Communication from Jamaica, on behalf of the African, Caribbean and Pacific group of states (ACP)

This following communication and submission, dated 6 October 2011, has been received by the Secretariat for circulation to and discussion by Members.

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1  Introduction

1.1.  The African, Caribbean and Pacific Group of States (ACP) recalls the mandate of the Working Group on Trade, Debt and Finance as informed by our Ministers and that is, for WTO to study how trade can best contribute to solving the problems of debt and finance. A series of issues continue to haunt the development and progress of many developing Members especially in the case of the ACP economies, such as external debt problems, existential threat of climate change and natural disasters, smallness in economic size, lack of economies of scale, limited productive market and more so lack of access to financing mechanism both to service debt as well as that of trade finance. For these very reasons, the Working Group has been tasked to look at how trade-related measures can contribute to finding a durable solution to help alleviate these problems.

2  Background

2.1.  More recently, the COVID-19 pandemic has exacerbated ACP economies particularly in the areas of international trade and trade finance which further aggravated the situation of our Members. Trade finance is estimated to have contributed between 80% - 90% of all world trade^[1] and serves as the lifeblood of the day-to-day international trade in goods, a critical element for cross-border trade and in many cases the movement of goods across borders cannot proceed without it. Both global and local financial systems have been impacted including those of the trade finance as well as debt servicing mechanisms.

2.2.  As in trade finance, recent studies^[2] have shown that significant gaps have already persisted before the pandemic as global demand for trade finance outpaced supply. Research has also shown that the trade finance gap will expand potentially as the pandemic continues and certainly once COVID-19 abates, businesses will need additional trade finance to emerge from the lockdown. The Asian Development Bank estimated the global trade finance gap to be in the order of USD 1.5 trillion, with developing countries and micro, small and medium-sized enterprises (MSMEs) being the most affected by the shortfall.

2.3.  On the other hand, the Organisation for Economic Co-operation and Development (OECD) reported^[3] in March this year that governments in OECD countries turn to their Export Credit Agencies (ECAs) to fill any financing gaps left by the private market and to mitigate the impact of the crisis both in the short and medium-term. It is reported however that short-term trade finance which is mostly for small and medium-sized enterprises (SMEs) is facing access problems and higher rates of rejections. Export Credit Agencies therefore has a critical role in the short-term trade finance by acting on liquidity and increasing capacity.