REPORT OF THE WORKING GROUP ON TRADE, DEBT AND FINANCE (2016)

TO THE GENERAL COUNCIL

1.1.  The Working Group held two meetings, on 31 May and 20 October 2016, under the Chairmanship of H.E. Atanas Paparizov (Bulgaria). At the meeting on 31 May 2016, the Working Group discussed the Director-General's proposals, laid out in his document "Trade Finance and SMEs", circulated in advance to Members, and presented orally by him at that meeting. The Director-General suggested that, on this important topic for many members, a number of actions were within reach. The WTO could work with partners to: enhance existing trade finance facilitation programmes, with a view to reduce the gaps in trade finance; address knowledge gaps in local financial institutions by increasing capacity building; foster dialogue with regulators; and monitor trade finance gaps. The Working Group's input was very important to address each of these issues. Many Members requested the floor. In summarizing their interventions (WTO document WT/WGTDF/M32), the Chairman indicated that the Director-General's report had generally been considered by delegations as a necessary and positive step in resolving the problems of access to trade finance, notably for SMEs in developing countries. Still, this was only the beginning of an in-depth discussion, to be continued in future meetings of the Working Group, step-by-step. Several delegations expressed the wish to discuss new methods of financing trade, such as supply chain financing and digital trade, and ways in which Micro and Small and Medium sized-enterprises (MSMEs) could be covered by the discussions on trade finance and proposals. Discussions in the 2016 Public Forum were expected to help clarify some of these issues. While interventions had confirmed that trade finance was the main topic for the Working Group's current work, other topics have been raised by some delegations for possible future submissions.

1.2.  At the meeting on 20 October 2016, the Working Group on Trade, Debt and Finance reverted to the topic on trade finance and SMEs, notably in developing countries. The Secretariat had circulated a progress report, in WTO Document WT/WGTDF/W/82. The 2016 Asian Development Bank's global trade finance gap survey showed that global trade finance gaps had remained large (US$1.6 trillion in 2015 despite the fall in trade in US dollar value, against US$1.4 trillion in 2014). They affected disproportionally SMEs. Globally, 58% of trade finance requests by SMEs to banks had been rejected, against 10% for multinational companies. Half of SMEs did not seek alternative funding, either because of the absence of it (in many developing countries), unawareness (70% of surveyed SMEs are unaware of digital finance) and other reasons. Trade finance gaps existed in all continents, including in developing Asia, Europe, Africa, Latin America, and the Pacific. The Secretariat also provided an update on the Director-General's meetings with heads of partner institutions, such as the International Trade Finance Corporation (Islamic Development Bank Group), and the International Finance Corporation (IFC, part of the World Bank Group). The Director-General and the Chief Executive Officer aimed at organizing a high-level round table on the topic of trade finance and SMEs at the next spring meetings of the IMF and World Bank, based on good, solid analysis. The issue of withdrawal by large banks from many developing countries, through the termination of correspondent banking relationship had been discussed by the Director‑General, with a focus on its impact on the smaller traders. Based on this update, Members expressed their support to these advocacy efforts, bearing in mind the limitations of the WTO's mandate. They decided to continue to discuss the topic of trade finance and SMEs in the year 2017. No other topic had been raised by delegations for possible future submission.

1.3.  On November 11, 2016, the Working Group adopted its Annual Report (2016) to the General Council.

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