WTO Meeting to Ease Credit Shortage for Trade

By THE ASSOCIATED PRESS
Published: November 3, 2008
Filed at 7:31 a.m. ET
GENEVA (AP) -- The World Trade Organization has summoned leaders of top banks to find new ways to finance the global exchange of goods and services, which faces a slowdown because of the tight credit constraints caused by the financial crisis.
WTO chief Pascal Lamy will chair the gathering in Geneva on Nov. 12. World Bank President Robert Zoellick, IMF Managing Director Dominique Strauss-Kahn and representatives of Citigroup Inc., Commerzbank AG, JPMorgan Chase & Co., and HSBC Holdings are among those invited.
The rapid expansion in global trade in the past years has been a key driver of economic growth. But over 90 percent of trade transactions involve some form of credit, insurance or guarantee -- financing that has become increasingly difficult for importers and exporters to secure amid the current crisis affecting global markets and banks.
The WTO said demand for trade financing is exceeding supply in some places around the world because of a capital liquidity shortage and increased needs for other forms of bank credits. The gap could affect the reliability of goods and services moving around the world.
Brazil recently complained at a WTO meeting that exporters from developing nations were struggling to get the necessary financing despite being among the most creditworthy. This is either because of heightened risk perceptions, that have created more stringent requirements by banks, or a simple lack of funds in the system.
In a letter to invitees, Lamy said the meeting of about 15 leaders would review how the international market for financing trade is faring, and look at ways to improve the availability of funds at affordable rates for developing countries.
The WTO said key international players need to figure out how to ensure a sufficient supply of capital for traders looking to cover risks such as the bankruptcy of commercial partners, damaged or delayed deliveries, transportation problems or sudden shifts in exchange rates.
Trade finance is among the most secure forms of finance because it is usually short-term, but during recent economic crises it has been harder to find willing lenders, the WTO said.