Trade Finance during the Great Trade Collapse potx

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
Trade Finance
during the Great
Trade Collapse
© 2011 The International Bank for Reconstruction and Development / The World Bank
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Washington DC 20433
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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
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
after Banking 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
vi Contents
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
Contents vii
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
viii Contents
6.1 Tightening Domestic Loan Standards 120
6.2 Domestic Commercial Lending 121
6.3 Global Merchandise Exports 121
6.4 Global Cross-Border Banking Activity 123
6.5 Short-Term Financing Received 123
6.6 Export Credit Insurance Exposure 125
6.7 Trade Financing Debt, by Country 126
6.8 Relative Declines in Exports, Export Insurance Exposure,
and Trade Finance Debt, by Region, Q2 FY08 to Q2 FY09 126
9.1 African Exports after Financial Crisis in Partner Country 167
9.2 African Exports after Financial Crisis 169
10.1 Export and Import Growth in Surveyed Countries 175
10.2 Postcrisis Export Growth and Constraints among
Surveyed Firms 176
10.3 New Market Exploration in Developing Countries 177
10.4 Severity of Export Constraints due to 2008–09 Crisis,
by Country 179
10.5 Sources of Export Market Constraints 180
10.6 Trade Finance Changes and Effects on Export Firms 181
10.7 Constraints on Bank-Intermediated Trade Finance, by Country 182
10.8 Export and Import Trade Finance, India and South Africa 184
10.9 Export and Import Trade Finance, Ghana and Kenya 186
10.10 Export and Import Trade Finance in Turkey, by Instrument 187
10A.1 Export and Import Growth, by Country 194

11.1 How Private Trade Credit Insurance Works 202
12.1 Survival of Trade Relations after Banking Crises 217
12.2 Recovery of Trade Relations, by Experience Level 220
12.3 Recovery of Trade Relations, by Size 221
12.4 Experience, Trade Credit Dependence, and Recovery of
Trade Relations 222
12.5 Size, Trade Credit Dependence, and Recovery of Trade Relations 223
16.1 World Trade and Trade Insurance Volumes 275
16.2 Medium- to Long-Term Export Credit Insurance 277
18.1 Number of GTFP-Covered Banks in Emerging Markets,
by Region 304
18.2 Shares of GTFP-Issued Guarantees in 2010, by Region 305
18.3 GTLP Supply-Demand Overview 314
19A.1 TFFP Transactions since 2005, by Number 335
19A.2 TFFP Transactions since 2005, by Value 336
20.1 ST Exports Covered, 2005–09 341
20.2 ST Credit Limits, Q1 CY05 to Q2 CY10 342
20.3 Change in ST Credit Limits, Q4 2007–Q2 2010, by Region 345
20.4 ST Export Insurance Claims Paid, 2005–09 345
Contents ix
20.5 MLT New Exports Covered, 2005–09 350
20.6 MLT Exports Covered, 2005–09 351
20.7 MLT Claims Paid, 2005–09 352
Tables
O.1 Overview of Trade Finance Products 5
4.1 Description of FCS Sample 77
4.2 Countries Hardest Hit by the 2008–09 Crisis 79
4.3 Regression Results 80
5.1 Summary of Bank Survey Respondent Characteristics 98
5.2 Changes in Merchandise Exports and Trade Finance,

by Country Group 99
5.3 Reasons for Decline in Value of Trade Finance 103
5.4 Change in Trade-Related Lending Guidelines: Tightening 105
5.5 Change in Trade-Related Lending Guidelines: Loosening 105
5.6 Pricing Changes by Bank Size, Q4 CY08 vs. Q4 CY07 107
5.7 Pricing Changes by Bank Size, Q2 CY09 vs. Q4 CY08 108
5.8 Pricing Changes by Bank Size, Q4 CY09 vs. Q4 CY08 109
5.9 Reasons for Trade Finance Price Increases 112
5.10 Impact of Basel II on Trade Finance Availability 112
7.1 Summary Statistics, Q2 2008–Q2 2009 139
7.2 U.S. Imports and Financial Variables, Q2 2008–Q2 2009 141
7.3 U.S. Exports and Financial Variables, Q2 2008–Q2 2009 143
8.1 Potential Impacts of Financial Crises on Trade Finance, by Type 151
11.1 EU Countries’ State Aid to the Short-Term Export
Credit Insurance Market 208
12.1 Recovery Time after Banking Crises, 1996–2009 214
12.2 Survival of Trade Relations after Banking Crises, 1996–2008 216
12.3 Effect of Banking Crises on Trade Relations Survival 217
12.4 Recovery Time, by Experience Level 219
12.5 Recovery Time, by Exporter Characteristic 223
12.6 Recovery Time and Financial Dependence 224
12.7 Recovery Time and Financial Dependence 224
12.8 Financial Dependence, Exporter Characteristics, and Recovery 225
12.9 Financial Dependence, Exporter Characteristics, and Recovery 226
15A.1 Governments and Multilateral Institutions that Took
Trade Finance Measures, as of April 2009 269
20.1 Market Shares of Private and Public ST Credit Limits, 2006–10 343
20.2 Shares of ST Credit Limits, 2005–09, by Destination Region 344
20.3 ST Claims Paid, 2008–09, by Destination Country 346
20.4 ST Claims Paid in Selected Emerging Markets,

by Destination Country 347
20.5 Shares of MLT Exports Covered, 2005–09,
by Destination Region 351
x Contents
The 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 con-
cerned the extent to which a drying up of trade finance caused the observed
decline in trade flows.
There are different types of trade finance. Banks offer a number of trade
finance instruments that vary in terms of risk. A large share of global trade finance
is also provided on an interfirm basis—that is, involving contracts between buyers
and suppliers. It rapidly became obvious that the data on global trade finance
flows (by type of products, providers, or markets) were incomplete. This dearth of
data complicated the estimation of a possible trade finance “market gap” and of
whether trade finance was indeed a major factor driving the fall in global trade.
An implication for policy was whether governmental intervention in favor of a
specific segment of the financial system—the trade finance market—was neces-
sary and, if so, what form such support should take.
The G-20 quickly reached broad agreement that the international community
needed more information and knowledge about trade finance markets and also
needed to consider expanding trade finance liquidity. International agencies, the
financial industry, and analysts cooperated to act on three fronts: (a) collecting
data to better inform decision makers on the prevalence of trade finance market
constraints; (b) helping design a quick and effective institutional and governmen-
tal response to restore confidence and liquidity in the trade credit market; and (c)

better understanding the effects of the changes in the international regulatory
framework for the banking sector on the supply of trade finance.
Foreword
xi
In response to the crisis, the International Finance Corporation—the private
sector arm of the World Bank—doubled the capacity of its Global Trade
Finance Program in late 2008 and, in collaboration with other development
finance institutions, set up a Global Trade Liquidity Program in July 2009 to
channel additional liquidity to finance trade transactions. In addition, the
World Bank undertook a series of bank- and firm-level surveys in developing
countries to gauge the impact of the crisis, complementing other institutional
surveys conducted in advanced and emerging economies.
This book brings together a range of projects and studies undertaken by devel-
opment 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 pro-
vides 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 crit-
ical 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 uncer-
tainty regarding the impact on trade finance of recent changes in the Basel III reg-
ulatory framework.
We hope that the contributions to this volume are just the start of a broader
effort to undertake more research and analysis on an important, and neglected,
segment of the financial market. Such analysis is conditional on the availability
of timely and comprehensive data on the cost and volume of trade finance as
well as the probability of default trade finance products. As discussed in a num-

ber of chapters in this book, generating such data requires a collective effort,
which we hope will be put in place and sustained in the coming years.
Bernard Hoekman Georgina Baker
Director, International Trade Department Director, Short Term Finance
Poverty Reduction and Economic International Finance Corporation
Management World Bank Group
World Bank
xii Foreword
The editors are grateful to all the contributors in this book who have willingly
embarked on this endeavor and offered their time, energy, and ideas to help
advance our collective knowledge on the role of trade finance during the 2008–09
global economic crisis. We have been particularly blessed to count on most actors
that played a significant role during the financial crisis, be it international or
regional institutions, government bodies, private sector players, or academia. This
rich and unique combination of views and analyses on the relationship between
trade and trade finance in times of crisis constitutes the real value added of this
book. It would not have been possible without the willingness of all the contribu-
tors to share their considerable expertise and their devotion to the purpose of
this book.
The production of such a book would not be possible without the involve-
ment, commitment, and dedication of many other individuals. Bernard Hoek-
man, director of the World Bank International Trade Department, provided the
overall intellectual guidance for this project under the direction of Otaviano
Canuto, Vice President of the Poverty Reduction and Economic Management
(PREM) Network. Mona Haddad, manager of the PREM Trade Unit provided
unfailingly generous support, suggestions, and help, whenever needed. The book
also immensely benefited from the inputs and comments from peer reviewers:
Hamid Alavi, senior private sector specialist, and Valeria Salomao Garcia, senior
financial sector specialist, at the World Bank; and Michael Hadjimichael, deputy
director at the Institute of International Finance (IIF).

But a book cannot exist without an effective production team. This book
benefited from the impeccable professionalism of the World Bank’s Office of the
Publisher. Stephen McGroarty, Theresa Cooke, and Andres Meneses managed
the publication process so efficiently and diligently that we hardly noticed it.
Mary A. Anderson carefully edited all of the contributions to deliver a harmo-
nized manuscript. We would also like to thank the dedicated and professional
Acknowledgments
xiii
support provided by the administrative team in the International Trade Depart-
ment, including Cynthia Abidin-Saurman, Rebecca Martin, Anita Nyajur,
Marinella Yadao, and Amelia Yuson. Special thanks also to Charumathi Rama Rao,
who provided support on the financial management aspects of the project, and
to Stacey Chow for her infectious energy throughout the publication and dissem-
ination phases.
Last but not least, we would like to thank the governments of Finland, Norway,
Sweden, and the United Kingdom for their financial support under the Multi-
donor Trust Fund for Trade and Development (MDTF-TD). The MDTF-TD sup-
ports the World Bank’s international trade strategy, which focuses on helping
developing countries benefit from their integration into the global economies and
making the world trading system more supportive of development.
The editors
xiv Acknowledgments
Jean-Pierre Chauffour is a lead economist in the International Trade Department
of the World Bank, in the Poverty Reduction and Economic Management Network,
where he works on regionalism, competitiveness, and trade policy issues. Prior to
joining the Bank in 2007, he spent 15 years at the International Monetary Fund,
where he held various positions, including mission chief in the African department
and representative to the World Trade Organization and United Nations in Geneva.
Mr. Chauffour has extensive economic policy experience and has worked in many
areas of the developing world, most extensively in Africa, the Middle East, and East-

ern Europe. He holds master’s degrees in Economics and in Money, Banking, and
Finance from the Panthéon-Sorbonne University in Paris. He is the author of The
Power of Freedom: Uniting Human Rights and Development (Cato Institute, 2009).
Mariem Malouche is an economist in the International Trade Department of
the World Bank, in the Poverty Reduction and Economic Management Net-
work. She joined the Bank in the Middle East and North Africa Region in 2004.
Before joining, Ms. Malouche obtained her Ph.D. in International Economics
from University Paris-Dauphine. Her areas of interest are trade policy, non-
tariff measures, regional integration, and export diversification.
Contributors
Hyung Ahn, International Finance Corporation, World Bank Group
Donna K. Alexander, Bankers’ Association for Finance and Trade–International
Financial Services Association
Irena Asmundson, International Monetary Fund
Marc Auboin, World Trade Organization
About the Editors and
Contributors
xv
Steven Beck, Asian Development Bank
Ghazi Ben Ahmed, African Development Bank
Nicolas Berman, Graduate Institute of International and Development Studies
Cosimo Beverelli, World Trade Organization
Daniela Carrera, Inter-American Development Bank
Thomas Dorsey, International Monetary Fund
Tore Ellingsen, Stockholm School of Economics, Stockholm University
Daniela Fabbri, University of Amsterdam
Thomas Farole, World Bank
Bonnie Galat, International Finance Corporation, World Bank Group
Adnan Ghani, Royal Bank of Scotland
Jean-Jacques Hallaert, OECD and Groupe d’Économie Mondiale (GEM), Institut

d’Études Politiques de Paris
John Humphrey, Institute of Development Studies
Tan Kah Chye, Standard Chartered Bank
Armine Khachatryan, International Monetary Fund
Leora Klapper, World Bank
Madina Kukenova, World Trade Organization
Jean-François Lambert, HSBC
Andrei A. Levchenko, University of Michigan and National Bureau of Economic
Research
Logan T. Lewis, University of Michigan and National Bureau of Economic
Research
Inessa Love, World Bank
Philippe Martin, Institut d’Études Politiques de Paris
xvi About the Editors and Contributors
Anna Maria C. Menichini, University of Salerno and Centre for Studies in
Economics and Finance
Jesse Mora, U.S. International Trade Commission
Fabrice Morel, Berne Union
Ioana Niculcea, International Monetary Fund
William Powers, U.S. International Trade Commission
Rudolf Putz, European Bank for Reconstruction and Development
Douglas Randall, World Bank
Nadia Rocha, World Trade Organization
Christian Saborowski, World Bank
Mika Saito, International Monetary Fund
Thierry J. Senechal, International Chamber of Commerce
Ahmet I. Soylemezoglu, World Bank
Linda L. Tesar, University of Michigan
Koen J. M. van der Veer, De Nederlandsche Bank
Jonas Vlachos, Stockholm University

About the Editors and Contributors xvii

$ All references to “dollars” or dollar amounts ($) are U.S. dol-
lars (US$) unless indicated otherwise.
AfDB African Development Bank
ADB Asian Development Bank
AGOA African Growth and Opportunity Act
ALADI Latin American Integration Association
ATL Agro Traders Ltd.
AVC asset value correlation
BAFT-IFSA Bankers’ Association for Finance and Trade–International
Financial Services Association (merged association)
BANCOLDEX Banco de Comercio Exterior de Colombia
BCBS Basel Committee on Banking Supervision
BIS Bank for International Settlements
BPLR Benchmark Prime Lending Rate
BU Berne Union
CCF credit conversion factor
CEPII Centre d’Etudes Prospectives et d’ Informations Internationales
(Centre for Research on the International Economy)
CIS Commonwealth of Independent States
DFI development finance institution
EBRD European Bank for Reconstruction and Development
ECA export credit agency
ECGD Export Credits Guarantee Department
EFD external financial dependence
EFIL Export Finance Insurance Corporation (Australia)
EMIB emerging-market issuing bank
ES Enterprise Survey (World Bank)
EU European Union

ABBREVIATIONS
xix
FCS Financial Crisis Survey (World Bank)
FI financial intermediary
FY fiscal year
G-20 Group of 20 (countries’) Finance Ministers and Central Bank
Governors
GDP gross domestic product
GTFP Global Trade Finance Program (IFC)
GTLP Global Trade Liquidity Program (IFC)
ICC International Chamber of Commerce
IDA International Development Association
IDB Inter-American Development Bank
IDS Institute of Development Studies
IFC International Finance Corporation (World Bank Group)
IFI international financial institution
IMF International Monetary Fund
IMF-BAFT International Monetary Fund–Bankers’ Association for
Finance and Trade
ISIC International Standard Industrial Classification
IT information technology
KYC know-your-customer
LIBOR London interbank offered rate
LC letter of credit
LOC line of credit
MFA Multifibre Arrangement
MLT medium/long-term (export credit insurance)
NAICS North American Industry Classification System
NFIB National Federation of Independent Business
OECD Organisation for Economic Co-operation and Development

RBI Reserve Bank of India
RBS Royal Bank of Scotland
SBSA Standard Bank of South Africa
SCF supply chain finance
SMEs small and medium enterprises
ST short-term (export credit insurance)
SWIFT Society for Worldwide Interbank Financial
Telecommunication
TCD trade credit dependence
TFI Trade Finance Initiative (AfDB)
TFP Trade Facilitation Program (EBRD)
TFP Trade Finance Program (ADB)
xx Abbreviations
TFFP Trade Finance Facilitation Program (IDB)
TFRP Trade Finance Reactivation Program (IDB)
TWCC trade-weighted credit contraction
UB utilization bank
WTO World Trade Organization
Abbreviations xxi

1
Introduction
On September 15, 2008, Lehman Brothers, the fourth-largest U.S. investment
bank, filed for bankruptcy, marking the largest bankruptcy in U.S. history and
the burst of the U.S. subprime mortgage crisis. Concerns about the soundness of
U.S. credit and financial markets led to tightened global credit markets around
the world. Spreads skyrocketed. International trade plummeted by double digits,
as figure O.1 illustrates. Banks reportedly could not meet customer demand to
finance international trade operations, leaving a trade finance “gap” estimated at
around $25 billion. The liquidity problem spread from the United States and the

European Union (EU) to developing countries’ markets. As the secondary mar-
ket dried up in late 2008, the trade finance gap reportedly increased to up to
$300 billion.
In the midst of the crisis, these alarming developments were at the epicenter
of world leaders’ attention. When the G-20 leaders held their first crisis-related
summit in Washington, D.C., in November 2008, their primary objective was to
reach a common understanding of the root causes of the global crisis and agree
on actions to address its immediate effects, including providing liquidity to help
unfreeze credit markets.
The purpose of this book is to provide policy makers, analysts, and other inter-
ested parties with a comprehensive assessment of the role of trade finance in the
2008–09 “great trade collapse” (Baldwin 2009) and the subsequent role of govern-
ments and institutions to help restore trade finance markets.
The 1997–98 Asian crisis had already illustrated the critical role that trade
finance plays during a financial crisis—especially its effects on trade—but that
crisis remained regionally confined, and international institutions and regulators
largely blamed the opaque financial sector in the affected economies for the crisis.
In contrast, the 2008–09 crisis originated in the United States, one of the most
Overview