   
  
WT/WGTDF/W/95  
 
15 April 2020 
(20-2939) Page: 1/2 
Working Group on Trade, Debt and Finance    
 
EXPERT GROUP MEETING  ON TRADE FINANCE – 30 MARCH 2020  
INFORMAL REPORT BY T HE WTO SECRETARIAT  
1.1.  The objective of this virtual meeting was to receive participants ' views about the most adapted 
policy response to current circumstances. The call was organized by the WTO Secretariat in 
collaboration with the International Chamber of Commerce 's (ICC) Banking Commission Secretariat. 
It benefited from the participation of  leading global and regional banks involved in trade finance, 
representative of export credit agencies, professional organizations, and multilateral development 
banks.  
1.2.  The Expert Group on Trade Finance signalled a significant deterioration of the availabi lity of 
trade finance, its risk profile and cost, relative to the meeting held in Geneva on 21 February, during 
the virus outbreak in China.  
1.3.  Several financial institutions argued that the increased demand by traders (both importers and 
exporters) for bank  support was not only requiring additional guarantees and liquidity, but also 
capital  or capital relief for financial institutions – as an increased demand for support weighted on 
their capital base. An important consideration in a «  roll-over » finance bu siness is that, as payments 
terms were extended for existing credit/facilities, the accommodation of new requests for became 
more difficult. Some participants considered that a «future flow of funds  » type of program me could 
be needed. International banks faced a deterioration of the liquidity of their partner banks, notably 
in developing countries, compromising the security of payables and receivables ' flows across 
international supply chains. It was reminded that capital relief for trade finance transacti ons had 
been recommended and temporarily enforced by Members of the G20, after the London Summit in 
2009 crisis. This contributed to freeing bank resources for financing more trade transactions.  
1.4.  Significant operational problems  currently hindered trade fin ance. Many countries had 
difficulties adapting to "work-from-home ". Legal documents necessary  for the processing trade 
transactions (invoices, bills of lading, customs documents) were either delayed, or not transmitted 
at all. Without such documents, trans actions could not be processed  and deliveries could not be 
made, with some national legal systems requiring only original documents from the counterparty to 
be presented for verification. Interim solutions worked in some countries, with the use of scanned 
documents and e -documents (such as e -bills of lading). However, in many areas, such as in the 
Indian sub-continent, the system was still largely based on original documents, and hence 
paper -based. The legislation was difficult to suspend as the verification of original documents upon 
the opening of letters of credit and requisitions for payments was precisely put in place to avoid 
fraud – which numbers were on the rise globally.  
1.5.  The International Chamber of Commerce, the standard setting body in the field of letters of 
credit, said that it was about to issue guidelines allowing for some relaxation of requirements, such 
as the 5 -days deadline for the presentation of compliant documentation. Still, the problem of missing 
official documents for trade  was a growing one, spreading from country to country, as shutdowns  of 
public administrations, port authorities, etc, had been decided abruptly and without alternative. A 
related problem was current restrictions on customs and mail services, which, even wh en documents 
had been collected, prevented their physical transmission to issuing banks, thereby preventing trade 
deliveries.  There was a strong demand from Asian institutions asking for the WTO to call for caution 
in restrictions related to mail services . 
1.6.  The availability of liquidity  depended greatly on the geographical location concerned. As often 
in acute crises, the poorest countries are the first and most affected: in Africa, the tightening of WT/WGTDF/W/95  
 
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  liquidity had been immediate as several international and regional banks had been either cutting 
their funding lines to African financial institutions for trade transactions or  increasing the cost of it. 
Some landlocked African countries were currently not able to receive essential imports of goods as 
a result of  border closures in neighbouring countries, and lack of finance. Transit trade was 
particularly affected.  
1.7.  In many other developing countries, including in Latin America, Northern Africa and 
Central  Europe, liquidity in US D was drying up quickly . While repr esentatives appreciated the 
reactivation of swap agreements between the Federal Reserve and a selected number of central 
banks, participants requested an extension of the number of central banks with which swaps 
agreements would be available.  
1.8.  In other reg ions, trade credit/payment guarantees  were in greater need than liquidity.  
A number of financial institutions and multilateral development banks argued that the perception of 
the payment risk was deteriorating rapidly. While financial intermediaries could handle one -off 
extensions of terms of payments, the uncertainty related to the duration of the crisis led to a 
heightened perception of the risk of not being paid back, this perception of risk increasing with the 
remoteness  of transactions. The vast majori ty of participants requested increased guarantees to be 
provided by export credit agencies and by multilateral development banks (guarantees on letters of 
credit and on short term trade credit). One participant wondered whether a moratorium on extended 
payment or period of grace of  three  months covering entire supply chain was feasible and practical. 
While such "blanket " measure would require a global agreement between private and public financial 
institutions, other participants insisted a full -scale inter vention of export credit agencies and 
multilateral development banks, increasing quickly their guarantee mechanisms.  
1.9.  In this regard, participants appreciated the adoption by the EU, on that day, of a key 
amendment to its State Aid rules, allowing companie s to obtain short -term credit insurance from 
public insurers. However, the measure applied only to OECD Members, leaving non -OECD Members 
uncovered. Proposals were made within the Berne Union for Export Credit Agencies (ECA) to be 
direct insurers for compa nies and to reinsure private insurers (on State account, like in 2009). Such 
a bold step was at the root of the 2009 G20 sponsored trade finance support – ECA supported about 
USD 130 billion in trade credit risk on State account. For the time being, governments which have 
adopted loan guarantee program mes for certain sectors (tourism, airlines) or certain categories of 
firms (SMEs) have not taken into account the specific needs of (domestic or international) trade. For 
example, SME guarantee schemes a re not supporting the factoring industry, which finances payment 
receivables amounting USD 2 trillion in domestic trade and USD 600 billion in international trade.   
1.10.   Multilateral development banks have increased their trade finance facilitation program mes to 
guarantee (mostly), and possibly fund directly, trade transaction (IFC, EBRD, ADB, Afreximbank 
have announced COVID -related schemes). One multilateral development bank has already recorded 
an 80% increase in demand for its support.  
1.11.   In summary, the repre sentatives of the trade finance community present at the meeting are 
unanimous in requesting:  
a. More international coordination of measures which have to date been taken at the national 
or regional level, with a view to protecting international supply chains  – particularly at the 
low end of the chains, in developing countries.  
b. More coordination between public sector actors, such between the WTO and multilateral 
development banks, among multilaterals; and with ECAs.  
c. Measures adapted to international trade, wit h a mix of guarantee  program mes by 
ECA mitigating the increased perception of payment risk; MDB program mes oriented 
towards developing countries ' preservation of trade structures; and SME based 
program mes guaranteeing – close to the architecture agreed at the G20 London Summit 
and monitored at the Toronto and Cannes Summits.  
 
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