RESTRICTED  
  
WT/WGTDF/M/3 6 
 
17 August  2018 
(18-5237) Page: 1/4 
Working Group on Trade, Debt and Finance   
 
 
REPO RT OF THE MEETING OF  8 JUNE  2018 
1.1.  The thirty -seventh  meeting of the Working Group on Trade, Debt and Finance (WGTDF) was 
held on 8 June 2018 under the Chairmanship of  Ambassador Mohammad Haqjo  (Afghanistan ). The 
Chairman  provided comment s briefly on  the recent meeting of the Expert Group on Trade Finance, 
which he attended on 26 March 2018 (WTO Document WT/WGTDF/W/86). He emphasized the high 
level of cooperation of participants to address the negative impacts of the large trade finance gaps 
affecting  developing countries, in particular micro, small and medium -sized enterprises ( MSMEs). 
He congratulated the Director -General for having taken leadership on this topic, mobilized 
multilateral devel opment banks , and partner ing with the Financial Stabilit y Board. 
1.2.  The Director -General  update d the Working Group  on recent progress regarding trade fi nance . 
Trade finance  gaps had been raised in different contexts as a major barrier to trade . The Asian 
Development Bank estimated  that th e global gap in trade finance  was about US$1.5 trillion. This 
represented  the amount of trade finance that ha d been requested by importers and exporters  to 
banks, but had been rejected. In many developing countries, the al ternatives to bank financing 
were scarce, so when rejec ted by b anks, the transaction was  abandoned. For example, i n 
Burkina Faso, global banks had historically provided pre -shipment fin ance of the cotton crop. This 
was vital as the crop accounted  for a quarter of total exports and 40% of the rural  population's 
income.  In recent years , banks had  withdrawn.  As a result,  the International Finance Corporation  
(IFC) and Islamic Trade Finance Corporation (ITFC) had to step in. However, if in the coming years 
no bank was  willing to participate, the re was a  risk that cotton ex ports would fall dramatically and 
cut off the dominant income source for approximately three million peop le. In 2016 a publication 
on trade finance  was issued, which spelled out potentia l actions : supporting multilateral 
development banks' trade finance fa cilitation programmes by way of advocacy and mobilization; 
reducing the knowledge gap regarding trade finance products, by encouraging our partners to 
increase their training programmes; opening a dialogue with trade finance regulators; and 
continuing to t rack and monitor trade finance gaps.  
1.3.  The Director -General had  been building a strong coalition  of partners to push these points 
forwar d. This involved  heads of the regional development banks, the Chief Executive Officer (CEO)  
of the International Financial  Corporation , Philippe Le Houérou, the Chair of the Financial Stabil ity 
Board  (FSB) , Mark Carney, and others.  The first area of progress was enhancing existing trade 
finance facilitation programmes of multilateral development banks. In 2016, these programm es 
had supported around US$22 billion in trade transactions.  This had increased to US$30 billion  in 
2017, and was expected to increase to  over US$35 billion in 2018  (+50% in two years) . The Asian 
Development Bank alone had supported in 2017 trade transacti ons for than 2,800 small and 
medium -sized enterprises ( SMEs ) in developing Asia . The Islamic Trade Finance Corporation and 
IFC had signed  in the WTO  a memorandum of understanding to pursue joint fin ancing in Africa.  
1.4.  The second area was addressing knowledge  gaps in local financial institutions. Encouraging  
news had also been recorded . Multilateral development banks ha d boosted their capacity building 
work on trade financ e, in collaboration with the I nternational Chamber of Commerce . Together 
they train ed nearly 2,600 people in 2017 – across 85 countries. The third element was increasing 
dialogue with regulators. Such a dialogue would  help build capacity in smaller, local banks to 
respond to  the trade finance demand. It would also encourage larger banks to return to markets 
that they withdrew from after the financial crisis. The heads of th e FSB, IFC and  WTO had agreed 
that their respective  organizations should work together . The FSB ha d made progress in the past 
couple of years in updating and clarifying  regulatory expectations – notably on anti -money 
laundering and kno w-your-customer regulations. Institutions  were looking at the possibility of joint 
technical assistance missions, helping to build knowledge on trade finance and on compliance 
require ments.  WT/WGTDF/M/36  
 
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  1.5.  Finally, the fourth area of action was improving the monitoring of trade finance provision. The 
Asian Development B ank's global gap study continue d to improve – thanks to the collaboration of 
an increasing numbe r of institutions. This include d the WTO , other multilateral institutions  and 
professional associations . The last available study benefited from the participation from 515 banks 
and more than 1,300 companies, of which a large number were SMEs. The Director -General 
expressed his confidence  that the processes and discussions t hat he  had initiated c ould deliver 
more positive outcomes in the period ahead , provided that the m omentum t o this work  was kept . 
Members could be advocates of this issue. Their feedback, views , and i nformation on best 
practices , were key to  achiev ing concrete progress  in the field . 
1.6.  The Representative of Pakistan  thanked the Director -General for his report. The issue of trade 
finance was of critical importance to developing countries, especially for smaller companies. 
Almost half of the US$1.5 trillion trade finance gap was recorded in developing Asia , despite 
increased support by multilateral development banks . The Asian Development Bank had  stepped  
up its operations in countries such as Pakistan, Vietnam and  Cambodia , focusing on  SMEs. This 
showed that demand for trade finance was very high globally. His delegation had noted that 
increasing compliance requirements, lack of liquidity, US Dollar  clearing  and other capacity issues 
were among  the main barriers facing MSMEs in obtainin g trade finance. As a result,  considerable 
challenges remained . He thank ed the Director -General and the Expert Group  on Trade Finance  for 
their hard work  and continued involvement . His delegation was of the view that financial 
technology firms  and digital finance had a great potential for MSMEs, particularly for women and 
youth -owned MSMEs. He looked forward to hearing and learning from experts in this domain. He 
noted that the Informal Working Group on MSMEs had organized a session on trade finance later 
during the  day. 
1.7.  The Representative of Israel  expressed support for the work that had been carried out during 
the past few years on trade finance, much of which had been done both inside and outs ide the 
Working Group. The Working Group had been an important forum to focus the discu ssion. One of 
the key element of this work had been the seminar held in 2016, which allowed for a useful 
exchange of views and discussion between government officials, banks and export credit agencies. 
The Secretariat also advanced its work through on -going engagement with the World Bank and the 
IMF, amongst others.  The Director -General had also taken a personal interest on trade finance , 
and he had reflected such interest through discussions with key officials from multilateral 
development banks in various fora. While more work  had to be done, it was encouraging to see 
positive  engagement from the various stakeholders.  The WTO had been  working on a breadth of 
initiatives to assist MSMEs navigate the water of international trade, espe cially through the 
Informal Working Group on MSMEs , and also other platforms like the Trade Dialogues Program me. 
In this sense, the Working Group on Trade, Debt and Finance  was part of a large r effort to make 
international trade easier for MSMEs. Trade fin ance was a very important area, which could decide 
on the success or failure of these companies in international markets. As it stood, still 60% of 
trade finance requests by MSMEs were rejected, resulting in too many cases in the trade 
transaction being ab andoned. The common objective was therefore to continue the work and 
eliminate as many such barriers as possible.  
1.8.  The Representative of Brazil  thanked the Director -General  for his report on his interactions 
with other multilateral financial institutions. Such inte raction s on trade finance were  very 
important to the membership. There was clearly a role for the WTO in this discussion . Members 
could provide the Director -General  and the Secretariat with inputs for their interaction with other 
partner instituti ons. In a paper circulated in June of 2017 with Mercosur partners such as 
Argentina, Paraguay and Uruguay (JOB/GC/127), Brazil had indicated that there was a demand on 
the part of MSMEs for a larger availability of information and tools allowing them to  assess the 
credit risk of commercial counterparties . The lack of such tools increased their cost of financing 
and undermine d their  confidence in complet ing foreign trade transactions. Brazil was still reflecting 
on how to build on this contribution , and share more concrete elements with the membership , the 
Secretariat , and the Director -General . The representative  showed  interest  about some of the 
concepts mentioned by the Director -General in his report, such as  "know your customer " (KYC) 
and "information pool ing platforms " – on which his delegation would reflect . 
1.9.  The Representative of Côte d'Ivoire  thanked the Director -General for his report on trade 
finance. His delegation welcomed the progress described in this area. M uch remained to be done in 
light of the large needs of MSMEs. Therefore, he encouraged the Director -General and the WT/WGTDF/M/36  
 
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  Secretariat to continue their efforts. The meeting of the Informal Group on MSMEs w ould allow 
Members  to pursue the discussion  on this topic . 
1.10.   The Representative of the European Union  thanked the Director -General and the Secretariat 
for all the work accomplished in the past two years, both at the analytical and operational level. 
Such work clearly showed that there was a case for policy action . The Director -General should 
therefore be thanked for his tireless efforts to raise awareness on this issue.  MSME s were at the 
heart of economic activities in most Members, including in the European Union. It was important to 
identify obstacles that hindered the availability of trade fina nce in developing countries  and 
elsewhere . The European Union was also working with relevant partners, including with 
international financial institutions and international regulatory bodies , with the objective of 
reducing con straints  faced by  MSMEs in accessing trade  finance. The European Union  worked as a 
donor in initiatives aimed at reducing the gap between demand and supply. The representative  
welcome d the opportunity to have follow -up discussions at the Informal Group on MSMEs.  
1.11.   The Representative of Panama  said that he could not emphasize more the social, political 
and economic importance of MSMEs in his  country. MSMEs accounted for 90% of all companies 
established in Panama. T his was why Panama had a national policy for promoting SMEs, focused 
on: business development services, access to financ ial services, entrepreneurship and promotion 
of technological innovation, access to foreign markets and internationalization. In addition, 
Panama has a microcredit financing fund for  SMEs . The national policy for SMEs  encourage d access 
conditions for credit  in a way that MSMEs could finance their fixed assets, installation of 
equipment, purchase of inventory and capital. Panama acknowledged  that more work needed to be 
done regarding public policies for integrating SMEs  into global trade . Panama would be  working on 
creating solutions and contributing to make trade in SMEs more efficient  for the benefit of 
employees and households . 
1.12.   The Representative of Nigeria  underscored the importance of this topic for his delegation, 
and showed his appreciation for the oral report of the Director -General and the work of the 
Secretariat. He highlighted the importance of the detection of trade finance gaps, and the need to 
receive the support of regulatory bodies in this work. It was important to be able to have reliable 
trade finance statistics , including on the gap  between supply and demand , to be able to formulate 
and apply policies . He asked for details on how multilateral development banks ( MDBs ) operated in 
trade finance, and how to benefit from their program mes. 
1.13.   The Secretariat  provided a number of details regarding the functioning of trade finance 
facilitation program mes operated by multilateral development banks, the sa fe character of trade 
finance, the withdrawal by  global banks from developing countries after the global financial crisis,  
the cooperation developed by the  WTO and IFC with the Financial Stability Board, on -site training 
and e -learning for trade finance, t he global trade finance gap survey, and the lack of good 
statistics on trade finance . 
1.14.   In the following discussion, the Representative of Uruguay  expressed the view that  the 
financial system had been strongly regulated as a result of the necessity to combat terrorism, 
money laundering and organized crime in general ; on the other hand, MSME s faced difficulties to 
access finance. Therefore, the question was whether one could  deal with such a  dilemma . The 
Representative of Nigeria  asked wheth er the issues of technolog y and supply chain finance could 
be discussed in future meetings. The Secretariat  said that the withdrawal by international banks 
could be explained by  many reasons, which had been analysed  in several reports of the 
International Monetary Fund , the World Bank and the Financial Stability Board . New r egulations 
were one cause of the withdrawal  but only one in many  causes . There should be  no contradiction 
between promoting international banking standards and unlocking trade finance. O n the contrary, 
the more financial institutions would be recognized internationally as doing proper due diligence  
and applying proper checks , the more attractive they would become as credible counterparties  to 
other banks . However, more efforts were necess ary to  inform and train developing country banks 
in handling  compliance issues . One problem was when they had to handle different regulations  
from different jurisdictions. This was  particularly  a challenge for poor countries' banks. Another 
problem was to develop information "utilities" that could make due diligence cheaper. The 
Secretariat said that the role of technology  and trade finance  would be raised during the Public 
Forum. Several sessions  on such a topic had been  proposed. Re garding supply -chain finance, it 
was possible to invite a specialist from the trade finance industry, at a future meeting of the 
Working Group , to make a presentation on this issue . WT/WGTDF/M/36  
 
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  1.15.   The Chairman  summarized the discussion on this item  of the agenda . There h ad been 
considerable interest and support by Members of the Working Group on Trade, Debt and Finance 
for the Director -General's initiative , and much praise  expressed for his direct interaction with 
leaders of multilateral development banks and of the Finan cial Stability Board. There had also been  
an acknowledgement for  the results obtained, both in terms of additional financing by multilateral 
development banks as well as for capacity -building. Trade Finance was one area of the WTO work 
in which the interac tion between Members and the Director -General had been  bearing fruits and 
results. There was also a desire by Members to follow the implementation of some if not all of the 
proposals made by the Director -General. In this respect, the Chairman proposed to i nvite in future 
meetings qualified persons working on achieving progress, who could inform the Working Group 
about the ir work and answer some of the questions that arose during the discussion. There were  
two particular questions, one being the role of tech nology in reducing trade finance gaps, and the 
other being about supply -chain finance. The Chairman also said that Members had a key role to 
play in  this discussion about trade finance. For some countries, there were no or little trade finance 
gaps. In oth er countries, this was not the case. Sharing experiences and discussing  best practices 
that would be consistent with the WTO framework  would be a good idea. Finally, there had been a 
demand for hearing, in the fall, about the Director -General's proposed round table on trade finance 
at the IMF and World Bank Annual Meetings . 
1.16.   The Chairman  conclude d on the Members'  willingness to continue exchanging views on trade 
finance, and to monitor progress on the Director -General 's proposals, a s well as any other value  
added  to be provided by  Members . 
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. Since t his had not been the case , he 
reminded Members that a draft annual report had t o be produced by the Working Group. A short 
draft report prepared by the Secretariat would be up for discussion at the next meeting of the 
Working Group, to be held in the fall. I t was so agreed . 
1.18.   With this, the Chairman  closed  the meeting.  
 
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