Skip to main content

Green Paper on Trade Finance as a tool for Trade Facilitation

Languages and translations
File type1
GreenPaper_ECE_TRADE_C_CEFACT_2017_INF1.pdf (application/pdf, 507.58 KB)

The objective of this United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) project is to articulate the linkages and complementarities of Trade Facilitation activities with the financing of international commerce under the broad array of Trade Finance and Supply Chain Finance solutions.

In essence, getting everything right around the physical movement of goods by streamlining operations from education to logistics, and infrastructure to regulatory considerations (i.e. the commonly understood scope of Trade Facilitation) is important.However, in the absence of adequate and affordable levels of financing and risk mitigation, such activities will only partially allow importers and exporters to conduct trade in a
sustainable way. Furthermore, the economic and development objectives will only be partially achieved.

Financing, in some form, supports the vast majority of trade flows, and lack of it has been identified almost globally as a serious obstacle to the growth and sustainability of enterprises—particularly Small and Medium Enterprises (SMEs). Suppliers linked to cross-border and international supply chains are often based in developing and emerging markets where the challenges of accessing affordable financing are further complicated. It is often the case that financing available locally in developing markets is simply too expensive for SMEs to take advantage of, thus the challenge is not only about access to finance, but also about the
risk for banks in financing SMEs.

Trade Facilitation is a mature discipline and a critical contributor to development efforts either at the policy or transactional level. It does this by fostering the adoption, effectiveness and success of programs for simple, transparent and effective trade processes being deployed in both advanced and developing economies. The exclusion of financing as an element of Trade Facilitation efforts misses a critical commercial reality that underpins  global trade flows, trade relationships and international supply chains. That is, the lack of adequate levels of financing is consistently identified as a major obstacle to the pursuit of additional opportunities in international markets.

In this context, this paper discusses the strategic importance to “bridge” Trade Facilitation, Trade Finance and Supply Chain Finance instruments, practices, and supporting technologies, and demonstrates that the inclusion of financing as an in-scope element of Trade Facilitation presents significant, untapped potential in trade-based international development. It does so concurrently from the perspective of Trade Facilitation practitioners and Trade Finance and Supply Chain Finance experts.