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The International Chamber of Commerce has officially released the “2010 Trade Finance Reflection†survey report by investigating 161 banks in 75 countries. The survey shows that due to the rise of trade protectionism and the impact of trade financing on the New Basel Accord, the prospect of a strong and lasting trade recovery this year is not optimistic.
The International Chamber of Commerce is a large global business organization with thousands of members from more than 120 countries, covering all aspects of the private sector. Many international and regional intergovernmental organizations, such as the United Nations and the World Trade Organization, have obtained views on international business through the International Chamber of Commerce. The report was commissioned by the WTO Trade Finance Expert Committee.
International Chamber of Commerce Chairman Feng Guojing said that world trade is the main victim of the financial crisis, but China's trading partners have benefited from the Chinese government's fiscal stimulus plan. In addition, from a worldwide perspective, exports of durable products have been more severely affected, while trade in non-durable consumer goods has been less affected.
Feng Guojing: Trade volume fell by 12% last year, a serious decline since World War II. But in some areas, especially Asia is not so significant. China’s trading partners have benefited from the government’s fiscal stimulus plan, and Chinese product imports have begun to rebound. Worldwide, the export of durable products is more severely affected, rather than the trade in durable consumer goods, including clothing and food. In addition, the service industry is more resistant to risks than commodity trade.
Feng Guojing also said that at present, trade protectionism is a major obstacle to the recovery of world trade:
Feng Guojing: Since the outbreak of the crisis, many countries have adopted policies that are conducive to domestic products and are not conducive to imported products. We must resist trade protectionist policies because they reduce trade and increase the negative impact of the global recession on national exports, economic activity and unemployment.
The survey also mentioned that the G20 London Summit last year agreed to inject $250 billion into trade finance within two years. But in order to strengthen regulation of global capital and liquidity, Basel's new capital agreement framework requires the implementation of a capital adequacy mechanism. The Basel Committee on Banking Supervision also requested that the risk weight of trade finance be increased to limit bank leverage. Under this influence, the bank’s review of documents is more stringent. The number of rejected trade financing applications increased by 30% last year, and traditional trade financing instruments, such as commercial letters of credit, standby letters of credit and guarantees, cost more than economic recession. It will be much higher before it happens.
In this regard, Feng Guojing is concerned that the implementation of the capital adequacy mechanism will not only have a negative impact on the effective corporate trade credit supply, but also may lead to the exhaustion of trade finance. Therefore, he suggested that banking institutions should re-examine the risks of trade finance.
Feng Guojing: The combination of low-risk trade financing instruments and high-risk off-balance sheet items clearly combines low-risk trade finance business with higher-risk off-balance sheet business. In fact, the risk of trade financing is Low, because it is more liquid, we want to transfer this point to the bank, let the bank separate the trade financing in the mortgage, do not implement the same standards as other businesses.