Rethinking Trade and Finance
Rethinking Trade and Finance
Rethinking Trade and Finance
Rethinking
Trade and
Finance
Acknowledgements
Sponsors
Partners
The International Chamber of Commerce (ICC) thanks its partners and this years
sponsors, ING Vysya Bank and Misys, fortheir support in the preparation of this Survey.
The ICC Global Survey 2012 would not have been possible without the pathfinding work
done during 2007-2012 by the ICC Banking Commission. We would like to thank Gary
Collyer, Senior Technical Adviser of the Banking Commission; Vincent OBrien, Chair of
the ICC Market Intelligence Group; and Leo Cullen of Coastline Solutions for their timely
inputs to this report. Ron Katz, the Editor of ICCs quarterly newsletter, DCInsight, has
reviewed the document with great care and made numerous valuable suggestions.
We would like to express our gratitude to ICCs network of 92 national committees
for providing information and advice to lead us through the often complex process of
conducting such a global survey.
The present report depended on the support of various experts from organizations
outside ICC. Marc Auboin of the World Trade Organization was instrumental in
requesting that this Survey be established. We would like to extend our special thanks
to our partners in this Survey: Mariem Malouche of The World Bank Group; Ranil
Salgado and Mika Saito of the International Monetary Fund (IMF); Steven Beck of the
Asian Development Bank; Rudolf Putz of the European Bank for Reconstruction and
Development; Bonnie Galat of the International Finance Corporation; and Daniela
Carrera Marquis of the Inter-American Development Bank.
Andr Casterman from SWIFT once again graciously provided background information
and contemporaneous data on trade finance messaging volumes worldwide on an
exclusive basis. Fabrice Morel from the Berne Union provided the much-needed
analysis on credit insurance.
More than ever, we renew our thanks to ICCs technology partner, Coastline Solutions,
for compiling the online Survey.
www.iccbooks.com
Contents
Acknowledgements
List of figures
List of acronyms
Pascal Lamy
Thierry Snchal
Foreword
Introduction
Executive summary
Section 1
10
Section 2
13
Kah Chye Tan, Daniel Cotti, John Ahearn and Daniel Schmand give us their take
on the current environment for trade finance and their expectations going forward for 2012
18
Trade Snapshots
Section 3
22
Section 4
33
Dialogue
Ranil Salgado talks with Vincent OBrien about the changing patterns of global trade
43
Section 5
45
List of figures
Figure 1
10
Figure 2
Location of respondents
11
Figure 3
11
Figure 4
12
Figure 5
12
Figure 6
12
Figure 7
13
Figure 8
14
Figure 9
ECA and MENA are on average the most exposed to the EU, including the most troubled economies (GIIPS)
14
Figure 10
15
Figure 11
15
Figure 12
16
Figure 13
22
Figure 14
22
Figure 15
23
Figure 16
23
Figure 17
24
Figure 18
24
Figure 19
24
Figure 20
25
Figure 21
Figure 22
25
25
Figure 23
25
Figure 24
26
Figure 25
26
Figure 26
26
Figure 27
26
Figure 28
27
Figure 29
27
Figure 30
28
28
Figure 31
Figure 32
28
Figure 33
29
Figure 34
29
Figure 35
29
Figure 36
SWIFT trade traffic sent by region major recipient region 2011, categories 4 & 7
30
Figure 37
SWIFT trade traffic received by region major emitting region 2011, categories 4 & 7
30
Figure 38
30
Figure 39
Volume of MT 700
31
Figure 40
31
Figure 41
32
Figure 42
32
Figure 43
33
Figure 44
34
Figure 45
45
List of acronyms
ADB
AfDB
BAFT
BCBS
BIS
Bp
Basis Point
BRIC
CCF
DCI
EBRD
ECA
EUR
Euro
GDP
ICC
IDB
IFC
Ifo
IFSA
ILO
IMF
LCs
Letters of credit
LGD
LICs
MDB
MDGs
MIC
Middle-Income Countries
PRC
SME
SWIFT
UCP
UK
United Kingdom
USD
WTO
Foreword
Pascal Lamy
In the current context of bank deleveraging and weak global economic activity, one of my priorities
is to continue monitoring the trade market situation throughout 2012.
We need to be able to assess any financing gap, above and beyond those identified by WTOs
G20 Report to Cannes, in the most challenging regions of the world. The report had revealed that
only a third of the 60 poorest countries in the world benefited regularly from the services offered
under trade finance programs, and that the lack of risk-mitigation programs in these countries
partly explained the high fees and collateral requirements paid by local importers to receive their
shipments.
The Reports recommendations that trade finance facilitation programs should be strengthened
where they existed, and be created where they did not yet exist, in particular in Africa, were adopted
by the G20 Development Working Group, and are in the concluding documents of the Cannes
Summit.
In this regard, we will continue to support the staff of the African Development Bank (AfDB) in its
endeavour to obtain from its Board the creation of a permanent trade finance facilitation program.
In this process, the AfDB is also benefiting from substantial technical support from the Asian
Development Bank and the IFC.
In the conclusions of the G20 Development Working Group, G20 Members also asked that efforts
to improve data collection on trade finance be increased. The current situation is hardly satisfactory:
there is simply no comprehensive set of international statistics on trade finance, mainly because the
worlds largest countries do not collect it properly.
The WTO has been pressing hard the statisticians in charge since the 2008-09 crisis and will
continue to do so in the course of 2012. In the meantime, the market surveys conducted by the
ICC Banking Commission are a very useful instrument at the disposal of policy-makers to have an
informed opinion on the state of markets.
Finally, the dialogue with the Basel Committee on Banking Supervision (BCBS) could usefully be
pursued. In 2011, this dialogue not only yielded concrete results in terms of improved prudential
requirements for trade finance in low-income countries, it also triggered initiatives such as the
establishment of the bank registry on loss given default for trade finance, as well as other useful
data. The establishment of the registry is a success for both the WTO and ICC.
Looking ahead, I believe it is important that the dialogue with the banking regulators be
strengthened on the basis of data collected by banks. The WTO stands ready to help in this
dialogue.
Pascal Lamy
Director-General, World Trade Organization
Introduction
Thierry Senechal
The pace of change in trade finance markets in recent years has been impressive. This is why, in
2009, the International Chamber of Commerces Banking Commission decided to provide a timely
analysis of patterns of trade finance in markets worldwide. This new report, ICC Global Survey
2012: Rethinking Trade and Finance, contains key metrics and analysis that will enhance our
understanding of trade finance markets worldwide.
Bankers and traders face some tough decisions in 2012, as they strive to decipher an abundance
of mixed economic messages. Market conditions remain grim, with traders confidence eroding
again because of market volatility. The supply and demand of trade finance remains in jeopardy,
and regulatory constraints are causing considerable concern. At the same time, the banking
model faces fundamental challenges: greater competition, consolidation of business with core
trade institutions, increased capital costs, changing patterns of global trade and a retrenchment of
European banks, which were previously the world leaders in commodity finance.
The prospects for economic prosperity remain uncertain. Trade has been impacted in many
countries over the past months, and conditions remain difficult in many regions. When trade finance
markets suffer from a lack of liquidity, the entire supply chain and eventually SMEs in developing
countries are severely impacted. These countries strong dependence on trade credit renders them
and their exporters more vulnerable to disruptions in trade finance.
In addition, the economics of regulation have become increasingly complex. The ICC Banking
Commission provided compelling evidence of the low-risk nature of trade finance. But the sector
has come under increased scrutiny from regulators in recent years, compounding pressure on
already feeble markets. Given trade finances importance to the economy, it is vital that regulators
take account of the unintended consequences that can arise from well-intentioned but unrealistic
restrictions on the trade finance sector.
The ICC Global Survey 2012: Rethinking Trade and Finance will be a useful tool for both policymakers and senior executives in financial institutions worldwide, enabling them to better understand
the broad challenges that must be tackled to ensure that trade finance continues to play a vital role
in the financing of global trade.
On behalf of ICC, I wish to thank all those who have contributed their time and expertise
to this report.
Thierry Senechal
ICC Senior Policy Manager, Banking Commission
Executive
summary
This 2012 ICC Global Survey received responses from representatives of 229 banks
located in 110countries. This response rate represents a continued increase over that
of previous Surveys. In2011, responses were received from 210 banks in 94 countries,
and in 2010, from 161 banks in 75 countries. The increase in the number of countries
participating allows us to provide a more diverse view of the global position regarding
trade finance activity and constraints.
We are therefore pleased to note that participation in ICC Surveys continues to
gain wide recognition in the industry, and the Survey contents clearly remain at
the forefront in providing keyinformation on trade finance, thereby significantly
bridgingthe information gap.
Trade finance statistics in 2011 were stronger than in 2009 and 2010
The responses to the ICC Survey questionnaire seem to confirm that the financial problems that were
impacting trade as a whole in 2009 and the early part of 2010 have diminished to some extent, but
there remain a number of residual issues that need to be addressed. Left unattended, they can still
cause irreparable damage to the trade finance industry.
Overall, the global picture looked brighter in 2011 than in previous years. Volumes in 2011 were up or
largely unchanged in most traditional trade products, the overall value of trade finance transactions
was also up and the percentage of trade credit lines that were cut for corporate and financial insti
tution customers continued to fall. Respondents foreseeing an increase in volume outpaced those
predicting a decrease by a ratio of around 2:1. Of the financial institutions responding, 51% reported
an increase in export L/C volume and 56% an increase in import L/C volume. Considerable increases
were also reported for guarantees (39% on the export side and 47% on the import side).
According to respondents, trade finance is still very much in demand. However, a shortage of liquidity
and a disproportionate aversion to risk continue to drive up interest rates on loans and advances in a
number of countries, especially in emerging markets. It was noted that 59% of respondents that had
experienced an increase in demand reported they had been able to satisfy their customers needs to
a large extent. Around 65% of respondents indicated that their fees for issuance of bank undertakings
had not changed in 2011.
The number of court injunctions and refusals still remains high. As an example, issuing banks of com
mercial letters of credit reported that pressure from applicants to refuse documents had increased
from 6% to 14%. Where this was still an issue, the main reason cited was financial downturn in local
market, whereas previous Surveys had reported falling commodity prices as the principal reason.
The 2012 Survey also showed that 30% of respondents (up from 26%) had experienced an increase
in the number of court injunctions stopping payment under bank undertakings.
Multilateral developments banks and Berne Union members are playing a vital role
All of the development banks, without exception, increased their limits and resources in 2011. An
interesting phenomenon was the increased number of transactions being initiated with the develop
ment banks by confirming banks as they endeavoured to lay off risk as part of a deleveraging process.
Respondents, including many ICC Banking Commission members, underscored the importance of
targeted temporary financing and, in some cases, agreements with international banks to address
liquidity shortages and problems of risk perception.
During 2011, Berne Union members insured a record amount of USD 1.7 trillion worth of exports, or
more than 10% of international trade. Despite the emergence of new significant challenges, it was also
a year of good results for most credit insurers, confirming the swift turnaround in the industry after
the global crisis of 2008/2009. However, political changes in the Middle East and North Africa, as
well as sovereign debt concerns in Europe and the US, underlined that the risk environment remained
volatile. Of the total amount insured, USD 1.5 trillion represented Short-Term Export Credit Insurance
(ST) in support of exports with a repayment period of less than one year. Medium-Long-Term Export
Credit Insurance (MLT), covering transactions with repayment terms of typically 3-5 years or more,
amounted to nearly USD 200 billion. Both short-term and medium-long-term business recorded
double-digit growth of 19% and 10% respectively.
Section 1
2012
Rethinking
Trade and
Finance
November 2011
Draft questionnaire
10
January 2012
Survey completed
February 2012
Results compiled
April 2012
Report completed
Participation in the
ICCGlobalSurvey 2012
The present report has been prepared by the
ICC Secretariat based on a Survey conducted
worldwide in early 2012. Coastline Solutions,
ICCs information technology partner, has been
responsible for the collection of the data.
The 2012 Survey received responses from
229 banks in 110 countries. This response rate
represents a continued increase over previous
Surveys. In 2011, responses were received
from 210 banks in 94 countries and in 2010,
from 161 banks in 75 countries. The increase in
the number of countries participating allows us
to provide a more complete view of the global
position regarding trade finance activity and
constraints.
Respondents to the ICC Survey 2012 came from the following countries:
Afghanistan
Albania
Algeria
Angola
Argentina
Armenia
Australia
Austria
Azerbaijan
Bahrain
Bangladesh
Belarus
Belgium
Belize
Benin
Bermuda
Bhutan
Brazil
Cambodia
Cameroon
Canada
Chile
China
Colombia
Congo, Democratic
Republic of the
Costa Rica
Croatia
Cyprus
Czech Republic
Denmark
Dhekelia
Dominican Republic
Ecuador
Egypt
El Salvador
Eritrea
Estonia
11
Finland
France
Gaza Strip
Georgia
Germany
Ghana
Greece
Guatemala
Honduras
Hong Kong
Hungary
Iceland
India
Indonesia
Iran
Iraq
Ireland
Italy
Jan Mayen
Japan
Jordan
Kazakhstan
Kenya
Korea, South
Kosovo
Kyrgyzstan
Lebanon
Lesotho
Macedonia
Malaysia
Malta
Mauritius
Mexico
Moldova
Mongolia
Nepal
Netherlands
Netherlands Antilles
Nicaragua
Nigeria
Pakistan
Palau
Panama
Paraguay
Peru
Portugal
Puerto Rico
Qatar
Russia
Saudi Arabia
Serbia and
Montenegro
Singapore
Slovenia
South Africa
Spain
Sri Lanka
Sudan
Sweden
Switzerland
Syria
Tajikistan
Thailand
Turkey
Uganda
Ukraine
United Arab Emirates
United Kingdom
United States
Uruguay
Uzbekistan
Venezuela
Vietnam
Zimbabwe
1%
2%
6%
8%
44%
44%
18%
19%
18%
10%
Guarantee 18%
Guarantee 21%
Collections 19%
Collections 18%
Open account 8%
Open account 6%
Other 2%
Other 1%
12
21%
9%
Section 2
Uneven performance
across the world1
%, 3m/3m, saar
108
95
Developing exports
High income exports
World exports
Series 2
83
70
Jan-08 May-08 Sept-08 Jan-09 May-09 Sept-09 Jan-10 May-10 Sept-10 Jan-11 May-11 Sept-11
13
20
15
MENA
10
5
0
-5
-10
SAR
SSA
-15
-20
Jan-10 Mar-10 May-10 Jul-10 Sept-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sept-11
Source: Authors
calculations, Datastream
data; real export values
Note: EAP: East Asia and
Pacific; ECA: Europe and
Central Asia; LAC: Latin
America and the Caribbean;
MENA: Middle East and
North Africa; SAR: South
Asia; SSA: Sub-Saharan
Africa
Figure 9 ECA and MENA are on average the most exposed to the EU,
including the most troubled economies (GIIPS)
50%
To EU27
To GIIPS
40%
30%
20%
10%
EAP
ECA
14
LAC
MENA
SAR
SSA
141
53
123
145
57
TTB initiations
Tariffs
NTMs
85
173
86
Source: Authors calculations using WTO data from 2009, 2010, 2011.
Note: TTB = Temporary Trade Barriers (antidumping, countervailing duties, safeguards)
226
145
118
46
37
Sep. 2008 - Sep. 2009
58
Source: Authors calculations using WTO data from 2009, 2010, 2011.
15
Export incentives
Import licensing
Export tariffs
Export quota
Export licensing
Import subsidy
20
Source: Authors calculations using WTO data from 2009, 2010, 2011; total
restrictions = 177, barring pandemic-related measures; trade remedies = antidumping,
countervailing duties, safeguards
16
Export restrictions
10
30
17
Trade
Experts
Trade
Snapshot
2012
Leading figures in international trade and finance give us their take on the current environment
for trade finance and their expectations going forward for 2012
Despite some downward pressure on global trade from a moderate slowdown in some of the
worlds largest economies, there is little to suggest a marked decrease in international trade flows
during 2012, as economies such as the US show renewed life and the middle classes in countries
such as India and Brazil continue to surge. It is also refreshing that, despite some heated political
rhetoric in a few countries, there has not been a large swing back to protectionism across the global
economy. In short, despite the headwinds, we can expect world trade to continue to grow, albeit at
a more muted level.
Trade will be one of the key growth areas for Barclays in 2012, across the entire bank. In fact we are
looking to double our trade business over the next five years, and to this end we have combined our
trade finance and working capital business into one product stream to provide an end-to-end set of
products to cover the full life cycle of a product or service, from financing supply lines to providing
letters of credit for export.
We are also fully engaged in the debate on proposed regulatory change across the globe. In
the European Union, implementation of Basel III rules on capital requirements risks jeopardizing
the ability of banks to provide certain elements of the trade finance product suite. Much of
Basel III should be welcomed, as it will help make the banking system safer and stronger, but
regulators stillneed to work with corporates and banks to ensure that certain measures do not
disproportionately damage the ability of banks to support businesses trading globally.
In my role as Chair of the International Chamber of Commerce Banking Commission, and with
Barclays as an individual organization, we are in direct dialogue with the Basel Committee and
theEuropean Parliament to ensure that incoming Basel III legislation balances the need for
managing the risks in trade finance with the importance of encouraging global trade flows. Themost
recent ICC Banking Commission meeting was held in Doha from 25 to 29 March 2012, and the
meeting had a forward-looking theme: Reframing the Future of Trade Finance Doha 2012. This
important meeting brought together the main stakeholders involved in the support of international
trade and finance. At the meeting, it was encouraging to see that communication and dialogue
between regulators, commercial banks and the major multilateral organizations remains open and
forward-looking. At Doha 2012, progress was made in advancing ICC trade facilitation rules and
guidelines. Where today we find growth in the world economy, in most instances international trade
is central to that growth. The challenge now in hand is to take steps to facilitate growth in trade, to
remove impediments and to direct resources to keeping the supply chain movingand trade lines
asopen as possible.
18
Trade
Experts
Trade
Snapshot
2012
Daniel Cotti
Since the second quarter of 2011, the economic recovery advanced at a halting walk rather than a
steady trot. Last years disasters in Japan were soon followed by a new crisis in the eurozone, a midsummer US debt crisis and, after the events of the Arab Spring, widespread instability in the Middle
East and North Africa. While Latin America and Asia remained bright spots, and we saw many signs
of health and growth in emerging markets, uncertainty and volatility dampened confidence on many
fronts.
This year, while the West is still coping with high unemployment, a weak housing market, lack of
clarity around policy and action in the EU and the unknown outcome of the US elections, economic
signals continue to be mixed across the globe. On the same day we may hear that the US economy is
showing signs of improvement, China is cutting the GDP target it has maintained for five years, the EU
has better news about Greece, and Middle Eastern tensions are causing a spike in oil prices.
Three years after the financial crisis, demand for goods is still not at pre-crisis levels in many markets;
small exporters and importers especially are still struggling to obtain financing in this murky and volatile
environment. Providers are operating in what is arguably the most challenging time in trade finance
history. It seems safe to say that our current compliance and regulatory burdens and our related
capital challenges are here to stay and will only increase in severity. While the recent decision by the
Basel Committee to waive the mandated one-year maturity and sovereign floors for trade finance is
of some help, the industry is still coping with unintended regulatory consequences, unprecedented
kinds of financial and sovereign risk, big liquidity issues and significant shifts in trade flows between
emerging and developed economies.
In Europe, we have seen several previously active providers of trade finance retiring from the field
due to funding and deleveraging challenges. While this presents an opportunity for other banks with
stronger balance sheets and global capabilities, it is by no means a positive development. A larger,
stronger lending community, with more liquidity and better risk distribution is what is really needed
to meet the needs of the global economy and boost recovery over the long-term. Further calibration
of policies and regulations, with leadership from the financial industry, governments and lawmakers,
could help make this happen. One example is the current debate in the US about the US ExportImport Banks reauthorization, a self-financed bank that helps create US jobs and facilitates the export
of U.S. goods globally.
Overall, I would like to appeal to the trade industry for global cooperation and transparency to drive
the dialogue on new industry solutions and instruments, rules, standards development, universal tools
and systems and the common interpretation of regulations that affect the broader trade finance sector.
ICC and its members around the globe, as well as all other relevant industry bodies and parties, are
working together to head off some of the negative impacts of regulation and compliance requirements.
We will accomplish this by developing standards that establish a baseline of expectation with regu
lators and increase transparency in the industry. This year, the industry can also move its lobbying
efforts to local regulators and do everything possible to ensure that regulators, politicians and other
market players understand the dynamics of the industry and get used to the fact that in the wake of
the regulatory shake-up and increased risk, the cost of trade finance will increase.
As fewer banks are asked to serve more trade customers, we must speed up our approach to the
automation of trade finance and the streamlining and harmonization of processes for open account
settlement, as well as leveraging new instruments like the soon-to-be ICC-endorsed Bank Payment
Obligation (BPO). We should also work collaboratively to meet the growing need for buyer- and
seller-centric supply chain finance in order to stimulate exports and ensure the steady expansion of
developed and emerging economies around the globe.
19
Trade
Experts
Trade
Snapshot
2012
John Ahearn
For the current trade Survey 2012, I see globalization, market consolidation and regulatory issues
coming into sharp focus. Globalization, consolidation and increased regulation have created a
global trade environment that has left financial institutions and their corporate clients revaluating
trade strategies.
The trade business faces fundamental changes and challenges. Banks without an extensive
branch network are likely to find it increasingly difficult to compete broadly, as new flows between
developing economies and within regions cause further consolidation of business with core trade
institutions. Increased capital costs may force banks that dont view trade as a core business line
out of the market. All resulting consequences must be kept in mind.
For example, many US banks had developed US-Brazil capabilities because that is where the bulk
of trade flows historically evolved over time. However, as these flows have changed, banks have
found that the capabilities are no longer being used, at least not to the extent or as efficiently as
they once were. These banks have to work out how to rebalance their business and origination
models to adapt to the new shifting reality. We need to be aware of and to take heed of the
changing patterns of global trade.
The increase in intra-Asia flows, along with the changing regulatory landscape, has left European
and US banks facing critical questions about how best to serve clients in global trade markets.
With the retrenchment of European banks, which were previously the world leaders in commodity
finance, there is now an opening for other institutions to become more deeply involved in this area.
For example, some super-regional banks with strong balance sheets will be well-positioned to take
advantage of this opportunity.
Proposed changes in capital requirements under Basel III could have an unintended consequence
of worsening trade finance conditions for all companies involved in the import/export business,
particularly in emerging markets. Strategic decisions about capital burdens have to be made, and a
re-examination and determination of what is core and non-core business will be essential. If trade is
not a core offering, how will banks provide capabilities for their customers?
Recent events have raised financial industry awareness of the changing risks and opportunities
facing the global trade business, and are likely to foster new approaches for dealing with countries
in financial stress and how in the future they will need to be supported by credit agencies. Inevitably,
innovative business models and structures will be developed to mitigate risk and make credit
available to those countries requiring support.
The changes that have taken place and will continue to occur in the coming years will require
banks and corporates to continue working closely with trade finance partners that have made a
firm commitment to the business in order to avoid pitfalls and eschew potential disruptions to their
growth objectives.
20
Trade
Experts
Trade
Snapshot
2012
Daniel Schmand
At Deutsche Bank we expect to see continued, albeit moderate and somewhat uneven recovery in
trade volumes and general activity.
We can see the early signs of recovery in the US and robust growth in emerging markets. Even
with a possible slowdown in infrastructure investment in these markets, rising consumer demand in
many countries will create new opportunities for trade finance growth. Clearly, the current crisis in
Europe is having an impact, notably in slowing down volumes and lowering risk appetite associated
with this region. In the aftermath of the 2008 crisis, many corporates increasingly see trade finance
as a viable source of working capital finance. Corporates have increased their focus on improving
supply chains, cash flow and reduction of risk, and they remain the drivers of demand for trade
finance.
It is interesting to observe the major global trade banks taking steps to improve their capabilities in
the international trade and finance field including deal structuring, onboarding, risk management
and distribution in order to meet greater demand. This is particularly relevant for funded trade
finance products and for open account-based trade such as supplier finance and purchase of
accounts receivables. Additionally, sustained high demand for commodities (especially in value
terms) is consuming a significant share of tight trade finance capacity.
The current crisis in Europe is having a negative impact on certain banks and their ability to support
trade finance activity globally. This, coupled with the challenge of higher regulatory-related capital
requirements for banks, has reduced some pockets of trade finance capacity, resulting in higher
funding premiums/pricing for both corporates and banks. Deutsche Bank is among a group of
larger global trade banks that are growing their trade finance businesses and associated capabilities
in order to fill the void. Meanwhile, government-supported trade programs are enabling banks to
better address their clients trade finance needs.
Banks are increasingly looking to incorporate more capital markets-oriented structures in order to
create capacity in their balance sheets. We expect to see risk premiums and pricing remain fairly
stable at this somewhat elevated level, at least over the near-to-medium term, as the economy
recovers and demand for trade finance continues to grow.
21
Section 3
Figure 13
Export processing volume trends, 2011
Figure 14
Import processing volume trends, 2011
No change
25%
Decrease
19%
24%
25%
Increase
51%
56%
50%
14%
15%
28%
35%
Guarantees
Guarantees
46%
38%
15%
15%
39%
Collections
47%
Collections
37%
Source:
ICC Global Survey 2012
22
39%
20%
19%
43%
42%
27%
Decrease
15%
Increase
58%
Trade credit lines (F1)
31%
Source:
ICC Global Survey 2012
21%
48%
23
44%
44%
Standby letters of credit
10%
9%
Guarantees
21%
18%
Collections
18%
19%
Open account
6%
8%
Other
1%
2%
Import
Export
20%
80%
26-50% decrease
1%
1%
1%
Guarantees
Standby L/Cs
Import letters of credit
1-25% decrease
7%
6%
9%
No change
66%
68%
62%
Increase
Decrease
31%
69%
26-50% increase
4%
2%
5%
>50% increase
2%
1%
1%
Source:
ICC Global Survey 2012
24
20%
22%
22%
30%
In addition:
70%
Operational impacts
49%
51%
60%
9%
25
31%
45%
55%
57%
62%
26
79%
40%
27%
Up to 25% higher
3%
26-50% higher
1%
51-75% higher
0%
>75% higher
0%
37%
Figure 28
SWIFT trade traffic worldwide in number of messages, 2003-2012
2011
growth
compared
to 2010
50,000,000
40,000,000
Total
Total
growth
-2.23%
30,000,000
Cat 7
growth
-1.38%
Category 7
20,000,000
Category 4
Cat 4
growth
-4.76%
10,000,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
Figure 29
SWIFT trade traffic evolution - Cat 7 sent (live)
9,000,000
8,375,000
7,750,000
7,125,000
6,500,000
2009
Q1
2009
Q2
2009
Q3
27
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
5,000,000
Asia-Pacific
3,750,000
+0.97%
2009
2008
-5.85%
2010
2,500,000
2011
North America
-4.77%
Middle East
-5.54%
1,250,000
Africa
-2.43%
-1.42%
1,145,000
Hong Kong (-6%)
890,000
China (+11%)
635,000
India (+1%)
France (-6%)
380,000
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
450,000
Germany (-3%)
Korea (-3%)
Italy (-5%)
375,000
300,000
- Iran: -19%
- Greece: -16%
- Lebanon: -14%
- Canada: -11%
- Egypt: -10%
- Taiwan: -9%
- Denmark: -8%
- Spain:-8%
Bangladesh (+11%)
Taiwan (-3%)
150,000
0
2009
Q1
2009
Q2
2009
Q3
28
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
7,000,000
Asia-Pacific
-1.10%
5,250,000
-5.52%
2009
2008
2010
2011
3,500,000
-0.65%
North America
1,750,000
-2.43%
Middle East
-4.75%
Africa
-3.44%
-1.15%
0
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
China (-0.1%)
1,225,000
Hong Kong (-5%)
950,000
India (+0.2%)
Korea (-2%)
400,000
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
Taiwan (-8%)
Singapore (+9%)
Germany (-5%)
365,000
Japan (-5%)
France (-9%)
Spain (-2%)
255,000
United Arab
Emirates (-2%)
Bangladesh (+12%)
200,000
2009
Q1
2009
Q2
2009
Q3
29
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
- Romania: 37%
- Nigeria: 14%
- Bangladesh: 12%
- Singapore: 9%
- Sri Lanka: 7%
- Saudi Arabia: 6%
- Indonesia: 5%
The countries with the highest decrease in 2011
compared to 2010 are:
- Iran: 20%; Greece: 14%; Lebanon: 11%;
Tunisia: 9%; France: 9%; Taiwan: 8%; Pakistan:
8%; Egypt: 8%.
Trade traffic sent by region (import traffic)
Italy (-6%)
United Kingdom (-7%)
310,000
2011
Q1
2011
Q2
2011
Q3
2011
Q4
5%
10%
major7%recipient
region 2011, categories
4 &6%7
6%
100%
75%
75%
6%
7%
13%
6%
13%
36%
3%
4%
10%
8%
2%
3%
4%
8%
2%
50%
50%
25%
25%
0%
0%
36%
0%
23%
0%
23%
Africa
16%
Africa
Africa
16%
Africa
Asia Pacific
72%
Asia Pacific
72%
1%
Asia-Pacific
1%
Asia-Pacific
23%
10%
3%
6%
1%
3%
23%
15%
1%
3%
Central
15% &
Latin America
22%
Central &
Latin America
22%
36%
36%
0%
Central &
Latin America
0%
Central &
Latin America
10% Europe
Euro zone
28%
Europe 3%
Euro zone
28%
5% Europe
6% zone
non-Euro
20%
Europe non-Euro zone
18%
20%
2%
18%
3%
2%
41%
41%
41%
41%
9%
7%
Europe
Euro9%
Zone
Europe - Non
Euro Zone
7%
Europe
Euro Zone
Europe - Non
Euro Zone
9%
9%
Middle East
34%
Middle East
34%
8%
16%
8%
1%
North America
11%
6%
North 5%
America
11%
7%
6%
6%
5%
7%
6%
8%
7%
8%
7%
15%
8%
3%
15%
3%
62%
54%
16%
29%
1%
62%
29%
3%
Middle
East
3%
Middle
East
3%
North
America
3%
North
America
54%
4%
All Countries
4%
All Countries
9%
100%
6%
75%
9%
15%
6%
75%
50%
5%
7%
15%
15%
5%
15%
7%
2%
40%
15%
2%
50%
25%
25%
0%
0%
40%
0%
12%
Asia-Pacific
55%
0%
Africa
12%
18%
Asia-Pacific
55%
Africa
Africa
18%
Africa
6%
15%
2%
Asia-Pacific
2%
Asia-Pacific
10%
29%
6%
11%
10%
2%
29%
5%
2%
21%
5%
21% &
Central
Latin America
21%
Central &
Latin America
21%
1%
21% &
Central
Latin America
1%
Central &
Latin America
11%
Europe Euro zone
37%
Europe Euro zone
3%
37%
9%
10%
9%
9%
10%
Europe
9% non-Euro zone
23%
Europe non-Euro zone
23%
26%
1%
26%
23%
3%
23%
1%
Middle East
42%
Middle East
42%
8%
17%
8%
0%
Europe
Euro
Zone
11%
Europe - Non
Euro Zone
8%
17%
19%
0%
4%
19%
Middle
East
4%
Europe
Euro Zone
Europe - Non
Euro Zone
Middle
East
23%
11%
8%
23%
North America
18%
9%
North America
5%
18%
8%
9%
7%
5%
8%
7%
49%
49%
13%
9%
13%
9%
9%
20%
9%
3%
20%
3%
42%
42%
4%
5%
North
America
4%
All Countries
North
America
All Countries
5%
12,000,000
8,000,000
4,000,000
30
Af
ric
a
tin Ce
Am ntr
er al &
ic
a
La
Am N
er orth
ic
a
As
ia
-P
ac
ific
no
n- E
Eu ur
ro op
zo e ne
M
id
dl
e
Ea
st
Eu Eur
ro op
zo e ne
a
tin Ce
Am ntr
a
er l &
ic
a
Af
ric
La
Am N
er orth
ic
a
As
ia
-P
ac
ific
no
n- E
Eu ur
ro op
zo e ne
M
id
dl
e
Ea
st
Eu Eur
ro op
zo e ne
7.0%
5.3%
-2.5%
4,700,000
3.5%
6.6%
4,600,000
1.8%
-1.9%
0%
4,500,000
-1.8%
4,400,000
-3.5%
2008
2009
2010
2011
Other 3%
CNY 0%
GBP 0%
GBP 0%
AED 1%
AED 1%
JPY 4%
JPY 2%
EUR
12%
USD
80%
31
Other 3%
CNY 3%
EUR
8%
USD
83%
407K
North America
127,168
575K
Europe - non-eurozone
229,207
1,456K
Africa
340,368
490K
Middle East
349,833
660K
Europe - eurozone
462,547
551K
Asia-Pacific
2,979,092
561K
223,096
724K
Europe - non-eurozone
246,562
1,850K
Europe - eurozone
509,431
665K
Asia-Pacific
3,346,128
435K
32
Section 4
Overview
EBRD
IFC
IDB
ADB
Program title
Trade Facilitation
Program (TFP)
Trade Finance
Facilitation
Program(TFFP)
Number of countries
ofoperation
20
91
20
16
Program commencement
1999
2005
2005
2004
11,255
1,966
4,236
Number of transactions
11,600
since commencement (year
end 31 December 2011)
Value of transactions
sincecommencement
Number of
confirming banks
800
800
264
112
Claims to date
zero
zero
zero
Website
www.ebrd.com/tfp
www.ifc.org/gtfp
www.iadb.org/
tradefinance
www.adb.org/tfp
33
65
50
46
40
30
48
45
43
39
36
38
34
30
48
20
10
Russia
toCIS
Russia
toRoW
CIS to
Russia
RoW to
Russia
Ukraine
toCIS
Ukraine
to RoW
CIS to
Ukraine
CIS to
Ukraine
34
RoW to
Ukraine
35
36
37
38
40
41
42
Dialogue
OBrien At our recent ICC Banking Commission Meeting in Doha from 25 to 29 March
2012, many stakeholders with an interest in expanding trade pointed to the fact that
trade patterns are shifting and that banks wishing to remain active in trade finance
must understand the nature of these fundamental underlying changes. Has there been a
fundamental change in the patterns of global trade?
Salgado Without a doubt, the global trade landscape has witnessed dramatic shifts over the
past several decades. In particular, the emergence of global supply chains and the growing role of
emerging market economies (EMEs) are staggering. To understand the future we sometimes need
to look to the past.
You use the word dramatic in terms of shifts in trade patterns but can you put that into
context what do you mean by dramatic?
The facts speak for themselves. As a share of global output, trade is now more than four times its
level in the early 1950s and the momentum continues. So, we must understand what is propelling
this momentum.A primary driver has been trade liberalization, which in itself led to significantly lower
trade barriers in advanced economies and more recently in developing countries. This momentum
was accelerated greatly by technology-led declines in transportation and communication costs.
Thisinturn, facilitated the fragmentation of production beyond national borders. So, in a nutshell
I can say that trade capabilities have expanded and diversified from advanced economies to
developing economies.
These developments led supply chains to become regional, as in the case of Factory Asia or even
global, as to give a practical example, in the case of manufacturing iPods and other technologydriven products, which are in huge demand from an expanding middle class. Furthermore, a
convergence in income levels and factor endowments across countries also playeda role in the
growth of trade relative to economic output.
This would appear to infer that the main players in terms of trade have shifted
fundamentally would this be fair to say?
43
Absolutely, I can suggest several important trends underlying the global trade patterns over the
past decade. First, the emergence of global supply chains has allowed emerging market economies
(EMEs) to enhance the technology content of their exports. Second, this rapid growth in hightechnology exports supported overall export growth, especially for EMEs. Third, with China and
other EMEs increasing their presence in sectors traditionally dominated by advanced economies,
the similarity in export structures has increased over time and so has competitive pressure on
advanced economies. Fourth, this growing similarity in export structures with remaining differences
in income levels suggests that dynamic EMEs can anticipate a further growth push.
If I may push you on that theme a little with the main players fundamentally changed
asyou described, does that mean that the new trade stars have a better optimised
supply chain advantage?
At a basic level yes, but it is not so simple. For example, in the Asian supply chain, goods-inprocess cross borders several times, including through the hub (Japan), before reaching their
final destination. For instance, about 15 percent of Japanese value-added embodied in Chinese
products goes through other countries in Asia before reaching China. In contrast, in other regions,
almost all foreign input is imported directly from the hub the United States in NAFTA and the EU15
in Europe.
So, yes, on the positive side, the new stars as you call them have comparatively enhanced their
supply chains. On the potentially negative side, the greater integration of production can also
render it potentially more vulnerable to disruptions of trade flows, whether policy induced, such as
through preferential trade agreements, or naturally caused, such as what happened in Asia after the
unfortunate recent Japan earthquake. Also, growth in trade interconnectedness and its overlap with
financial interconnectedness have increased the cross-border transmission of shocks, as was seen
in the 2008-09 global financial crisis.
However, the resilience of trade remains impressive. For example, the bounce back from the
supplychain disruptions caused by the March 2011 Japanese earthquake was significantly stronger
than anticipated.
In the context of the changing patterns of world trade as you have outlined, do you
atthispoint in time believe we can be optimistic looking forward as we close this
March2012 ICC Banking Commission meeting in Doha?
The current environment characterized by fragile financial systems, high fiscal deficits and debt,
and interest rates close to the zero bound provides fertile ground for self-perpetuating pessimism
and the propagation of adverse shocks, the most critical of which would be a intensification of the
crisis in the euro area, if that were to occur.
With this backdrop and from my perspective, there are basically four requirements for a more
resilient recovery: sustained but gradual fiscal adjustment in countries with high deficits or debt;
supportive monetary policy, particularly in advanced economies; structural reforms to support
growth; and restored business and consumer confidence. Regarding the last, policymakers can
help anchor expectations through mutually consistent and cooperative international solutions.
While trade flows slowed down towards the end of 2011, there have been recent signs of a rebound
albeit still tepid. In particular, we have seen a pickup in trade in the U.S. and non-Asian EMEs,
though still sluggishness in the Euro Area and Asia.
Thank you for your insights into the changing patterns of world trade and your view
on thecurrent trade environment. On behalf of the ICC Banking Commission I want
tothank you and the IMF for being our partner in the ICC Banking Commission,
MarketIntelligenceGroup.
You are most welcome. The IMF continues to support trade and trade facilitation through our
economic policy advice to member countries and through analysis on trade issues.
44
Section 5
2006
2007
2008
2009
2010
2011
843,719
975,262
1,126,721
1,296,878
1,123,195
1,257,795
1,492,600*
Claims paid
702
783
1,007
1,128
2,418
1,407
1,322
Loss ratio
35%
35%
40%
40%
89%
44%
n/a
in million USD
New business covered
*) Estimate
Medium-Long-Term Export Credit Insurance
2005
2006
2007
2008
2009
2010
2011
104,241
126,891
142,120
153,591
190,589
173,393
191,195
Claims paid
2,115
1,913
1,245
1,128
3,004
1,836
2,456
Loss ratio
65%
57%
35%
30%
63%
32%
n/a
in million USD
New business covered
45
Medium-long-term business
ECAcover in high demand
The MLT statistics of the Berne Union capture
insurance coverage provided by state-backed
Export Credit Agencies (ECAs). With more than
USD 191 billion in 2011, the volume of new MLT
transactions insured by Berne Union members
reached a record number.
The high demand for ECA cover demonstrates
that we are again or still in a situation where
few, if any, major MLT transactions close
without risk mitigation provided by ECAs. This
is due to the continued challenging global
risk environment, as well as the heightened
awareness of credit insurance as a riskmanagement tool. Compared to the pre-crisis
period, banks have adjusted their risk appetite,
and they rely on insurers to carry the risk of
obligor defaults.
Claims paid to customers for defaults on MLT
transactions increased by 37%, from USD
1.8 billion in 2010 to USD 2.5 billion in 2011.
Although only an estimate can be made at
this stage, it seems that premium income has
significantly increased as well. In all likelihood,
the loss ratio for 2011 claims paid in relation
to premium income should be similar to the
one for 2010. The highest amounts of claims
paid per country were paid due to defaults
in Kazakhstan (USD 409 million), Libya
(293 million), Ukraine (USD 163 million), the
Netherlands (USD 114 million), and Sudan
(USD 113 million).
The circumstances of every claim in the MLT
area are specific. Frequently, it is only one
debtor who defaults, or one large transaction
that goes sour, but this default may impact
several insurers. Consequently, it is difficult to
draw general conclusions from the list of top
claims countries as above. Having said this, it
appears from the list that no safe haven exists,
and that ECAs always take significant risk every
time they insure an MLT export.
Total MLT transactions under cover in the
books of Berne Union ECAs at the end of 2011
amounted to USD 583 billion, the highest level
ever for new business covered. More than ever,
the support of ECAs appears to be crucial
to help banks unlock liquidity and to enable
exporters to trade internationally.
46
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