. /.   WORLD TRADE  
ORGANIZATION  WT/WGTDF/W/40 
18 November 2008 
 (08-5617) 
Working Group on Trade, Debt and Finance  
  
 
EXPERT GROUP MEETING ON TRADE FINANCE – 12 NOVEMBER 2008 
 
Note by the Secretariat
 
 
 
1. The WTO hosted an expert meeting on trade financing – the second this year – on 
12 November 2008.  The previous meeting on 25 April had concluded that, in current market 
conditions, the group should continue to meet and network on an on-going basis and reconvene 
should the situation require it.  The panel of repr esentatives remained the same:  regional development 
banks active on all continents, the World Bank/IFC, the Berne Union (public and private sector trade 
insurance and export-import banks) and leading co mmercial banks (Citigroup, Commerzbank, HSBC, 
ING, JP Morgan Chase, and the BNES from Brazil).  
2. The objective of the meeting was threefold: (1) take-stock of current market conditions, in 
particular relative to an already tight market fo r trade credit and guarantees in April;  (2) review 
measures taken to deal with difficulties that had de veloped in trade finance markets since then;  and 
(3) brainstorm on ideas and initiatives that could contribute to mitigate the current situation and 
prevent further deterioration. 
3. In his introduction, the Director-General high lighted that since the April meeting, he had 
received information from WTO Members and market participants that the situation in the trade 
finance market was deteriorating, in particular  since the summer.  He had followed-up on earlier 
requests by market participants, in particular by wr iting to the heads of international institutions to 
draw the attention of their management and boards to the importance of trade finance facilitation for 
international trade and to encourage them to main tain, and where possible expand, their activities in 
this area.  He had written also to the General Ma nager of the BIS to channel concerns of market 
participants about the impact of the implementati on of Basle II rules on international trade finance 
operations, while making it clear that the WTO was not  the right forum to deal directly with these 
rules.   
4. Market participants confirmed that the trade finance market had become tighter since April, 
and particularly since September.  Two key problems were identified.  One was a shortage of liquidity 
to finance trade credit, which translated into unus ually high spreads for customers. The shortage of 
liquidity was a general feature of current interna tional banking conditions as the various segments of 
credit markets were competing for limited liquidity  and capital and there was wide availability of 
treasury bills for investment.  Market participants gave a broad estimate of the liquidity gap in the 
trade finance market of $25 billion at present.  The second problem stemmed from a general re-
assessment of risks caused as much by the financ ial crisis as by the slowing down of the world 
economy.  These problems were being felt most acutely by banks and traders in emerging market 
economies.  In general, trade finance providers for esaw a further deterioration of market conditions in 
coming months.  Although the slowdown in world trade might at some point reduce the demand for credit, the need for risk mitigation would increase a nd with the increase in the perception of risk the 
appetite for investing liquidity in trade fina nce markets might further vanish.      WT/WGTDF/W/40 
Page 2  
 
  5. Some steps had been taken to respond to this di fficult situation.  To be noted was the recent 
announcement by the President of the World Bank that  he intended to propose to the Executive Board 
of the IFC an augmentation of the ceiling, to $3 billion, of the trade finance guarantees available 
under the IFC's trade finance facilitation programme.  This was a good example of quick reaction to 
market developments, and of Aid for Trade in ac tion. The Berne Union also confirmed that export 
credit agencies had been stepping in much more ac tively in recent months. Collectively, they had 
increased their business by more than 30 per cent in the last twelve months, with a recent acceleration.  
The WTO had confirmation that this increase in activ ity was being backed in some cases by national 
governments. 
6. The message from some other regional developmen t banks with similar programmes to that of 
the World Bank/IFC was that they could do much mo re to response in the market if their Executive 
Boards would also raise their ceilings on this kind of  financing activity.  A message that  the Director-
General of the WTO was ready to carry to Member  governments was to encourage them to contact 
their finance and development officials representing them on the Boards of the regional development 
banks to promote their greater involvement in trade fi nance activities.  It was clear that co-partnership 
with other actors would be considerably facilitated if risk mitigation was stepped up – up to 100 per 
cent coverage of individual transactions for the confirmation of letters of credit, for example. 
7. As to what needed to be done in the future, the priority task was to enhance capacity to 
mitigate the effects of increased perception of ri sks and to provide the market with earmarked 
liquidity for trade finance.  Both the internationa l financial institutions and export credit agencies had 
possibilities to expand their contributions to cover ri sk and provide additional liquidity under existing 
instruments, although this would not happen withou t public authorities stepping in to provide them 
with more support.  As to the coverage of the estimated liquidity gap, commercial banks generally 
believed that it could be filled reasonably comforta bly through increased co-sharing partnerships with 
international financial institutions and export credit agencies to the extent that the trade and finance 
and insurance programmes of these institutions ar e supported by their shareholder governments. 
8. A second task, that needed to be viewed over the medium-term, was to  improve mechanisms 
of information sharing, risk assessment techniques, and data collection on trade finance.  This would 
expand the scope for co-financing trade among privat e banks and between the banks and public sector 
institutions such as the IFIs and the ECAs.   
9. The WTO will look into the issue of lack of statistics on trade finance, although this will 
require cooperative action between the various play ers, the commercial banks, export credit agencies 
and the regional development banks.  The WTO will also  continue to liaise with interested institutions 
to make the case that the market for trade finan ce is one of the most secure areas of banking and 
insurance activities and it has a strong multiplier effect on trade.  At a time of decelerating trade and 
economic growth, investing resources to keep trade fina nce flowing has a vital role to play.  Countries 
most vulnerable to shortages of trade finance ar e the emerging  market economies on whom the world 
is counting to sustain trade and economic growth as growth in the developed countries slows down. 
10. In conclusion, the Director-General believed a dominant message was that more multilateral, 
public-backed institutions should share more liquidi ty and risk by way of co-financing and risk-
sharing with the private sector, which would remain the dominant player in trade finance activities.  
He will take opportunities to continue to advocate in that direction, and invites all participants to 
continue working towards the strengthening of sustaina ble structures for the supp ly of trade finance to 
developing countries under th e Aid-for-Trade initiative. 
11. The group will meet again in the Spring of 2009. 
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