RESTRICTED  
  
WT/WGTDF/M/3 4 
 
15 August  2017 
(17-4374) Page: 1/3 
Working Group on Trade, Debt and Finance   
 
REPO RT OF THE MEETING OF  18 JULY  2017 
1.1.  The thirty -fifth meeting of the Working Group on Trade, Debt and Finance (WGTDF) was held 
on 18 July 2017 under the Chairmanship of Mr. Asi Yousef  (Israel ). After confirmation of his 
election, the Chairman  provided a s ummary of recent developments on trade finance. The 
Secretariat had reported in writing on a meeting of the expert group on trade finance held in 
March (WTO Doc ument WT/WGTDF/W/84 ). The report confirm ed that the availability of trade 
finance in the develop ing world had remained adversely affected by the recent reduction by global 
banks of their correspondent networks. The Chairman also indicated that the Director -General held 
a private, informal round table on trade finance with senior officials  from multil ateral development 
banks  (MDBs) , on the margins of the 6th Global Aid for Trade Review . He invited the Secretariat to 
report on this round table.  
1.2.  The Secretariat  reported that se nior officials from MDBs  and the Director -General  shared the 
same diagnosis on  trade finance gaps.  Many international banks ha d pulled back from developing 
countries markets , which had  restrict ed access to trade finance in those countries, particularly for 
SMEs. The reduction of the network of correspondent banking relationships had  been significant in 
the period 2011-2016, although it had been  slowing down in the past year. This reduction had 
been documented by recent  reports by the  International Monetary (IMF) and  the Bank of 
International Settlements (BIS) for example,  in the Apri l 2017 IMF report on recent trends in 
correspondent banking relationships, and in the July 2016 BIS report on correspondent banking. 
MDBs confirmed that the reduction in correspondent banking relationships was very much visible 
on the ground. As a result, the trade finance gap was very high . It was  estimated to be about 
US$1.6 trillion according to the Asian Development Bank and the International Chamber of 
Commerce's trade finance s urvey, half of which was in developing Asia, US$120-130 billion in 
Africa, and the rest spread across the rest of the world. The gap could be as high as  20% of the 
value of global trade finance market s. It has affected SMEs traders disproportionally, since 58% of 
their trade finance requests ha ve been rejected. In more than 70% o f the cases, such SMEs  have 
been seeking no financing alternatives because it was not available. This trend  has resulted in a 
poor state of affairs given the importance of SMEs in providing jobs and growth in many countries. 
According to the 2016 World Eco nomic Forum's  Global Trade Enabling Report, lack of trade finance 
was one of the three top obstacles to exporting in half of the countries surveyed.  
1.3.  During the Director -General's round table,  multilateral development banks generally indicated  
a willingness  to do more in favour of trade finance, within existing resources.  The outcome of the 
ADB-ICC survey had been  consistent with what they saw in the field. For example, the EBRD 
witnessed rejection rates affecting SMEs in the order of 50%. Of course, there  were also structural 
and legitimate reasons for such rejections: lack of know -how by local traders and local banks in 
managing the risks of trade and trade finance, lack of collateral for lending  and lack of credit 
history, etc. However, the impact of some regulation s and the greater selectivity of banks had 
played an important role  as well . The International Financial Corporation (IFC ), the private sector 
arm of the World Bank Group , had run a survey of 306 banks in  92 developing countries, which  
indicated that the smaller banks face d major challenges in complying with new international 
regulations on anti -money laundering and other sanction re quirements. These challenges  have 
reduced their ability to serve their customers, in particular , the traders. I n som e countries, local 
banks were being cut off from the international financial system. Specific cases were mentioned.  
1.4.  MDBs were interested in increasing their capacity to serve markets , but the overall message 
was there was " only so much " they could do . With global trade falling by 16% in US dollar value 
terms, trade finance facilitation programs , taken altogether , had support ed an average of  
US$20 to 25 billion  of trade  per annum, an amount somewhat b elow the average of previous  
years . The two institutions having the largest programs said that they had space under existing WT/WGTDF/M/34  
 
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  programs to  respond to  increasing  demand , when trade would pick up . Other institutions  said that 
an expansion of their program s would be constrained  by their capital  base. Since  the resour ces 
devoted by  MDBs  to trade finance were limited, it was important for them to do more together , by 
way of co -financing and co -risk sharing, where geographical coverage overlapped. At the end of 
the round table, t he IFC and the Islamic Trade Finance Corpo ration (ITFC) signed a Memorandum 
of Understanding to conduct  joint trade finance operations  in Western Africa.  
1.5.  All heads of MDBs asked for a regulatory dialogue  with the Financial Stability Board . Two 
arguments were put forward : first, multilateral develo pment banks, in their support to local banks, 
could do a lot to get these  banks to comply  with international norms. At the same time, it had 
become  obvious that the international bar had been placed quite high for these  smaller banks , in 
small countries. It was felt that they could never do enough to satisfy compliance  requirements, 
which,  at times, differed from country -to-country . Still, MDBs  were doing a lot to promot e the 
pooling of information for compliance  purposes . MDBs had plans to train SMEs directly, notably 
though digital platform s. It was concluded that this dialogue with the Director -General on trade 
finance had been fruitful and could be continued. Participants intended meet in the fall , perhaps 
with private sector representatives and internat ional financial regulatory agencies.  
1.6.  The Chairman  opened the floor to Members.  
1.7.  The Representative of Mexico  referred to WTO Document WT/WGTDF/W/84 , which mentioned 
that 58% of small and medium -sized businesses had been denied trade finance applications . The 
rejection rate for  large companies was only  10%. This situation reduce d the competitive 
opportunities of small and medium -sized enterprises in international trade.  In Mexico, small and 
medium -sized enterprises face d challenges similar to those described by the Secretariat . He had 
noted the efforts of the expert group on trade finance in promoting the SWIFT repository of 
information for identifying clients, which was used by 2,500 financial institutions  globally . In 
Mexico the SWIFT device was used by appr oximately 40 financial institutions , and access to it had 
been increased by almost 100% in one year. Small and medium -sized companies play ed a very 
important role in the national economy, thus the Federal Government has promoted s everal  
programs aimed at i mproving access to financing, such as Crédito Joven; the National System of 
Guarantees , Support to Women entrepreneurs, and Foment to Capital of Risk.  Mexico hope d to 
contribute positively to the discussions on the financing of small and medium -sized enter prises  in 
the WTO . 
1.8.  The Representative of Thailand  support ed the  WTO's initiative in trade finance and SMEs. Like 
all other countries, SMEs play ed a vital role in Thailand's  economy, as they accounted for  more 
than 90 percent of all enterprises. The availab ility of trade finance was as an important challenge  
prevent ing SMEs f rom realizing the benefits of trade. In this regard, the Bank of Thailand in 
cooperation with the Ministry of Finance adopted the Financial Sector Master Plan for the year 
2016-2020, which aim ed at promot ing financial access for SMEs by, inter alia, improving necessary 
SMEs database of the financial institutions system; reviewing the regulations in order to expand 
the types of assets that c ould be used by SMEs as loan collaterals; and sup porting alternative 
means  of fundraising  in the start -up phase , such as Crowdfunding and Peer -to-Peer Lending.  
Thailand believe d that continued dialogue and cooperation on this matter would  help tackle trade 
financing gaps and suppo rt SMEs' growth. Thailan d stood  ready to engage with Members in 
moving this agenda forward.  
1.9.  The Chairman  concluded  on this item  that he had heard a good level of interest and support 
by Members of the Working Group on Trade, Debt and Finance. This was is one area of the WTO 
work in which the interaction between Members and the Director -General seemed to bear fruit. 
The SME/MSMEs dimension of trade finance had been highlig hted. Follow -up by the 
Director -General was ver y encouraging . It therefore made sense for the WGTDF to meet  after the 
follow -up round table scheduled by  the Director -General. He hoped that the Secretariat, in 
preparing that round table , would incorporate the  Members'  views.  
1.10.   The Chairman  thus moved on to the next and last item on the agenda . He noted that 
delegation s had agreed, as confirmed in the last Annual Report of the WGTDF  (WT/WGTDF/ 15), to 
continue to discuss the topic of trade finance and SMEs in the year 2017. He asked whether any 
delegations planned to make new submissions and raise any other topic in the near future. Since 
this was not the case, it seemed that trade finance would remain the main subject of discussion in 
the WGTDF, at least in the short run . The Chairman also indicated that the WGTDF was bound to WT/WGTDF/M/34  
 
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  make a  report  to the General Council  at the end of 2017 , in fact by mid -November . He suggested 
that the Secretariat prepare a short factual report under his responsibility, to be circulated to 
Members before the next meeting in the fall. As usual, Members w ould be invited to  make their 
comments , if any, and after incorporation of agreed changes, it would be proposed to approve the 
report  on a no -objection basis by a set date.  
1.11.   There was no objection to this  proposed  course of action. It was so agreed . 
 
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