. /.  WORLD TRADE  
ORGANIZATION   
WT/WGTDF/W/67 
29 October 2012 
 (12-5858) 
Working Group on Trade, Debt and Finance  
 
 
 
EXPERT GROUP MEETING ON TRADE FINANCE – 25 OCTOBER 2012 
 
Informal Report by the WTO Secretariat 
  
 
1. The objective of the October meeting was threef old: (i) to take stock of the current market 
situation, with a focus on factors such as liquidity, risks and price patterns by countries and regions (ii) to consider progress on prudential and non-prude ntial regulatory issues (iii) to examine possible 
trade finance issues that may be of G-20  interest during the Russian Presidency. 
2. With respect to the current market situati on, there was a consensus among participants that 
volumes in trade finance markets were growing only sl owly, consistent with the slowing down in the 
growth of volumes of world trade, as the two were linked by an almost one-to-one relationship. There 
seemed to be no overall serious capacity constraint on trade finance, at least from a global point of 
view - although geographically ther e were tensions in Europe and in other parts of the world (for 
example parts of Latin America).  Also, US do llar funding remained an issue outside the United 
States, although swap agreements helped alleviate the situation in some region, in particular in the 
light of growing use of the RMB.  However, there was a permanence of stress at the low end of the 
market, be it for poor countries or small and me dium sized enterprises in middle income countries, 
justifying the continued need for risk mitigation pr ovided by multilateral development banks, several 
of which saw demand for their products increase signifi cantly since the last meeting (in particular the 
Asian Development Bank). The African Deve lopment Bank also was making progress on the 
establishment of a "permanent" trade finance facilita tion program comparable to that of the Asian 
Development Bank. Trade finance facilitation programs  corrected usefully failures at the low end of 
the market and were clearly development-oriented. Current shortages of trade finance in particular 
regions such as in former CIS countries were worry ing, as the EBRD program was already running at 
full strength.  
3. In the wider scheme of things, the trade fina nce market was experiencing structural changes 
in market shares, operators and instruments: sh ifts away from letters of credit to open account 
financing, in line with the expansion of supply chai ns and the integration of new countries into such 
value chains; less bank intermediation, perhaps more  inter-company lending, su pported by more trade 
insurances volumes, and greater interest by non-ba nks to invest into trade assets; perhaps less 
convening power by global banks on third party fina ncing, more by regional banks. However, global 
and other international trade banks would certa inly benefit from the continued expansion of 
international supply chains, in which their large clie nts were key players. This expansion is likely to 
be driven, as it has been in the past, by the growing import content of exports in all parts of the world. 
4. With respect to regulatory matters under the Basel framework, the Dir ector-General reminded 
participants that WTO interest in the matter was driven by the development impact of the industry 
(contributing to the expansion of trade and hence economic growth), its low risk character (trade 
finance being safer than major sovereign risks), a nd the absence of leverage  (one-to-one relationship 
with the transaction on merchandise). The Director-G eneral had conducted usef ul discussions with the 
President of the Financial Stability Board (FSB), on clarifying the conditions of the waiver on the WT/WGTDF/W/67 
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  one-year maturity floor for short-term, self-liquidating trade finance instruments, and the provisions 
regarding liquidity rules applying to short-term trad e finance (less than 30 days). A key aspect of this 
dialogue was the implementation of the leverage ratio to trade finance instruments under Basel III 
rules. The Director-General hoped that the WT O would soon meet with the Basel Committee's 
Committee on the leverage ratio. He also confirmed with the EU Commission that the EU's planned to 
set the credit conversion factor for the calculation of the leverage ratio at rates of 20% and 50% 
depending on products. One participant indicated the in terest of other Basel Members for an approach 
similar to that of the EU. The Director-General  concluded that the dialogue with Basel Members 
should be fact-based, and ought to be fed by more da ta collected by the industry. There was a need, in 
particular, for country specific-data to be drawn fro m the ICC registry. The registry constituted a true 
public good, that had been taken seriously by th e Basel Committee and that could provide important 
information in respect of promoting trade finance vis-à-vis rating agencies. 
5. A first discussion took place on other non-pr udential regulatory issues described as "know-
your-customers" (KYC) requirements, based on useful input by the IFC, the ICC and industry representatives. The debate did not focus so much on the regulatory requirements themselves, rather 
on the various ways that they are being structur ed, defined and implemented according to different 
countries and regions. The Director-General remi nded where the WTO would come from on issues 
such as this one. The WTO was about opening trade a nd one way to do this was to facilitate trade- 
hence WTO involvement in trade finance issues. The KYC issue came in as other regulatory or 
compliance issues; hence the point was not whether th ese were needed or not, rather the focus should 
be whether these regulatory compliance issues, depending on how they were structured and 
implemented, could damage the weakest in trade markets. The WTO had a specific duty to these weak 
market participants - a reason why the WTO was involved in the SPS facility (STDF), for example. However, the WTO was not the sectoral regulator fo r such topics. The main concern for the WTO was 
when the structure, implementation or difference between regulations had a trade clogging impact.  
6. The Director-General was thus ready to help , but by no means wanted to be seen as stepping 
into the regulatory business proper - which was not in the direct remit of the WTO. He therefore 
suggested the following steps: first, the industry s hould at least define common positions and views 
within the ICC; second, work on a better diagnosis  and identification of the various concerns, and 
establish positions and options that would allow the industry to reach out to the regulators - specifically the FAFT (GAFI) in the OECD. When this is done, the WTO was ready to use its 
convening power to put around the same table the ICC-led industry representatives and the OECD if 
needed - to try to grasp low hanging issues of prac tical nature, if that could be done. The Director-
General was ready to review progress regularly in the context of the Expert Group. 
7. Finally, a discussion took place on possible other G-20 trade finance-related topics, 
identifying the collection of more "registry" info rmation by banks as a priority, notably country and 
region-specific information. The Expert Group would meet again in the spring of 2013. 
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