WTO expects merchandise trade to drop by over 30% this year
In a new paper, the International Chamber of Commerce estimates that as much as $5 trillion in market capacity will be needed to return trade volumes close to 2019 levels in 2021.
With the World Trade Organization projecting that the effects of COVID-19 could cause merchandise trade to drop by over 30% this year, ICC has cautioned that a rapid economic recovery will only be possible if sufficient credit is available to bring trade close to its pre-pandemic trend over the next 18 months.
Despite impressive early actions taken by commercial banks and public bodies in response to the initial phase of the crisis, ICC has called on policymakers to proactively scale support for trade finance transactions to prime the market ahead of demand returning to the global economy.
To this end, the global business organization has identified four priority interventions that, if properly calibrated, could immediately bolster financing capacity – ranging from large scale purchases of low-risk trade assets to free up banks’ balance sheets to providing targeted capital relief for trade transactions under global financial stability rules, known as Basel III.
ICC Secretary General John W.H. Denton AO said: “COVID-19 has exposed the arcane reliance of global trade flows on physical documentation. With social distancing requirements expected to continue for the foreseeable future, it’s imperative that policymakers enact emergency reforms to allow trade transactions to be processed using digital documents.
"Unnecessary delays in cross-border trade can strain small companies at the best of times – in the current environment they risk proving fatal.
"Several governments – including Algeria and India – have already shown exemplary leadership in taking paper out of international trade: it’s now time for others to follow their lead.”
ICC has also called on policymakers to enact emergency legal reforms to avoid delays in the processing of bank-intermediated trade finance products.
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