| Statement on Trade Financing by H. E. Amb. Sun Zhenyu on Informal General Council Meeting |
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| Thursday,November 13,2008 Posted: 23:34 BJT(34 GMT) |
| From:wto Article type:Original |
Thank you, Mr. Chairman.
We welcome the initiative of the DG to convene the informal group of experts meeting on trade financing at such a crucial time, and thank the DG for briefing us on this morning’s meeting.
Impacts of Financial Crisis on Trade Financing
As the Secretariat background note (JOB(08)/111) has rightly pointed out, the effects of the current banking and financial crisis on international trade have been felt directly through the tightening of the market for trade finance for developing countries and LDCs. For a variety of reasons, banks are cautious in lending and the borrowing costs have increased sharply, giving rise to trade financing difficulties. In particular, banks are reluctant to provide letters of credit to importers, which suffocates the normal trade flow.
It should be added that in crises like this, the least responsible are usually the worst affected and the least able to cope. So naturally, small-and-medium-size enterprises in developing countries have been worst hurt by the financial crisis and the consequent dry-up of channels for credits and trade financing.
Impacts of Financial Crisis on Trade
Before the burst of the bubble, global trade already went on a down turn. According to the International Trade Statistics 2008 released last week by the Secretariat, world merchandise trade already slowed down in 2007. The financial crisis makes the pictures of this year and next year even more bleak.
According to the latest prediction of the IMF, world trade growth will slow down to 4.9% in 2008, and further down to 4.1% in 2009. Many say that even these figures are too optimistic.
With the spread and deepening of the financial crisis, China is also witnessing the increasing impacts on its export performance.
During the first three quarters of 2008, the increase of Chinese export to the US dropped by 4.6 percentage points over the same period of last year. Export increase to the EU has dropped by 7 percentage points.
The picture across the developing world is roughly the same.
What Role could the WTO and its Members Play?
First, the WTO could mobilize trade-finance providers to increase funds. More importantly, trade financing should be made available at affordable rates. We are glad to hear that progress has been made in this regard under the DG’s leadership. We hope the DG will maintain communications with relevant international organizations and banking institutions and keep members informed of the progress therein. Members could also notify the Secretariat difficulties they encounter in trade financing so that the WTO could step in timely with relevant organizations and institutions to find solutions. Special attention should be given to developing countries and LDCs.
We also commend the DG for establishing the task force on financial crisis in the Secretariat. Beside focusing on financial crisis and trade financing, the task force should also pay attention to trade-related measures by Members and make due notice to Members. We support Egypt’s proposal for the WTO Secretariat to prepare a report on the current situation of trade financing.
Second, we share the DG’s view that trade is not the cause of financial turmoil but good trade policies may be part of the solution. It is important that all Members maintain market opening, stay committed to the rules-based multilateral trading system and guard against protectionism. History has taught us that “beggar-thy-neighbor” policy will only make the situation worse. Therefore, an early conclusion of the DDA negotiations would send positive signals to the market and increase business confidence. Given that trade remedies, particularly anti-dumping, are the most convenient resorts for protectionist purposes, anti-dumping disciplines should be strengthened in the rules negotiations in order to prevent the abuse of anti-dumping measures.
Third, Members should be encouraged to make efforts to expand domestic demand. In this respect, the State Council of China put forward ten measures to stimulate domestic demand last week. These measures include: to speed up construction of residences for people most in need; to speed up infrastructure construction in rural areas; to speed up construction of major infrastructures such as railways, highways and airports; to speed up health, culture and education developments; and to enhance construction on the protection of ecological environment. It is estimated that these measures will add 580 billion US dollars of investment into the economy by the end of 2010. This is probably the best contribution China could make to overcome the world’s financial crisis.
Moreover, in order to help SMEs in China to deal with the challenges, the Chinese government is making its best efforts to provide facilitations in favor of them. Specifically, China Banking Regulatory Commission has set two goals for all banks. That is, the speed of credit growth for SMEs is not lower than that of the total credit growth, and the credit increase in absolute amount for SMEs is not lower than last year.
On Washington Financial Summit
The current international financial crisis has serious impacts on world economic development and on people’s livelihood. In order to effectively deal with this global challenge, the international community should enhance confidence, strengthen coordination and step up cooperation. China is willing to engage in discussions at the Washington Financial Summit on how to take effective measures to quickly restore market confidence, to contain the spread of the financial crisis, to minimize the influence of the financial crisis on real economy, and to avoid a global recession. The financial crisis has reflected many deep-rooted flaws of the current international financial system. The international community should carefully study the lessons drawn from this crisis and carry out necessary reforms based on full consultations of all stakeholders. In particular, in-depth discussions should be carried out on how to strengthen international financial regulation, improve international financial organizations and reform the international monetary system.
I thank you, Mr. Chairman.
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