Trade Finance during the Great Trade Collapse

432 Pages·2011·6.4 MB·English

by  Jean-Pierre Chauffour, Mariem Malouche

T F
rade inance
during the
Great Trade

Collapse
Editors
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Trade Finance
during the Great
Trade Collapse

Trade Finance
during the Great
Trade Collapse
Jean-Pierre Chauffour and Mariem Malouche
Editors
© 2011 The International Bank for Reconstruction and Development / The World Bank
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Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
All rights reserved
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ISBN: 978-0-8213-8748-1
eISBN: 978-0-8213-8749-8
DOI: 10.1596/978-0-8213-8748-1
Library of Congress Cataloging-in-Publication Data
Chauffour, Jean-Pierre.
Trade finance during the great trade collapse / Jean-Pierre Chauffour and Mariem Malouche.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-8748-1 — ISBN 978-0-8213-8749-8 (electronic)
1. Export credit. 2. Exports—Finance. 3. Financial crises. 4. International trade. I. Malouche, Mariem,
1973- II. Title.
HG3753.C435 2011
332.7'42—dc22
2011012219
Cover photos: © moodboard/Corbis (Money Rolls); Adobe Image Library (background)
Cover design by Tomoko Hirata/World Bank
contents
Foreword xi
Acknowledgments xiii
About the Editors and Contributors xv
Abbreviations xix
Overview 1
Section I SPECIFICITY OF TRADE CREDIT AND TRADE
FINANCE DURING CRISES 25
1 Trade Credit versus Bank Credit during
Financial Crises 27
Inessa Love
2 Firms’ Trade-Financing Decisions during Crises 41
Daniela Fabbri and Anna Maria C. Menichini
3 Interfirm Trade Finance: Pain or Blessing during
Financial Crises? 59
Anna Maria C. Menichini
4 Financial Crisis and Supply-Chain Financing 73
Leora Klapper and Douglas Randall
Section II TRADE FINANCE DURING THE 2008–09 CRISIS:
INNOCENT OR GUILTY? 87
5 Trade Finance in the 2008–09 Financial Crisis:
Evidence from IMF and BAFT–IFSA Surveys of Banks 89
Irena Asmundson, Thomas Dorsey, Armine Khachatryan,
Ioana Niculcea, and Mika Saito
6 Global Perspectives in the Decline of Trade Finance 117
Jesse Mora and William Powers
v
vi Contents
7 The Role of Trade Finance in the U.S. Trade
Collapse: A Skeptic’s View 133
Andrei A. Levchenko, Logan T. Lewis, and Linda L. Tesar
8 Trade Finance in Africa: A Survey of Firms 149
John Humphrey
9 Financial Crises and African Trade 161
Nicolas Berman and Philippe Martin
10 World Bank Firm and Bank Surveys in
14 Developing Countries, 2009 and 2010 173
Mariem Malouche
11 Private Trade Credit Insurers during the Crisis:
The Invisible Banks 199
Koen J. M. van der Veer
12 Trade Finance in the Recovery of Trade Relations
afterBanking Crises 213
Cosimo Beverelli, Madina Kukenova, and Nadia Rocha
Section III UNDERPINNINGS OF TRADE FINANCE
INTERVENTION DURING FINANCIAL CRISES 233
13 The Theoretical Case for Trade Finance in
a Liquidity Crisis 235
Tore Ellingsen and Jonas Vlachos
14 Why Boosting the Availability of Trade Finance
Became a Priority during the 2008–09 Crisis 245
Jean-Jacques Hallaert
15 Market Adjustment versus Market Failure 257
Jean-Pierre Chauffour and Thomas Farole
16 Should Developing Countries Establish
Export Credit Agencies? 273
Jean-Pierre Chauffour, Christian Saborowski, and
Ahmet I. Soylemezoglu
Section IV INSTITUTIONAL TRADE FINANCE SUPPORT
DURING THE 2008–09 FINANCIAL CRISIS 287
17 World Trade Organization Response to the Crisis:
A Convening Power to Boost the Availability
of Trade Finance 289
Marc Auboin
Contents vii
18 The World Bank Group’s Response to the Crisis:
Expanded Capacity for Unfunded and Funded
Support for Trade with Emerging Markets 301
Bonnie Galat and Hyung Ahn
19 Regional Development Banks’ Response to
the Crisis: Scaling Up the Trade Finance Facilities 319
Rudolf Putz, Ghazi Ben Ahmed, Steven Beck,
and Daniela Carrera
20 Credit Insurance in Support of International Trade:
Observations throughout the Crisis 337
Fabrice Morel
21 Business Responding to the Financial Crisis:
Setting Up a Policy Agenda for Trade Finance 357
Thierry J. Senechal
22 Private Bankers’ Response to the Crisis:
Warnings about Changes to Basel
Regulatory Treatment of Trade Finance 373
Donna K. Alexander, Tan Kah Chye, Adnan Ghani, and
Jean-François Lambert
23 Trade Finance under the Current Basel
Regulatory Framework: What are the Issues? 385
Marc Auboin
Index 393
viii Contents
Boxes
5.1 The IMF/BAFT-IFSA and Other Bank Surveys 97
5.2 Key Findings and Observations from the
Fifth Trade Finance Survey 114
6.1 Common Types of Trade Finance and the Risk for Exporters 119
10.1 Policy Update on Selected Countries and Multilateral Initiatives 189
19.1 Terms and Conditions of TFI Credit Products 325
19.2 IDB Trade Financing Increases Intraregional Transactions 330
20.1 Credit Insurance and How It Works 338
20.2 The Berne Union 354
Figures
O.1 Trade Fluctuations by Region, 2007–10 2
O.2 Trade Finance Arrangements, by Market Share 4
2.1 Regime where the Incentive Motive Dominates 49
2.2 Regime where the Liquidation Motive Dominates 51
2.3 Trade Credit Intensity, Wealth, and Creditor Protection 53
2.4 Input Tangibility, Wealth, and Creditor Protection 54
4.1 Extension of Trade Credit, by Country 75
4.2 Changes in the Extension of Trade Credit, by Country 76
4.3 Access to Bank and Supplier Financing, by Country 78
4.4 Trade Credit and Liquidity 83
5.1 Trade Finance Arrangements, by Market Share 90
5.2 Merchandise Trade Index, 2007 to mid-2010 92
5.3 Global Funding Pressure, 2008 to mid-2010 93
5.4 Three-Month LIBOR Spreads in Advanced Markets 94
5.5 External Debt Market Spreads in Emerging Markets,
2008 to mid-2010 95
5.6 Loans to Nonfinancial Firms in the Euro Area and
U.S., 2007 to mid-2010 95
5.7 U.S. Commercial Paper: Outstanding Accounts,
2008 to mid-2010 96
5.8 Overall Changes in Merchandise Exports and Trade Finance 100
5.9 Changes in Merchandise Exports and Trade Finance,
by Country Group 101
5.10 Estimated Composition of the Trade Finance Industry 102
5.11 Overall Change in Trade-Related Lending Guidelines,
Q4 CY09 vs. Q4 CY08 104
5.12 Ability to Satisfy “All Customer Needs” 106
5.13 Effect of “Recent Developments” on Pricing of
Trade Instruments 110
5.14 Change in Trade Instrument Pricing 111
5.15 Change in Probability of Default, 2007–09 113