Doha Declaration explained
Implementation Decision explained
the negotiations are organized
Speaking notes for the Director-General
As we all know, the world is experiencing one
of the most severe financial crises in modern history, with its
epicentre in the United States and spill-over effects on major financial
centres around the world. The correction of asset values is so strong
that it has systemic implications on the soundness and safety of the
entire international financial system. Governments, central banks and
regulatory authorities are acting on several fronts, injecting
liquidity, re-capitalizing and restructuring financial institutions, and
stopping risky behaviour that could further precipitate markets into
depression. Beyond this, the realization that an overgrown financial
system had developed bubbles, based on poor assessment of risk and
questionable use of ample flows of liquidity has been raising questions
in countries and internationally about the need to provide a stronger
skeleton to the international financial architecture.
Seen from our side, the side of the real economy, the financial crisis
that we experience is a wake-up call indicating that the world economy
cannot grow above the limits of its real production, and that feeding it
by debt and liquidity may only provoke severe corrections.
This is not the first shock witnessed by our multilateral trading
system. Despite its young age, the WTO has already faced previous
episodes of financial crises, and has shown resilience. By keeping
markets open during periods of financial and external payments crisis,
the multilateral trading system has shown that it can give a chance to
crisis-stricken countries to recover through trade. However, we have
also learned from these periods that, to do so, access to trade finance
at affordable rates must be maintained in such critical times to ensure
that international trade can continue to play its shock-absorbing role.
After the Asian crisis and in cases the abrupt interruption of trade
credit lines by international banks to some crisis stricken countries,
the WTO, in partnership with the IMF and the World Bank, formed an
informal group of experts from regional development banks, credit
insurance agencies and international banks who are involved in providing
trade finance facilities of one kind or another. Under the banner of
coherence, the aim is to seek options to deal with the scarcity of trade
finance during periods of crises and what appeared to be a trend to
withdraw from smaller developing countries' markets. Since then, the WTO
hosted meetings periodically to discuss means to address these
shortcomings, the last one in April 2008. At the time, we sensed rising
costs and liquidity shortages which were already hitting trade finance
for particular developing countries and LDCs.
The meeting that I chaired this morning, with the same panel of
representatives of private banks, international financial institutions
and export credit agencies, has confirmed that the market for trade
finance has severely deteriorated over the last six months, and
particularly since September. Two key causes of that were identified.
One is a shortage of liquidity to finance trade credits. The second is a
general re-assessment of risks caused as much by the financial crisis as
by the slowing down of the world economy, and it is there that those two
cycles interact with one another. These problems are being felt most
acutely by traders and banks in the emerging market economies.
The view expressed this morning by the trade finance practitioners is
that the situation is likely to deteriorate further in the months to
Some of these difficulties were becoming apparent even in April when I
chaired the last meeting of this group. Following up on this meeting,
some steps were taken to respond to the situation. Let me draw your
attention in particular to the announcement earlier this week by the
President of the World Bank, Robert Zoellick, that he intends to propose
to the Executive Board of the World Bank/IFC a tripling of the ceiling,
to $3 billion, of the trade finance guarantees available under the IFC's
trade finance facilitation programme. This is a remarkable example of
quick reaction by an IFI to current market developments and demand, and
of Aid for Trade in action. The Berne Union, which re-groups export
credit agencies, has also informed us that export credit agencies have
been stepping in much more actively in recent months. Collectively, they
have increased their business by more than 30 percent in the last twelve
months, with an acceleration since the summer. We had confirmation that
this increase in their activity is being backed by some national
governments, for example Germany, Japan and Hong Kong, China.
The message from some other regional development banks with similar
programmes to that of the World Bank/IFC is that they too could do much
more to respond in the market if their Executive Boards would also raise
their ceilings on this kind of financing activity. This is a clear
message for WTO Members — contact your finance and development officials
who represent you on the Boards of the Regional Development Banks to
promote their greater involvement in trade finance activities, as a sort
of lifeline for their economic activity in many countries.
What still needs to be done?
A priority task is to enhance capacity to mitigate the effects of the
increased perception of risks and to provide the market with earmarked
liquidity for trade finance. From that point of view, both the
international financial institutions and the export credit agencies have
the possibility to expand their contributions to cover risk and provide
additional liquidity under existing instruments. So there may be no need
to invent any new instruments. They are there and need to be enhanced,
but this will not happen without public authorities stepping in to
provide them with more support.
The market currently estimates the liquidity gap in trade finance at
about $25 billion. This of course is a sizeable sum, but not enormous
relative to the amounts that central banks have found it necessary to
inject into financial and banking markets in the past couple of months.
The private banks believe that this gap could be filled reasonably
comfortably through increased co-sharing partnerships with international
financial institutions and export credit agencies to the extent that the
trade finance and insurance programmes of these institutions are
supported by their shareholders, which of course is you, the member
A second task, that needs to be viewed over more of the medium term, is
to improve mechanisms of information sharing, risk assessment
techniques, and data collection on trade finance. That would expand the
scope for co-financing trade between private banks themselves and
between the banks and public sector institutions such as the IFIs and
the ECAs. We heard some concrete proposals on how to move ahead on these
issues this morning. Naturally, this is not a task for the WTO, but we
do have something to contribute in my view and we shall continue to work
with the various actors on these issues.
The costs of taking these steps and actions is not exaggerated. The
market for trade finance is one of the most secure areas of banking and
insurance activities and it has a strong multiplier effect on trade. At
a time of decelerating trade and economic growth, investing resources to
keep trade finance flowing has a vital role to play. Contrast this with
the costs of inaction. The countries most vulnerable to shortages of
trade finance are the emerging market economies on whom we are counting
to sustain trade and economic growth as the developed world slows down.
This is a useful message for the world leaders meeting in Washington on
The world economy is slowing and we are seeing trade decrease. If trade
finance is not tackled, we run the risk of further exacerbating this
downward spiral. The global slowdown, whether it is called a recession
in some parts of the world, a slump elsewhere, will last for sometime,
and will affect all countries. We simply cannot say that globalization
is benefiting emerging economies when developed economies' global demand
is expanding, and that no effect will be felt when such demand falls. At
the national level, there will be more risks, more job losses, more
There will inevitably be demand for greater safety nets
and security, which is legitimate. But there will also be demand for
The political message that WTO members should send both inside the
multilateral trading system and outside is that the WTO is ready to take
this challenge with a strong sense of collective responsibility and
solidarity. Members should resist calls for protectionists measures. In
a globalized world, one's protection is another's lost opportunity. And
everyone's protection — the kind of beggar thy neighbour that we saw in
the 30s — is a recipe for a severe contraction of international trade,
depressed growth and rising unemployment, again the kind of situation we
saw in the 1930s. This was evident during the Asian and Latin American
financial crisis of the 90s. Governments understood that keeping markets
open was part of the solution, not part of the problem, and GATT/WTO
disciplines at the time helped in resisting calls for closing trade.
The second message is of course to oppose financial chaos by further
organized, regulated and balanced trade opening through the Doha Round.
While countries struggle with the design of global financial rules, they
could send a positive signal by better regulating international trade
through the completion of the Doha Round.
After seven years of negotiations, we have come a long way in our
collective endeavour. My sense is that we are not that far way from our
objective of concluding the Round, even if a number of tough nuts remain
to be cracked, notably in the agriculture and industrial modalities,
which would be a stepping stone towards a final Doha deal. My sense is
that we can achieve modalities in these two areas by the year end. I
remain of the view that this is doable. And it is probably even more
desirable now than a year ago. But we now need to do it. The process to
get there is well known — the very good old recipe of bottom-up,
transparency and inclusiveness. But above all, a common desire to
mitigate the impact on your people of the severe deterioration of their
economic, and hence their social conditions.
Just to address a few of the points which have been made, although we
will be addressing a number of them later.
First, I do not intend to attend the Washington 15 November meeting,
which does not mean that this meeting should not send a strong signal on
trade, the Round and trade finance. There happen to be other ways to be
present than to be physically present, and we are working hard on that
with friends in the G-20.
Second, the meeting this morning was not a meeting with Members. It was
a very technical meeting with specialized practitioners. And if there
are — and I understand that there are — messages for international
financial institutions, I mentioned in my introduction that these
international financial institutions are member-driven just like the WTO
is Member-driven. So Members here present have all of the available
channels which members of these international financial institutions
have in order to direct their operations in one or another direction.
What we can do in the WTO is complement what Members do, raise
awareness, put a bit of public attention on this, but at the end of the
day these international financial institutions will take the decisions
which their boards will take and you are the members of these boards.
Third, on the general discussion about trade opening and regulation
— without departing from my, I hope, well-known neutrality — let's
intellectually at least make a difference between opening or not opening
on the one side and regulating or not regulating on the other side. You
can open your markets and regulate, you can open and deregulate, you can
close and regulate and you can close and deregulate. Trade opening is
one thing, regulating the sectors which you have opened in such a manner
that your domestic operators and foreign operators are treated the same
way, is something different. So, at least for the sake of the
intellectual argument, I think there should be no confusion between
these two notions.
Finally, our relationship with the Bank of International Settlements in
this field is a relationship not to the BIS as a Central Bank of Central
Banks, which it is not financewise. The BIS, financewise, is a clearing
house for Central Banks but not the Central Bank of the Central Banks as
if there was a sort of lender of last resort above the Central Banks
that could provide more finance. Our relationship with the BIS is a
relationship with the BIS constellation, which is BIS as a regulator,
notably with the Basel II standard, and this question will be
followed-up as a number of other questions which are being dealt by the
Task Force in the next session of the Working Group on Trade, Debt and
Finance. This specific issue is on the Agenda of the meeting of the
Working Group, which is the body for following-up on the work of the
internal Task Force that I have created. However, I am perfectly ready
to do sort of periodic reviews of the situation under the mandate I have
given to this internal Task Force, starting by the way with the next
General Council meeting.
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