Since the end of the Second World War, there has been a massive increase in global trade between independent sovereign states. A significant percentage of the products we buy on a daily basis are now traded internationally. Sometimes these goods have been transported across several countries before arriving as finished goods in our shopping trolleys. The rise of global supply chains means that intermediate goods cross borders far more often than they did in a world where most stages of production took place within a single country. This is one reason why growth rates in world trade regularly outstrip even growth rates in global GDP.
In facilitating this volume of international trade, the importance of an appropriate trade finance infrastructure cannot be overstated. Cross-border transactions present a number of potential difficulties for the parties (importers and exporters) involved.
For instance, how do the trading parties handle the practical problems arising from the transport of, and payment for, goods moving from one country to another? How can sellers obtain access to pre-export finance in order to fulfill their customers’ orders? Are there guarantees or insurance products available to reduce the uncertainty associated with international trade? What risks related to differing legislation, customs, and practices need to be considered?
The absence of an appropriate trade finance infrastructure would constitute a major barrier to trade.
Uncertainty surrounding payment, limited access to financing, and lack of guarantees or insurance would severely hinder the ability of importers and exporters to trade, with a consequent knock-on effect on the export potential and growth rate of both individual countries and the global economy.
