RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/WGTDF/M/20 
15 June 2010 
 
 (10-3247) 
Working Group on Trade, Debt and Finance  
  
 
REPORT OF THE MEETING OF 4 JUNE, 2010 
 
 1. The twentieth meeting of the Working Group on Trade, Debt and Finance (WGTDF) was 
held on 4 June, 2010 under the Chairmanship of Am bassador F. Gonzales (Paraguay).  The Working 
Group adopted
 the agenda. 
2. In his introductory remarks, the Chairman  recalled that Members had agreed in September 
last year and in their subsequent report to Ministers, that they would continue monitoring developments regarding the availability of trade fi nance. This was a key el ement of the activities of 
the Working Group, reflecting in particular the ch ange for trade that had arisen from the recent 
economic crisis. Monitoring developm ents in this area had become even more important since the G-
20 Summit in London decided on a package to "ensure the availability of at least $250 billion in short-
term trade finance".  In this context, the WTO Expert Group on Trade Finance had met under the chairmanship of the Director-General on May 18, 2010. The Secretariat had circulated its report to Members shortly thereafter in WT/WGTDF/W/48.  Th e Director-General had invited the Chairman to 
attend Expert Group meeting. 
3. The Chairman proposed to centre the di scussion of the Working Group on recent 
developments in trade finance, as reported by the S ecretariat, and on current preparations in the run-
up to the Toronto G-20 Summit.  
Discussion on Trade Finance between the Chair, Members and the Secretariat  
4. The Secretariat
 based its report on Document WT/WGTDF/W/48, and on a number of 
elements gathered by G-20 experts on trade finan ce, in their preparations for the Toronto G-20 
Summit. It appeared that trade finance market c onditions had further improve d since the fall of 2009; 
the bulk of trade flows (both trans-Atlantic and tr ans-Pacific flows) was fully financed – liquidity 
being less of an issue globally. The improvement was driven by fast-growing emerging markets, for which spreads had come down to pre-crisis levels: they benefited from the "flight to quality" and in 
general a greater selectivity of globa l banks towards counterparty risk.  
5. Three factors of uncertainty remained: (a) gl obal banks were still in a phase of restructuring, 
meaning that low remunerative activities such as tr ade finance were regarded as relatively less 
attractive than other forms of bank activities; furthe r, the threat of a tightening of capital adequacy 
ratios for cross-border lending activities was not en couraging banks at taking more risks in an 
environment of already scare capital (b) concerns about  sovereign debt risk ad ded up on the general 
risk aversion of global banks (c) As a result, there was a risk that global banks withdraw some 
capacity from trade credit markets, particularly in ma rkets at the periphery of large trade flows. Where 
local commercial banks could substitute global banks, this was not a major concern, but this was more 
of a concern in areas in which local banks were themselves under pressure to merge and restructure, 
or lacked the know-how to engage in trade finance. The combination of greater risk aversion of global 
banks and sovereign debt overhang meant that in 30 to 40 countries in the word, the availability of 
trade finance was restricted or its affordability reduced.  WT/WGTDF/M/20 
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  6. The WTO group of experts thought that it was premature to phase out at once the risk-
mitigating instruments put in place by government-backed institutions in the context of the G-20 package. Exit from such package had to be gradua l, well prepared and targeted. Liquidity support, 
which had been less of a concern in Asia , could perhaps be winded down more easily. 
7. Two other issues had been considered by WT O experts and the Director-General: first, the 
need for a continued dialogue between prudential authorities and the trade finance community, based 
on figures and facts. Second, consideration of po ssible long-term actions to support the supply of 
trade finance in Africa and other regions in which a loss of capacity has been  recorded, for example 
through increased technical assistance to local banks, and/or the creation of a trade finance facilitation 
programme at the African Development Bank. 
8. The Chairman
 opened the floor to delegations wishing to ask questions on the presentation by 
the Secretariat, or make broader statements on the topic. 
9. The Representative of Pakistan  expressed satisfaction that the trade finance environment had 
improved, notwithstanding a mixed pattern of rec overy across different regions and countries. He 
noted that there had been a concentration of bus iness towards big emerging markets, while world 
trade relied on a large number of countries and sm all and medium sized enterprises, which did not 
benefit from such easy access to trade finance. Hence, he found premature to wind down official 
support and supported the enhancemen t of capacity-building under the Aid-for-Trade Umbrella. Risks 
regarding the recovery of trade and finance were s till vivid, and simply planning a return to business-
as-usual was not realistic. Regional disparities and im balances had to been addressed, to hope for an 
extension of the recovery to all developing c ountries. He expressed confidence that the Working 
Group on Trade, Debt and Finance could discuss th ese wider issues, reminding the inextricable links 
between external debt, trade and finance, precisely.  The mandate of the Group was not limited to the 
impact of monetary and financial instabilities on the multilateral trading system. Equal attention 
should be devoted to the problem of external i ndebtness and development finance in developing 
countries. He looked forward to examining the note promised by the Banker's Association on Finance 
and Trade (BAFT) about the ways and means to "r e-hook" the "small players" to mainstream trade 
finance markets. 
10. The Representative of the European Union  agreed with the overall assessment by the 
Secretariat on the trade finance situation. The Eur opean Union and its Members have been a key actor 
of the G-20 trade finance initiative launched in 2009,  and shared the view that this initiative had 
proven its value. While it was designed as a temporary relief package, under the present 
circumstances, there was no need to rush to a premature "exit". The EU was thinking about any 
follow-up steps needed, after the expiration of the init iative at the end of 2010, particularly in areas in 
which the recovery had been more sluggish than expected. Referring to WTO Document 
WT/WGTDF/W/48, the representative asked whether there was any "hard" evidence of the spill-over 
on trade lending of tightened banking and sovereign risk conditions in South Eastern Europe. The EU 
continued to be interested in the work of WT O trade finance experts, and was making its own 
preparations for the upcoming meeting of the G-20 on this particular topic.  
11. The Representative of Brazil  welcomed the fact that the work of the Group had maintained 
trade finance high on the agenda of the WTO and internationally. The pers onal involvement of the 
Director-General had certainly contributed to it, and he expressed his appreciation on behalf of his 
delegation. In a situation of increased volatility of the sovereign debt risk of certain countries, he 
encouraged the Director-General to hold meetings of the expert group frequently and regularly to 
keep the trade finance situation under review. The Gr oup's future tasks were two-fold: first, to help 
regions whose markets have not been able to recover after the financial crisis; in this context, further 
actions had to be taken with respect to the situ ation in Africa, and hence Brazil would support any 
endeavour to enhance the continent's effort to  recover its financing capacity. Second, the Group  WT/WGTDF/M/20 
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  should strive to guarantee a revision of the Basel II regulatory framework, with a view to have the 
safe character of trade finance properly recognized. He  concurred with the view that such a revision 
required with hard data, and, in this context, wi shed to thank the International Chamber of Commerce 
and the Asian Development bank to  have taken the initiative to establish a trade finance default 
registry. Finally, he indicated that the "exit" st rategy by the G-20 with respect to support to trade 
finance had to be gradual, and ta ke in consideration the special difficulties of certain regions and 
certain categories of players. 
12. The representative of China  expressed satisfaction that his country had been leading the 
improvement in trade finance markets. 2009 had b een a very bad year for world trade as well as 
China's trade. Trade finance had shrunk, which aggravat ed the drop in trade. In dealing with the crisis, 
the Chinese government had taken measures to expand  domestic demand and shift the main drivers of 
economic growth. Specific measures were taken to support trade and trade finance, for example by 
expanding the coverage of  short-term export credit insurance pr ovided by the Chin ese Export Credit 
Insurance Company, and by supporting efforts by cr edit guarantee institutions to expand their services 
to SMEs. China participated in the funding of the IFC's Global Trade Liquidity Programme by buying 
IFC bonds in the value of USD1.5 billion. The Chin ese central bank signed currency swap agreements 
valued at a total of RMB650 billion Yuan with cen tral banks or currency authorities of Argentina, 
Belarus, Indonesia, Malaysia, Hong Kong, China, an d Korea. China also signed and participated in 
the Chiang Mai Initiative Multilateralization (CMIM) Agreement valued at a total of USD120 billion 
together with the 10 ASEAN countries, Japan, Kor ea and Hong Kong, China. It also announced a 
program to provide loans of USD15 billion to the ASEAN countries, loans of USD10 billion to the 
African countries and other member countries of  the Shanghai Cooperation Organization (SCO) 
respectively, and to establish the China-ASEAN Investment Cooperation Fund in an amount of 
USD10 billion. 
13. In addition, the Import-Export Bank of Chin a has engaged in joint financing scheme with 
partner institutions, such as with the US EXIM Ba nk to provide trade financing facilities of USD20 
billion to support bilateral trade. It provided trade financing of up to USD3 billion to banks in Russia, 
Turkey, India, Chile and multinational financial ins titutions such as the Afri-Exim Bank.  The Chinese 
Government has also made efforts to create an enabling environment for commercial banks, domestic 
or foreign, to provide trade financing to China’s imports and exports, for example in the context of 
major infrastructural investments in  the energy and transport sectors.  Innovative forms of structured 
trade financing have been set up with major intern ational banks.  The government promoted the use of 
the Renminbi for trade settlement in a number of trade transactions, with other parts of the world, 
including on commodity financing.  Although demand picked up and the outlook was brighter for China, there was still a long way to return to the pre- crisis situation.  Further efforts, including in the 
area of trade finance, needed to be made by WT O members and relevant organizations to rebuild 
confidence in trade and trade finance,  as an engine for development. 
14. The representative of Japan
 reiterated his appreciation for th e Director-General's initiative in 
favour of mobilizing trade finance in the recent period , and the leading role of China in the recovery 
of trade finance.  He asked questions with respect to  the rise of the sovereign risk in parts of Europe, 
and its impact on credit ratings, and hence the liqui dity situation in that part of the world. 
15. The representative of Colombia  said that, while the improvement in trade finance global 
markets was good news, that improvement did not be nefit all countries.  There were new issues for 
concern, such as the increase in sovereign debt and exchange rate risks.  This raised one question, 
whether fiscal consolidation plans announced in some  parts of the world would not have a detrimental 
effect on trade and trade finance. 
16. The representative of Cuba  noted that while some signs of recovery had been visible lately, 
particularly in the area of trade finance, all play ers had not benefited the same way.  Small trading WT/WGTDF/M/20 
Page 4  
 
  operations were not financed as easily as large ones – with SMEs facing the highest costs, particularly 
in developing countries. In the past two years, acc ess to finance depended even more than before on 
the size of national economies and of traders.  There was a need to reform the international financial 
system in a way that would bring a better equality of treatment.  Cuba thought that it was important 
for the Working Group to deal with the question of  external debt, not only because the debt overhang 
of developing countries remained high, but also because these countries did not access the massive 
financial resources mobilized by the interna tional community during the recent period.   
17. The representative of Venezuela
 was not as optimistic as other countries with respect to 
improvement in trade finance and, more generally , with prevailing scenarios of global recovery. The 
social cost of the recent crisis was still being fe lt across the world, with poverty and unemployment on 
the rise in many developing countries.  Funding fo r development, as targeted by the millennium 
development goals, was no longer guaranteed, and th e efforts to revitalize trade through the DDA 
were insufficient.  It was important to revitali ze the discussion on the relationship between external 
debt, trade potential and development, perhaps with  the input from different contributors, such as 
academics.   
18. The Representative of the Secretariat  provided a number of clar ifications regarding the 
questions raised by several delegations, including  on the way in which the financing of trade was 
affected by episodes of sovereign debt crises, incr eased exchange rate vola tility, and in general by 
recent doubts over the pace and stability of the global economic recovery.   
19. The Chairman  thanked delegations for their contri butions. He reminded that, while it was 
clear that the mandate of the Working Group was br oader than the simple i ssue of trade finance, 
developments in the past two years had provided for a full justification of the focus of the Group on 
that particular topic, which should remain under re view for the foreseeable future. On other issues 
such as debt, it would be important to base any fu rther analysis on written submissions by members. 
He would consult with some members about thei r willingness to make written inputs by the summer, 
for possible discussion at the next meeting. Also, suggestions on a list of possible external 
contributors, be it on the topic of trade finance or  on other topics, could be made in writing for the 
consideration of the Chairman and Members at the next meeting of the Working Group. 
20. In his summing up, the Chairman also emph asized the continued interest of delegations 
regarding the work of WTO experts on trade finance.  After taking stock of the initiatives taken by the 
G-20 Summit in London and subsequent progress achieve d in Pittsburgh, it seemed that since the fall 
of 2009 the market situation for trade finance had eased  further in the largest markets, in particular 
those financing north-north trade and intra-pacifi c trade –, a situation that was worth noting.  
However, this improvement in major markets left smaller players, be they traders in low-income 
countries or smaller traders in developed countries, vulnerable to credit scarcity, and restrictions and 
obstacles to obtaining trade finance at affordable co st. Part of the explana tion for this development 
was greater selectivity on the part of commercial inst itutions of their risk, or at least their perception 
of risk.  It seemed also that the private sector has not fully returned to some market segments (such as 
trade insurance).  Moreover, the attractiveness of trade finance as a banking activity had been reduced 
by a number of factors such as an increase in comm ercial and sovereign risk s, prudential regulations 
and other reasons.  The Working Gr oup was willing to continue to interact in future with outside 
Experts, the Secretariat and other interested parties to help ensure that by the time of "exit" the 
initiative is a full success. He suggest ed that the Group held another meeting in the second half of the 
year, ahead of the G-20 meeting in Seoul, to look at  the progress, if not the exit strategy, from the G-
20 Initiative on Trade Finance.  By that time, the Group would be able to look at concrete, written 
submissions made by members on other subjects. With this, he closed the meeting.  
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