Author : Pascal Lamy
Date : December 1, 2008
My apologies for not writing for nearly a year. I foresaw in my last two blogs that we were entering an intensive busy period in the WTO negotiations. The talks did indeed keep me busy this year, not least before, during and after the meetings in July that were so close to a breakthrough. What none of us foresaw was all the other issues that would come up during the year, culminating in the global financial crisis.
But I thought it was time I catch up with you and share some of my concerns. Just last week I chaired a meeting with some key players in the banking world. This may come as a surprise to some since the WTO is not a financial institution. It's not involved in lending and borrowing. But finance affects all economic activity and the credit crunch poses a serious threat to trade, and a threat to trade is a danger to our chances of helping lift the world economy out of the crisis. Did you know that 90% of trade is financed on short term credit? If liquidity dries up or if the cost of the credit rockets, you have the recipe for trouble.
This meeting was not the first of its kind. The WTO regularly meets other organizations such as the World Bank, IMF and regional banks with trade finance as one of the subjects on the agenda. Today's participants represented private banks, international financial institutions, and export credit agencies, roughly the same as a group I invited here in April.
The picture that emerged is grim. The recession itself is already slowing down trade because people and companies are buying less. On top of that, companies that would normally be able to trade are finding it more difficult to do so because credit is tight.
Worse, because of the uncertainties, the cost of borrowing and insurance has risen. Risk, out of sight for so long during all those years of apparent certainty, has itself become a player - through imprudent mortgage lending, the misuse of hedge funds, and now in trade, through higher premiums and a reluctance or inability to lend.
Worst hit as far as trade is concerned are traders and banks in emerging market economies but we have seen that small and medium companies all over the world have been adversely affected as well. We heard from the financiers that the situation is likely to deteriorate in the coming months. This is particularly worrying because the large emerging economies could help to keep the world economy ticking over while the developed economies recover. One only need to look into the growth forecast for 2009: the engine of growth will be in emerging economies. Apart from the setback to their own prospects, if they too are squeezed, then global recovery will be even more difficult and take even longer.
The credit and insurance that help trade flow smoothly normally form one of the most secure areas of the whole financial sector. It is small compared to the big bank business. But the benefits are magnified for the economy as a whole because trade acts as a multiplier. We must sustain it. If trade finance is not tackled, we run the risk of worsening the world economy's downward spiral.
This is the message that I passed to many of the leaders that were meeting in Washington on 15 November and there was a clear sense that more needs to be done to help here.
Some action is already underway, and we have heard a number of announcements for example from the World Bank which is doubling the lending ceiling for trade finance activities by its sister organisation, the IFC. The problems are liquidity and risk and both must be tackled.
We're told that the liquidity gap in trade finance - how much more money is needed to meet the demand for trade credit and insurance - is $25 billion. This is a lot of money, but not enormous when compared with the amounts that central banks have made available in the rescue packages of the last couple of months. Private banks believe the money can be found through joint efforts among the various agencies and the governments that are their shareholders.
Part of the cooperation between the financial institutions would involve sharing information more, and improving ways of dealing with risk.
Risk can also be reduced by action within the WTO. The WTO's trading system is organized, regulated, disciplined, balanced and predictable. It has helped to ward off the beggar-my-neighbour protectionist trade wars that the world saw in the 1930s. The WTO's members have repeatedly shown that playing by the rules and keeping markets open have been part of the solution to various financial crises over the years. This was confirmed again in Washington last weekend, in the political commitment of the governments involved to resist protectionism and abide by their WTO obligations.
They can send a positive signal to the world by taking another step to strengthen this insurance policy by completing the Doha Round negotiations. After seven years, the talks have come a long way. Some tough obstacles still remain, but the end is now within reach. Getting there would be another victory for certainty over risk.
As you know leaders in Washington instructed their Ministers to get a deal on agriculture and industry modalities (yes, I know this jargon is terrible!) by the end of the year. So do not be surprised if I do not write over the coming weeks. Do post your comments, nevertheless, which I hope to read - and respond to - over Christmas.
Hope to hear from you soon.
Pascal Lamy
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Date : September 5, 2009 04:09
Dears ,
In this time In Vietnam you can hear in MASS MEDIA the news about diference worlds conference support conclude DDA .This is the good new for AId for trade topic .
Now the trade influence to the life very deeply . People solve the conflict throught negotiation, avoid fighting.
BUY and SELL are important factors for development .
This time Party , ministry of Industrial and Trade stimulate campaign " Vietnamese person, uses Vietnamese goods "
Because they want to create more and more JOB for Vietnamese people .
Interesting that : this it campaign, this is not order to people . Import and Exports goods are going normal .Not any forbiden for import goods
Date : April 28, 2009 03:29
To Mr. Pascal Lamy and colleges: Focus on theme add for trade, I would like to inform to Forum the new:
Add 51 billion VND (1 USD = 17,784 VND) for domestic trade promotion Programm .It will be use in domestic market year 2009 (25/04/2009-05:45:00 PM)
(Government Portal) - Date 24/4 Priminister have the Decision add 51.022 millions VND from National Reserve Budget 2009 for domestic trade promotion Programm.
Pri-minister assign Ministry Trade and Industrial in collaboration with Ministry of Finance build the rules for support.
The domestic trade promotion Program 2009 is the string of activities support the government's program for prevention economic declining and social insurance The programmed have 3 contents : the activities support the enterprises carry the survey about market , the Vietnamese share , real situation of distribution system , capacity of enterprises ,Base on this information help the enterprises build the strategy , steps for domestic market , organize the training courses for enterprises .Second Support the activities to take goods to Rural area , Industrial zones, and the selling of goods at the end of week. Third : Carry the IEC activities for customers , lessons learn , trading skill .Support the distribution the information about good examples , bad examples, introduces the excellence Vietnamese enterprises
( Resource : department of trade promotion )
Minh Ph??ng
Decision 529/Q?-TTg)
My observation from life
- Vietnam lack of methods to carry the market survey and forecast.
- They don't have the skill in using the global information, the same in macro levels
- The culture and rules in trade in the way formulated.
- Connection to Regional and Global Center is weak
- We call the collaboration and support from International community.
Thank you for attention
Date : April 19, 2009 16:34
Monsieur Lamy,
Vous vous accrochez au cycle de Doha depuis plusieurs années, sans doute pour justifier votre poste, mais il faut le reconnaitre, l'échec des négociations n'a eu aucun impact sur le commerce mondial et sur son évolution, bien plus dépendante de la marche des économies.
On peut même soutenir que la mondialisation financière et commerciale a accru la synchronisation des économies et accéléré la diffusion de la récession au plan mondial en empêchant que les pays en développement puissent continuer à soutenir l'activité.
Dans ce contexte, votre position, non argumentée relève du voeu pieux ou de l'obstination.
En revanche, je partage votre position sur la priorité au rétablissement du crédit commercial.
Cordialement
Date : April 8, 2009 11:08
Dear Mr Lamy
I receive the first information about G-20 from WTO -webmaster
In time I foward it to all friends in my net work .
We worry about future, we follow what happen in the world
In Vietnam mass media they inform that G-20 is very sussefful finished , they inform that the banking system will be controled . All people agree with this idea
Now in vietnamese society the competion is increasing , the labor -market put many requirement to workers .
We also know that the G-20 put 250 billions U S D support the world trade activities .
I think this is the big Aid for trade will support the poorers in many countries sell the goods to the market . They will have money for life
Conglatulation
Date : January 13, 2009 10:56
3rd world finance might punch above its weight here big-time. A key contribution to any envisioned deflationary spiral in the USA et al is the consumers have lost much of their collateral they would otherwise be using to borrow and create wealth with which to cycle further economic activity.
M.Yunus provided a model years ago of 3rd world entrepreneurs paying back loans without collateral. Some of the details were arbitrary, but he captured that survival and poverty-aversion were motivations of 3rd world entrepreneurs, that produced even better repayment rates than 1st world collateral-possessing entrepreneurs.
Perhaps something here can be captured to induce collateral-strapped USA entrepreneurs to take on and excel at small businesses? Some USA equivalent (or equal) to poverty-aversion and fear of death?
More generally, if the social studies of small businesses can be better understood, collateral will be viewed just as needless warehouse space was proven superfluous by just-in-time shipping. Part of the problem with society is money is used to attract credit instead of skill. Take away the parasitic money-makes-money behaviour and accompanying flat taxes lobby, and skill is better rewarded and increases.
Date : December 3, 2008 08:26
Thank you Minister Lamy
I would tell you what happen in Vietnam.
Vietnam have banking system for credits .
In community the people give credit with high rate ( it is call hot credit or black market ) - withthout intervention of rules. This is only an agreement between man and man. If some thing happen, it difficult move problem to judge.
We daily do not use the Credit Card to buy and sell. Maijority of us use money in cash .
Now financial crisis in the world, the price for rice, chickens, pig meat is going down. But the price for services like education and health care is increasing day by day. The peasants can't sell the rice, fish ... and they don't have the right to take credits from banks.
The pucharse power reduces, the small enterprises are going to bankroupt. We think in the time to come the unemployment will be increasing.
In recent time the interest rate is reducing from 16-17% to 10 %/ 1 year. It may be better in future for companies.
We, in the family, reduce the use of money, to pay for main needs : for foods, clothes, electricity and water and communication.
I do hope you and others experts know what happen in our society.
Thank you for attention
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