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Trade Finance during the Great Trade CollapseThe bursting of the subprime mortgage market in the United States in 2008 and the ensuing global financial crisis were associated with a rapid decline in global trade. The extent of the trade collapse was unprecedented: trade flows fell at a faster rate than had been observed even in the early years of the great depression. G-20 leaders held their first crisis-related summit in November 2008. The goal was to understand the root causes of the global crisis and to reach consensus on actions to address its immediate effects. In the case of trade, a key question concerned the extent to which a drying up of trade finance caused the observed decline in trade flows. This book brings together a range of projects and studies undertaken by development institutions, export credit agencies, private bankers, and academics to shed light on the role of trade finance in the 2008-09 great trade collapse. It provides policy makers, analysts, and other interested parties with analyses and assessments of the role of governments and institutions in restoring trade finance markets. A deeper understanding of the complexity of trade finance remains critical as the world economy recovers and the supply of trade finance improves. The international community continues to know too little about the fragility of low income economies in response to trade finance developments and shocks, as well as about the ability and conditions of access to trade finance by small and medium enterprises and small banks in developing countries. Similarly, there is uncertainty regarding the impact on trade finance of recent changes in the third Basel regulatory framework.
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Trade Finance in Crisis : Should Developing Countries Establish Export Credit Agencies?New data on export insurance and guarantees suggest that publicly backed export credit agencies have played a role to prevent a complete drying up of trade finance markets during the current financial crisis. Given that export credit agencies are mainly located in advanced and emerging economies, the question arises whether developing countries that are not equipped with these agencies should establish their own agencies to support exporting firms and avoid trade finance shortages in times of crisis. This paper highlights a number of issues requiring attention in the decision whether to establish such specialized financial institutions. It concludes that developing countries should consider export credit agencies only when certain pre-requirements in terms of financial capacity, institutional capability, and governance are met.
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Trade Finance in Crisis : Market Adjustment or Market Failure?As world leaders have agreed to
 massively support trade finance, this paper discusses the
 singularity of the issues related to trade finance in the
 context of the global economic crisis. Why should
 international trade finance be a particular issue of concern
 in the current circumstances? Are there specific market or
 government failures associated with trade finance that
 justify a special and differential treatment of the issue by
 policymakers? If so, what would then be the most appropriate
 policy instruments to address those concerns? The paper
 cautions against the notion of a large trade finance
 "gap," yet highlights the possible rationales and
 conditions for an effective intervention in support of trade finance.