligence were introduced in financial service sectors, with a view to address finance 
requests more quickly and reduce the cost of loan applications from SMEs.  
1.10.   The Representative of Côte d'Ivoire  noted that access to finance had always been the main 
obstacle to the growth of most Micro, Small and Medium -sized Enterprises (MSMEs) in developing 
and least developed countries. Sub -Saharan Africa had the highest proportion of financially 
constrained SMEs in the world (54%). The funding gap for the 44 million MSMEs in sub -Saharan 
Africa had been estimated at US D 331 billion in 2018. The COVID -19 pand emic had only amplified 
and worsened the financial situation of MSMEs. They faced drastic reductions in income due to falling 
demand, as traditional sources of liquidity dried up. Despite efforts to comply with banking 
standards, many SMEs were denied acce ss to loans or were subject to excessive collateral 
requirements.  
1.11.   There had also been a resurgence of problems regarding cross -border payments, in the light 
of different data messaging standards for payment transactions and difficulties to connect differen t 
digital payment networks. These facts led his delegation to discuss the question of trade finance 
within the framework of the Joint Initiative Group on MSMEs. A proposal was examined in this group, 
in June, under the symbol INF/MSME/W/25/Rev.1. It mentio ned the difficulties that MSMEs had in 
accessing trade finance and invited Members to exchange best practices, and share information on 
relevant technical assistance and capacity building activities; it also welcomed international 
initiatives aimed at faci litating the adoption of a global legal identification system for companies, 
such as the global Legal Entity Identifier (LEI), and it invited Members to cooperate in support of 
these initiatives. Furthermore, this draft text invited the WTO Secretariat to organize, with the 
support of the relevant international organizations, information sessions on subjects related to 
MSMEs' access to financial solutions for international trade, such as the global LEI, and to shed light 
on Members' reflections and possible  actions. Finally, it encouraged WTO Members to work actively 
to examine and/or propose ways to facilitate MSMEs' access to trade finance solutions, in particular 
trade finance, in the context economic recovery during and after the COVID 19 pandemic, 
particularly in the developing countries and the LDCs most affected.  
1.12.   Financial solutions and concrete measures facilitating access to finance and building a more 
resilient MSME financing ecosystem in the future were essential to enable MSMEs to seize the 
busine ss opportunities offered by the WTO agreements. The WTO should contribute to it in a 
framework of cooperation with international, regional and national institutions, as it does in the 
framework of negotiations on fisheries subsidies aimed at contributing t o the resolution of a problem 
of sustainable development linked to the safeguarding of fishery resources.  
1.13.   The Representative of Malaysia  congratulated the Chair for his election and thanked the 
Secretariat for its report. Like other counties, Malaysia had also been severely impacted by the 
COVID -19 pandemic. Health -related measures had affected the operation of SMEs in various sectors 
and their ability to conduct business and engage in cross -border trade. In Malaysia, some 98% of 
businesses were SMEs. Recog nizing their importance to Malaysia 's economy, various agencies had 
introduced programmes to support and enhance their capacity. These included programmes 
providing advisory services on e -marketplaces and training on information and communication 
technolog ies. The COVID -19 had created new challenges to SMEs. To expedite the economic 
recovery, Malaysia had announced four economic packages amounting US D 65 billion, to 
reinvigorate the economy. The first economic stimulus package had been announced on 
27 February  2020. It sought to alleviate the pandemic 's immediate impact upon tourism and related 
industries. One month later, the Government announced a stimulus package worth US D 5 billion, 
aimed at easing people 's financial burden, supporting businesses, a nd strengthening the economy. 
In addressing the needs of SMEs, Malaysia 's central bank allocated funding for SMEs to sustain 
business and safeguard jobs. In addition, to ease the cash flow of SMEs affected by COVID -19, 
Malaysia 's central bank provided an a utomatic deferment (moratorium) of all loans and repayments 
for a six -month period. This measure took effect from 1 April 2020.  WT/WGTDF/M/39  
 
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  1.14.   His delegation acknowledged that it could be necessary for economies to implement 
emergency measures designed to address COVID -19 challenges. These measures had to be carefully 
targeted, proportionate, transparent, and temporary. They should not create unnecessary barriers 
to trade and should be consistent with WTO rules. On another note, Malaysia welcomed the Joint 
Statement by He ads of Multilateral development banks and the WTO on supporting trade finance 
during the COVID -19 crisis. This Statement was important to give impetus to the work of the Working 
Group on Trade, Debt and Finance.  
1.15.   The Chairman  and several Members had a brief  exchange of views regarding next steps, 
notably the possibility of inviting external speakers to provide additional information on multilateral 
development banks' support to markets, and on any further possible written input by Members.  
1.16.   Following this exc hange, the Chairman  summarized the discussion on this item of the agenda. 
One could say that, as stated almost at every meeting of the Working Group, WTO work on trade 
finance was important for Members. In normal times, the WTO was working with partner ins titutions 
on initiatives aimed at strengthening the local capacity of Members to supply trade finance. In the 
current COVID -19 related crisis, the WTO was acting by way of advocacy, mobilization of energies, 
resources and actors, with a view to promote coo perative solutions among the various players. 
WTO's mobilization of resources from multilateral development banks to help developing countries 
including the poorest, was important in the current situation. The role of the Director -General in 
directly mobil izing the heads of six other heads of relevant multilateral organizations was 
acknowledged. The SME/MSMEs dimension of current efforts had been highlighted. At the next 
meeting, the WGTDF will revert to the topic of trade finance and current gaps, notably by inviting 
representatives of multilateral development agencies and, if possible, a representative of the private 
sector, for them to provide their perspectives. Should Members wish to provide a written submission 
on this topic, they would be welcome to d o so ahead of the meeting to allow other Members to 
examine it.  
1.17.   The Chairman  thus asked whether, according to Item 2.B of the agenda, there had been any 
request for making a new submission by Members on another topic covered by the WGTDF. This had 
not been  the case. Therefore, he presumed that trade finance would remain the main topic of work 
in the WGTDF's agenda. It was so agreed . 
1.18.   With this, the Chairman closed  the meeting.  
 
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