The collapse of global trade, murky protectionism, and the crisis:

The collapse of global trade, murky protectionism, and the crisis
ings agencies won't help here as such counterparty risk tend to be "biased" against
developing countries risk.
Measures proposed by the private sector
The Banker's Association for Trade and Finance and other commercial bankers have
proposed the three following measures.
• Change the Basel II rules.
In view of the positions developed by both bankers and the Bank for International
Settlements (BIS) on trade finance, the WTO Expert Group on Trade Finance has considered
that the best course for bankers would be to make a case for themselves on
low default and the self-liquidating nature of trade finance, through a survey to be
conducted by the International Chamber of Commerce (ICC) on historical data – a
survey which is underway and is to be presented at the March 18 Expert Group meeting
at the WTO. Some regulators (such as the FSA) are currently discussing with representatives
of the banking industry, and it seems that some smaller requests of
bankers could be accommodated (this benefits only to banks regulated by the FSA,
though, it needs to be agreed globally.
• Introduce a ring-fenced liquidity fund for trade finance.
Here it is important to look at the nature of proposals. Some national Treasuries are
unconvinced that a large, sector-specific liquidity fund would be efficient, or fair from
a competition point of view. At the recent WTO trade finance conference, their representatives
argued that taxpayers would not accept paying once for the overall liquidity
injection into cash-strapped banks, and again for a special trade-finance vehicle
– especially since such a vehicle would trigger demands for similar things from
other credit market segments.
The trade finance departments of banks, it was said, need to compete better internally
for the extra cash provided by central banks. The problem is not one of overall
lack of liquidity but one of allocation of it, certain institutions remaining overly liquid
and having significant room for intervention. It should not be forgotten, that in
competitive banking markets, the best run banks are already anticipating a future
banking landscape where several of their competitors would have disappeared.
However, the design of much smaller, better targeted and experimental liquidity
funds, run by international financial institutions, for smaller segments of the market
or new countries, in particular those which most likely to be hit by the contraction
of supply (for example in least-developed countries' markets), is currently underway.
• Encourage more risk-sharing with public sector-backed institutions.
This proposal is also advocated by the WTO and international financial institutions.
The idea would be to mobilise public-sector actors, such as Export Credit Agencies
and the Regional Development Banks, in the effort to shoulder some of the privatesector
risk as well as encouraging co-financing between the various providers of trade
finance. With the support of WTO members, the WTO Director-General has adopted
a two-step approach in WTO Expert Group for Trade Finance in 2008, i.e.: (i) finding
collective short-term solutions, notably by mobilising government-backed export
credit agencies and regional development banks; and (ii) developing technical measures
that allow for better interaction between private and public sector players in the
short- and medium-term. The latter encompasses projects developed by the
International Chamber of Commerce, the IMF, the IFC, and the Berne Union, all of
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