The gaps between supply and demand in trade finance could seriously impede trade’s ability to support Post-COVID-19 economic recovery and the private and public actors have to work together to tackle these shortages.
The World Trade Organization (WTO), the International Chamber of Commerce (ICC) and The Business Twenty (B20) Saudi Arabia have warned the trading world about the decreasing availability of trade finance.
The combined call for action that emphasizes the role of cross border trading for economic revival follows the meeting between WTO Trade Dialogues and the private sector in May. The meeting had been a platform for the discussion of prominent trade finance concerns.
The statement reaffirms the crucial role that trade finance plays in reviving the global growth in imports and exports.
“Since the need for trade finance is estimated to be between USD 2 trillion and USD 5 trillion, meeting this demand and addressing the shortfall will be challenging,” it said.
One of the major concerns is the widening gap between supply and demand that would affect micro, small and medium enterprises (MSMEs), especially in developing countries. This can have a major consequence on employment and hence, income.
The need for a rapid transition to paperless trade and e-documents in the management of trade finances were highlighted in the statement. Public and private sectors are encouraged to work together to achieve this transition.
Further, through the statement WTO welcomed effective views on how the regulatory authorities can help in easing the restrictions on trade finance provision. In order to reduce risk, expanded risk sharing that can help commercial finance along with the expansion of development bank schemes were suggested by the organization.
WTO Director-General Roberto Azevêdo said that failing to address the trade finance shortfall will seriously undermine ongoing efforts to give the trade the boost it needs to help global economic recovery.
As a means to overcome the current crisis, it is important that MSMEs continue to be able to access trade finance. The joint statement is an emphasis on the requirement of timely measures for the same.
The Business Twenty (B20)
Business Twenty (B20) is an informal forum that supports the G20 through specific policy recommendations, the consolidated representation of business interests and economic expertise. It also fosters dialogue between the public and private sectors. It consists of business representatives who typically come from the G20 countries and selected invited countries or international organizations.
Saudi Arabia will be hosting the fifteenth G20 Summit in Riyadh on 21-22 November 2020 and aims to deliver an impactful and differentiated policy development process, while reinforcing and sustaining the critical role of the global business community.
