WT/WGTDF/W/81  
 
14 April 2016  
(16-2119)  Page: 1/4  
Working Group on Trade, Debt and Finance   
 
 EXPERT GROUP MEETING ON TRADE FINANCE – 11 APRIL 2016 
INFORMAL REPORT BY THE WTO SECRETARIAT 
1.1.  The objective of the March 2016 meeting was twofold: (i) to take stock of the current market 
situation (ii) to examine possible areas of co-opera tion between participants based on proposals by 
the WTO Secretariat. 
1.2.  In his opening remarks delivered on behalf  of the Director-General, the Deputy Director-
General thought that there was, based on the evidence provided by the Asian and African 
Development Banks’ surveys, no doubt that the lack of trade finance hit mainly SMEs, particularly in developing countries. Lack of affordable trade finance was a major barrier for SMEs in integrating into global trade, particularly as global trade was shifting towards new “frontier” 
countries. This was the short message conveyed by the Director-General on several occasions: 
first, he published a short Op-Ed in the Wall Street Journal last year to raise the profile of the issue. Second, the Director-General raised the attention of leaders and delegates in his keynote 
speech at the UN Third Conference for financing fo r development in Addis Ababa. On that occasion, 
he committed to launch an initiative, after discussing and sharing ideas with WTO partners. He met with IFC President Cao and other leaders. Wi th WTO support, the Chinese Presidency of the 
G20 also accepted to support this topic for inclusion in their agenda for 2016.  
1.3.  The Director-General asked the WTO Secretariat about ideas and proposals on realistic and 
practical steps, which could reduce further the trade finance gap. There were things which were within the collective reach of the expert group. Consultations held in the course of the past few 
months confirmed that there was no need to re-i nvent the wheel; the patient work program that 
had been developed over the recent years within the expert group needed to be scaled up. More could be done by the various actors, public and pr ivate. In some areas, economies of scale could 
be made by being better coordinated, and by increa sing the efficiency of existing offerings. This 
philosophy was reflected in the short background paper made available by the WTO Secretariat to the expert group as well as to the G20 Working Gr oup on Trade and Investment, for consideration. 
The Director-General was planning to issue a longer paper along these lines.  
1.4.  Regarding trade finance facilitation programs, the idea was to propose an increase in the 
amount of trade covered by them, tentatively from  $30 (today) to $50 billion, through the existing 
network of programs comprising the World Bank's IFC, the Asian and African Development Banks, 
the Inter-American Development Banks, the Islamic Development Bank and the European Bank for 
Reconstruction and Development. These programs, providing mainly for trade payment guarantees 
and also some funding, were not designed to el iminate all market gaps. They allowed SMEs and 
banks locally to engage into international trade, thereby building capacity and experience. Still, the 
activity of multilateral development banks (MDBs)  was a good indicator of the evolution of the 
existing market gap. Regarding capacity-building, it was clear that part of the trade finance gap 
reflected a knowledge gap in developing countries; local financial sectors had limited human 
capacities in the area of trade finance. Training efforts needed to be increased. Moreover, a dialogue with regulators, notably in the area of know-your-customer information and the like, could usefully be conducted to address the trade and development dimension of trade finance. 
Finally, efforts to track the trade fina nce gap needed to be enhanced.    
1.5.  The meeting started with a review of the current market situation. In many respects, this 
situation was contrasted. Quantitative easing made liquidity relatively abundant at the "higher 
end" of the market, allowing large corporates to benefit from easy financing at low rates. At the 
same time, small and medium-sized enterprises (SME s) were still "suffering", both in developed WT/WGTDF/W/81 
 
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  and developing markets, from the impact of re duced correspondent banking networks, the greater 
selectivity of banks, and the focus of the largest institutions on the best rated "customers".  Hence, the concentration of liquidity on the largest traders and mature markets created intense competition on already low prices. The higher cost of compliance resulted in further erosion of 
profit margins. Lower margins deterred global banks to engage into more trade finance, at least 
relative to more lucrative lines of business. At the same time, some credit lines remained unused due to the fall in the US dollar value of trade, an d the deterioration in the risk ratings of countries 
affected by lower commodity prices.  
1.6.  Excess liquidity was no longer flowing to emerging market countries, as the most dynamic 
ones suffered a gradual shift in market sentiment and risk perception – despite trade finance remaining a safe proposition (as clearly shown by the trade credit registry). Relative to last year, 
Brazil, Russia, China, and Nigeria had seen risk pe rception growing and volumes of finance falling. 
Sub-Saharan Africa faced the "perfect storm", with falling commodity prices and increased sovereign risk. Dollar availability for trade was an issue again in many developing countries. 
However, reflecting the reallocation of global trade and production according to comparative 
advantage, there were also a number of "bright spots" (Chili, Vietnam, Bangladesh, Pakistan, 
Turkey and some countries in East Africa). In these countries, the problem was inversed. There 
was not enough finance, as local financial systems were not always able to support such increased 
trade, and could not count on global banks whic h had "de-risked". In China, SME financing for 
trade and other activities, while having grown recently, was still an important issue, particularly in a context of slowing economic growth. There was a limit to what government-owned institutions 
such as Sinosure could do. There was a need for more Chinese banks to work with multilateral 
development banks (MDBs) in the context of trade finance facilitation programs. The IFC was able to operate in China but the Asian Development Bank was not. In view of the global market 
situation and the overall increase in risk perception, the demand for credit insurance remained 
strong. Factoring volumes grew only slowly, reflecting slowing trade. 
1.7.  Representatives of MDBs said the trade finance facilitation programs were designed to 
support small trade transactions in the poorest countries. Stepping into larger developing 
economies could require an increase in the size of  such programs, particularly as current demand 
was at the highest. Still, the risk perception by the market did not match the actual level of risk, 
which was smaller. Examples were given in the Middle-East. The ITFC had already stepped in, 
increasing its support to trade by 15%. The Afri can Development Bank was looking at partnering 
with sister institutions in relatively large markets such as Nigeria and Angola, but in general it noted that international banks had withdrawn lately from Africa. While regional banks had gained 
market shares, they could not replace immediately retreating global banks. In trade finance 
markets, size mattered. All in all, current support for trade by MDBs was stable, at around $30 billion a year, against a $1.4 trillion trade finance gap in developing countries. 
1.8.  Structural market shifts were continuing. The demand for traditional forms of trade finance 
such as letters of credit was levelling off while supply chain finance was in high demand. The trend towards the dematerialization of trade finance instruments continued, and major investment in technology by global banks aimed at offering "block chain" platforms, in which their customers 
could use internet-based "open ledger" platforms, allowing them track and process in real time the 
payments for their trade transactions. 
1.9.  The Deputy Director-General presented briefly Secretariat ideas to set inspiring, albeit 
realistic targets that could galvanize action and pool more resources collectively. These ideas have 
been discussed in broad terms for the first time at the G20 Trade and Investment Working Group. 
More discussion would take place before the G20 Trade Ministers meeting and the Summit.    
1.10.  Regarding the global trade finance gap and SMEs, representatives of several MDBs indicated 
that their institutions were currently making plans to scale up their trade finance facilitation programs, subject to senior management or Board approval. The IFC, operating by far the largest 
program, was planning some expansion. The ITFC was also increasing support to trade finance in 
its countries of operations (+15% this year, +7% next year). In cases where limits had not been 
fully used, institutions were looking at ways to further target products for clients, be it supply chain finance for SMEs or soft commodity programs. Some institutions wished to move towards 
100% risk covering, while other could not go furt her than 50%. There was an obvious desire to 
exploit synergies among MDBs, within the mandate and policy of each institution. One institution was looking at reducing its pricing to better reac h out to SMEs. A rapid review of current plans WT/WGTDF/W/81 
 
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  showed that the inspirational objective of reducing  the gap by $50 billion could be achieved, if the 
MDB programs were scaled up as planned. Flexibility in implementing this objective was a key condition for success as programs are primarily de mand-driven and each institution is sovereign. 
1.11.  Regarding capacity-building, there was al so an overall desire by private and public 
institutions to team up on delivering more technical assistance, hence reducing the "knowledge 
gap".  Several institutions planned to "leverage"  the ICC Academy by providing training modules 
(ITFC, Factor Chain International, Berne Union). The Academy has many advantages, not the least 
in providing ICC certification and reaching out to developing countries' customers through its wide 
network of ICC national committees. However, it was felt that the Academy could run in parallel with other existing e-platforms. There was enough demand for everyone in the market. Actually, very large markets such as China and India were under-served. Several institutions indicated that 
onsite and direct training should also be continue d, as it had been very successful over the years. 
In general, MDBs and private sector association described their achievements, and pledged to do 
more. For example, the IFC had already provided training to more 6,000 people, extending 
numerous courses on various areas of trade finance. It has also engaged in longer-term training 
arrangements with regional partners, such as Ecobank in Africa. The ITFC has also provided direct training to hundreds of participants, and it is sponsoring country and regional training activities. In 
2015, the EBRD provided e-learning courses on "i ntroduction to trade finance" and "ICC rules for 
documentary credit" to over 1,000 bankers, of whom 440 passed their exams. More collaboration 
is envisaged, notably between the EBRD and Factor Chain International. The African Development Bank is looking at "mobile clinics" through external consultants. Specialized training on discrepant 
documentation and mobile banking is envisaged. The Asian Development Bank is exploring 
increased presence on the capacity-building front. Al l participants said that courses should not only 
target trade finance operators but also SMEs and regulators.  
1.12.  Participants committed to improve gap detection and mapping. Considerable progress has 
been made by the Asian and African Development Bank, through their trade finance gap studies. 
The Asian Development Bank is working on an improvement of methodology and coverage. 
Increasingly, other institutions are teaming up: the ICC banking commission, the FCI and Berne 
Union are participating in the Asian Development Bank survey. This survey is complemented by a company survey, supported by an increasing number of partners, such as the Dutch CBI
1 (with its 
network of 3,000 importers), and the UN Internatio nal Trade Commission. The WTO will assist the 
ADB in the design and analysis of results. Hope fully, the ADB and AfDB could merge their surveys 
at some point. All participants committed to su pport the ADB and ICC surveys. Gradually, the 
network of MDBs issuing and confirming bank s should be used to feed such surveys. 
1.13.  Like in previous years, there has been a fair amount of discussion on non-prudential 
regulatory issues described as "know-your-customers" (KYC) requirements and related regulations on anti-money laundering (AML). For the WTO, the question was to define the possible content of 
any future dialogue with the OECD's Financial Action Task Force, and find a WTO "angle" to it. Any 
future dialogue has to be fact-based, as was the dialogue with the Basel Committee on Banking 
Supervision in the past. To this extent, the analytical basis for linking AML-KYC requirements, on the one hand, and de-risking, on the other, has been relatively weak. The survey undertaken by 
the International Chamber of Commerce Banking Commission after last year's expert group had 
been inconclusive. However, the World Bank and th e Bank of International Settlements (BIS) have 
both published reports about correspondent bankin g in the fall of 2015, in the context of the 
Turkish G20 Presidency. The report by the World Bank on "Withdrawal from Correspondent 
Banking: where, why and what to do about it", confirmed that half of the banking authorities surveyed experienced a decline in corresponding ba nking relationship, with the highest impact on 
cash management services, international wire transfers and remittances channelling and trade 
finance. However, the report also highlighted that  de-risking had many other causes than just the 
cost of compliance on AML-KYC.  
1.14.  The World Bank and BIS reports provided for recommendations to address these problems: 
inter-alia, supervisors should follow a risk-based approach, provide greater clarity and stability on 
the extent of obligations, promote a greater use of KYC "utilities", etc. Other technical measures are described in these reports. For the record, ideas had emerged from the expert group, notably 
from the IFC, on establishing "utilities" such as the KYC repository that was eventually created by 
                                               
1 The CBI (in Flemish) is the Dutch Foreign Affairs Ministry's Centre for the Promotion of Imports from 
Developing Countries.  WT/WGTDF/W/81 
 
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  SWIFT. The BIS report calls for a greater dialog ue between other institutions and the FAFT. As 
stated on several occasion, the WTO Secretariat indicated that it would be happy to engage, to the extent that the WTO could bring value and data to that dialogue. No particular progress was made to this aim at this meeting – institutions having often different views about the problem and how 
to approach it. However, some ideas emerged. For example, one large bank mentioned that the 
banking community had by now been subject to a very large number of checks on trade-related 
transactions, with very limited, if no case, of money laundering. Perhaps such information could be 
aggregated in some way by the industry. Others  believed that the industry ought to present a 
series of best practices, which could serve as a basis for dialogue with the FAFT. It was argued that the AML-KYC training done by the trade community (either through the ICC e-learning platform or locally by some global banks) could be something that could be reported to the FAFT, 
and serve as a basis for future discussion on the need for regulatory stability across jurisdictions. 
1.15.  The Deputy Director-General welcomed this dialogue and saw positive engagement in 
supporting and implementing the WTO initiative in favour of reducing trade finance gaps in 
developing countries, with a focus on SMEs. The process of building support within the WTO and at 
the G20 will continue. Some members of the expert group may be called to contribute in the coming months. There were several possible ideas. One of them would be for the WTO to organize 
a session at the WTO Public Forum, gathering in dustry leaders and representatives of the FAFT. 
Another will be to foster dialogue between industry leaders and WTO members. He pointed to future dialogue between the private and public sectors in the coming months, notably a meeting 
between representatives of the B20 and WTO memb ers at the end of May. There was also the 
possibility for industry leaders and MDBs to a ddress Members directly through the WTO Working 
Group on Trade, Debt and Finance. There will be no shortage of opportunities for supporting trade 
finance work in the WTO.  
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