Good morning ladies and gentlemen,

Let me start by thanking the organisers of this conference for inviting me. I am also pleased to see Mr Jean-Francois Lambert as the Chair for this session. He is an active member of the WTO Expert Group on Trade Finance which monitors global trade finance developments and we benefit from his insights, as well as from other prominent players of the trade finance community.

This conference is timely for us in the WTO, for two reasons: first because we are in the process of finalising our annual  flagship publication, the World Trade Report 2010, whose theme will be “Trade in Natural Resources: Challenges in Global Governance”. We will therefore keenly follow your discussions here. Second, trade finance will be on the menu of the G-20 summit in Toronto later this month. This would be a good moment to review progress on the support package on trade finance that the G-20 London summit set up last year and try to further focus it on trade finance providers and traders that need it the most.

While the majority of you here engage in the financial trading of commodities, at the WTO, our members engage in setting and implementing the rules that govern global trade; that includes indeed trade in commodities. So I guess, one can say we are serving a similar purpose, which is to make trade possible, to ensure that the transmission belt between demand and supply works smoothly.

The global commodity trade is an important component of WTO members' exports, particularly the developing and emerging economies among them.

Trade in natural resources represents an important and growing share of world trade. In 2008, at the height of commodity prices, this share was around 24 per cent of total global merchandise trade in dollar terms. This includes of course trade in oil and fuels, minerals and food commodities.

It is also worth noting that in the global financial markets, commodities are now recognised as a major asset class, making up approximately 15 per cent of banks' fixed income revenues. According to recent research by Citigroup analysts, bank revenues from trading are expected to be 15 per cent to 20 per cent down from 2009, with commodities being the only sector with expected growth.

For developing countries, commodities, including cotton cocoa, minerals and so forth represent a significant share of their exports and in some economies in Africa and the Caribbean this share is as high as 80 per cent.

The question therefore should not be whether trade in commodities is important to global recovery efforts, but how do we ensure that commodities play their expected role in these efforts. Part of the answer lies in the availability and affordability of commodities trade finance, in all regions of the world, particularly those which are more commodity trade dependent. The other part of the answer has to do with the multilateral trade rules that regulate global commodities trade.

Trade finance is the oil that keeps the wheels of global trade running; hence our active interest and ongoing  participation in global initiatives to address the impact of the global financial crisis on the availability and cost of trade finance. The fact is that around 80 per cent of world trade is financed by some form of credit.

You all know that in the midst of the financial crisis the supply of trade finance had fallen short of demand, both in volume and value, in a context of liquidity shortage and re-assessment of counterparty risk, hence raising fears that this would deepen the collapse of trade and hence the recession. We have received  reports that the financing of some important commodity trade deals in developing countries, in particular in Africa, had been difficult to syndicate, such as, for example, in 2009 the pre-export financing of Ghana's cocoa crop.

Since the second half of 2009, though, the global trade finance market situation has eased up. According to trade finance experts which last met on 18 May 2010 at the WTO, liquidity has returned to the bulk of trade markets. Despite this overall positive assessment, experience differs widely across regions, with emerging markets leading the recovery. And although liquidity is less of an issue, the problem remains one of aversion to risk, particularly in smaller players in smaller markets

While our experts tell us that there is a large appetite for risk and ample liquidity to finance trade from China, India, Brazil and Korea, at the lower end of the market, there continues to be strong constraints. This is particularly true for  Sub Saharan Africa where some financing capacity seems to have been lost. At this stage it is not possible to determine whether this is permanent or temporary. The explanation given by global commercial banks is that the cost of collecting information on counterparty risk is high and that coupled with the low profitability of small operations in the region, trade financing remains unattractive, particularly on the import side.

Given the commodity dependence of these countries, this remains a serious matter for concern: financing commodity exports and not imports would be a short-sighted strategy. Import financing is also allowing for essential inputs to make future exports, be it commodity-based, competitive. Should you wish to be regarded as long-term partners for their development, you might wish to remain involved in the financing of substantially all trade of low-income countries, and keep your lines of credit open, not just for the most profitable commodity deals, where I guess competition for offering financing will tighten when commodity prices start to go back up again.

On the side of public backed institutions, which have done a good job at supporting trade finance during the recent period, particularly in regions that had suffered from the retreat of global commercial financial institutions, we should avoid to wind down the G-20 trade support package too rapidly.  Clearly, credit risk support will still be needed for some time to go but official support and emergency financing will not remain forever. It will therefore be up to you to allow for greater exposure to places such as Africa, Central America, Central Asia, and other areas where access to trade finance remains a problem where prices have not returned to affordable levels.

While trade finance for commodities trade is crucial for ensuring that trade flows, the environment within which this takes place is equally critical. This is why for the past  nine years, WTO members have been working hard to revamp the rules that regulate multilateral trade and to better level the playing field. As you know, commodities trade suffers from distortions that can be traced back to the colonial times and as such are structured in favour of rich countries at the cost of developing ones. A good example is the fact that there is still an imbalance in the WTO rules between the stringency of the rules for imports, and their laxity for exports. Or that tariffs escalate as products undergo a transformation and value added, an old feature of the colonial rule which would at last  disappear if we were to conclude the Doha Round.

Concluding the Doha Round would address not only tariffs, but also  subsidies and non-tariff barriers, thus significantly reducing the current distortions in global commodities markets, particularly those that impact on developing countries' trade performance, including in sectors like cotton or fisheries to name a few.

Whether the WTO, in the future, should step further in commodities trade rules than the already mandated negotiations is for WTO members to decide. We will provide them, and you all, with food for thought on this issue at the end of July, when we will be launching in Shanghai our 2010 World Trade Report which we have devoted to trade in natural resources.

At this stage, let me conclude in saying that the timely  conclusion of the Doha Round, coupled with improved conditions in the trade finance market, will go a long way in ensuring a timely exit from the current crisis. And as we are already seeing, the recovery we are witnessing is to a large extent commodity driven. You therefore have a stake in making this a sustained recovery.

Thank you for your attention.