Strengthening the global trade and investment system for sustainable development

Strengthening the global trade and investment system for sustainable development

Trade financing, an esoteric and poorly understood branch of finance, is demonstrably critical to the pursuit and conduct of international trade, by companies of all sizes, and by small and medium-sized enterprises (SMEs) in particular. Those based in developing and emerging markets are in even more urgent need of the liquidity and risk mitigation solutions available through trade financing.

The global financial crisis has demonstrated beyond debate that there is an important role for public sector and international institution actors in assuring the availability of adequate levels of affordably priced trade finance, particularly (but not exclusively) in times of crisis.

It is worth noting explicitly that the discussion which follows necessarily refers to various instruments and structures of trade and supply chain finance for the sake of clarity and to provide concrete examples; that said, reference to trade finance and supply chain finance should be understood in the widest possible sense, encompassing any financing and related activity in risk mitigation, that aims to support the conduct of cross-border trade. The focus ought to be on a holistic understanding of this domain, its linkage to the conduct of trade and its clear potential to contribute to international development and poverty reduction.

Interestingly, some of the techniques evolving with the aim of supporting international supply chains can (and do) apply very well in the context of domestic, supply chain-centered activity.

A core question to consider is whether, independently of instruments and transactional technicalities, there is sufficient capacity in the global system to finance trade, and thereby to create economic value, and contribute to development and poverty reduction.

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