At a meeting in Bali, Indonesia last recently, the heads of four international organizations issued a strong call to ease trade tensions and refocus on the importance of trade and the multilateral trading system in fueling economic growth. This call was made by Director-General Roberto Azevêdo, together with IMF Managing Director Christine Lagarde, World Bank President Jim Kim and OECD Secretary General Angel Gurria, at a jointly-organized conference under the theme “How global trade can promote growth for all.”

According to the Director General of the World Trade Organization Mr.Azevêdo, the trading system is not perfect — but it represents the best efforts of governments around the world, working together for 70 years, to find ways to cooperate on trade issues. He pointed that it took a lot of people and a lot of time to push the boulder this far up the hill. Thus, even keeping it in place requires constant effort.

Mr. Azevedo said that currently, the WTO covers around 98% of global trade and has overseen a historic opening of markets and integration of economies. Since 1980, average tariffs have been cut by two thirds. The system has provided stability and predictability in global trade — holding firm even during the financial crisis. And, as a result, it has helped to fuel unprecedented growth and development around the world, as well as a dramatic reduction in poverty. To him, the system has real value so there is need to keep working on it.

Mr. Azevedo then pointed out the need to explore all avenues which could ease the current tensions and strengthen the trading system.  “We all know the risks of further escalation — risks to the economy and risks to the trading system itself, which would multiply the economic risks over the long term. We can’t let that happen. We need trade and the trading system to play their part in fueling growth — just as they have done so effectively for seven decades.” He said.

The World Trade Organization and six other international organizations have recently pledged to deliver greater financial inclusion in trade.
At a special session during the Annual Meetings of the World Bank and the International Monetary Fund (IMF) in Nusa Dua, Bali, Indonesia, the organizations committed themselves to finding ways to close the gaps in trade finance provision.

During the event held in October 2018, the Director-General Roberto Azevêdo said that despite the importance of trade finance, a number of problems have emerged since the financial crisis. Supply and demand have become unbalanced. Perceived regulatory risk, combined with the low capacity of the financial sector in some countries, has resulted in big gaps in provision. The Asian Development Bank estimated that the global gap in trade finance is about $1.5 trillion. This gap represents a significant barrier to trade. It is of particular concern that this gap affects developing countries and smaller businesses the most. Today, 60% of trade finance requests by SMEs are rejected.

Mr. Azevedo said that opportunities for growth and development are being lost, which to him was a clear indication that action is required. He pointed that over the recent years they have been building a coalition to that end. Philippe (Le Houérou, CEO of the International Finance Corporation) and Mr. Azevedo joined forces and started reaching out to the heads of the regional development banks, the Chair of the Financial Stability Board, and many others.

He outlined the significant progress that has already been made in recent years, including to enhance the trade finance programs of key institutions. These programs are expected to support over $35 billion of trade this year, which is an increase of more than 50% over two years. He also outlined progress in addressing the knowledge gaps in local financial institutions, and in increasing dialogue with regulators to ensure that necessary financial regulations do not have unintended consequences for trade finance, which is a very low risk form of lending. He pointed to further actions which are needed in each of these areas.

Mr. Azevendo pointed that there is need to make global trade more inclusive, but further added that trade inclusion needs financial inclusion. He then explained that there was need to continue developing concrete ideas and solutions that make a real difference. Working with a range of partners – including the private sector – which can then help provide momentum to this work.

Source: World Trade Organization