Trade and Finance In the WTO

1. Trade and Finance In the WTO

2. International organization regulating international trade • Functions (Article III.5 of the WTO): • - Administer existing WTO Agreements • - Negotiation of new rules and agreements • - Settle trade disputes between members • - Monitor trade policies • - Policy Coherence with other international organizations, mainly the IMF and WB

3. Coherence Mandate • Benefits from WTO system should be supported by cooperative policies • WTO should rely on stable trade and finance policies (financial and exchange rate stability). Trade opportunities should not be undercut by financial instabilities • Trade and development (continued flows of ODA, in particular for trade – Aid for trade) • WTO should cooperate with IMF, WB on cross-cutting issues, at members, DG and staff level

4. TRADE AND FINANCE AGENDA • Important in financial crisis: avoid contagion • Maintain flows of trade finance in line with demand • Avoid protectionist reactions WTO: shock absorber

5. Trade Finance: Major concern of WTO members • Interruptions during Asian crisis • WTO, IMF, WB create Expert Group on Trade Finance in 2003 – informal group • Participation: RDBs, multilaterals, EXIMS, Banks: at level of practionners • Role: market stock-taking, discussing market disruptions, and solution: cooperation between various actors, information and risk-sharing

6. Expert Group Meeting role? • Started in analytical mode: Analysis of the Asian financial crises 2 papers: IMF: «Trade Finance in Financial Crisis (2004) and WTO « Discussion Paper 2: Boosting trade finance in periods of financial crises ») • Clarification of causes of Asian market disruptions (increased risk perception, lack of insurance when needed, herd behaviour, weak domestic banking systems, concentration of risks in banking system, lack of coordination) and of initiatives taken during the crisis. • Gradually moved to informal forum of practicioners: information-sharing; Discussing contingencies (developing network of trade finance facilitation programme – dissimination of good practice); Aid for Trade

7. Expert Group Meeting role? • Focus: Stock-taking at any point in time (lack of statistics); look for solutions: cooperation between actors; advocacy in favor of WTO compatible forms of financing /RDBs; forum for cooperation and dialogue between market participants

8. Expert Group Meeting role? • One step up: November 12 meeting – debriefing WTO Members, IMF and WB. Greater level of mobilization, strong message to G-20 • Pb: shortage of liquidity and disporportionate aversion to risk lead to shortfall in commercial banks of $25bn. Credit price and insurance up to three times normal circumstances • Solution? One mean is for international and regional leaders to shoulder some of the risk through co-financing and thereby entice private lender back into this market.

9. What was achieved? • Export credit agencies from OECD and non OECD are stepping: ST credit providers; programmes for SMEs; ECAs are conducting operations regionally (supporting chain supply) • RDB and IFC are enhancing trade finance facilitation programmes. Ceilings have been roughly doubled. • Central Banks are providing liquidity for conducting repo. Auctions in $ for financing trade finance in countries which currency devalued against $

10. Next steps: • Other short-term action: market looks at options to fill gaps: co-financing and risk-sharing; idea of earmarked liquidity pool • Rapid survey of market: IMF; making a case for softer regulation under Basle II (ICC) • Long-term: develop a standard of information sharing on customers (IFC - KYC) • Continuing to strengthen capacity on supply of trade finance through Aid for Trade initiative . • Expert group stands ready to meet at any time. Continued networking among participants. Prague Union members next time?

11. Thank you for you attention!