Vincent O’Brien, chair of the ICC Banking Commission’s Market Intelligence Group gives GTR the scoop on the findings of the ICC’s Global Survey 2014: Rethinking Trade and Finance.

“The ICC has just taken the temperature of trade finance industry – publishing the largest and most comprehensive survey ever on July 2. It involved representation from 298 banks in 127 countries, making this a truly representative sample of the trends impacting our industry.

And while the patient is recovering nicely, a full discharge is a little way off.

On the plus side, trade is growing. On an annualised basis it was a shade above 3% in 2013. Yet that rate is well below the rates shown before, and even after, the global financial crisis. That said, the annualised growth rate picked up to 4% during Q1 2014 and should accelerate to exceed 5% through 2016, again allowing a cautious optimism for the year or so ahead.

What stalls that growth? It’s a mix of factors but one is that there is still a trade finance funding gap, according to the survey’s respondents. Partly, this is being addressed by alternative funders and other pools of liquidity, as well as banks easing their funding constraints. But, with 41% of respondents reporting a perceived shortfall in trade finance globally, the challenge remains.

This is particularly hard on two groups – SMEs and those in emerging markets, which means trade growth is being impeded at the very points containing the greatest potential for growth. And potential there is: south-south trade now represents 46% of the global total, up from 35% in 2001. In fact, south-south trade now accounts for over half of all developing country exports. These new trade corridors are growing at a greater pace than elsewhere and – particularly with respect to Asia – are increasingly seen as the primary focus for trade activity.

Yet the survey highlights other constraints. For instance, some 65% of respondents reported that implementation of Basel III regulations is affecting the cost of funds as well as the overall liquidity of trade finance. Indeed, as many as 87.5% of respondents stated that Basel III had affected their operations. Additionally, around three quarters stated that Basel III had directly impacted the cost of export finance, although one perhaps more welcome response is that Basel III had generated an increase in innovation: some 72% stating that Basel II had made them ‘more innovative as an organisation’.

Certainly, the ICC continues to work closely with all relevant regulatory bodies in this respect – with the aim of producing the right regulatory balance for our needs.

Added to worries about the provision of trade finance, however, are concerns about the growth of trade-restrictive measures. For instance, the G20 countries accounted for three-quarters of all trade-restrictive measures imposed since 2008. According to the WTO, 193 new trade restrictive measures were introduced between December 2012 and November 2013, most commonly ‘antidumping’ measures.

Of course, there is no ‘blame game’ intended in the reporting of these figures – and they are balanced by more positive news: in this case the prospect of a 5 to 15% boost in GDP with the on-going reduction in supply chain barriers.

In fact, if just two improvements were made with respect to supply chain barriers – border administration and transport; and communications infrastructure (to just 50% of global best practice) – global GDP could be increased by US$2.6tn and exports by US$1.6tn.

So our message is one of optimism. Since the 1990s, trade has tended to grow at around double the rate of GDP, meaning that the rebound in US GDP growth will encourage global trade growth, although sluggish eurozone growth will continue to hinder prospects in this respect. China, meanwhile, is becoming a bigger economy with a more stable pattern of growth, which helps generate steady (rather than volatile) trade growth.

As for the survey – I think it proves the point that statistical data can help support the aims of both market participants and policymakers. The regulatory pressure has been intense since the financial crisis – some of it based on anecdotal rather than empirical evidence. Certainly, the more that data can replace anecdote, the better our chances of finding the right regulatory path for the industry.

What’s also excellent about the survey is the power of collaboration. As stated, this is the largest ever survey with richest data from the widest geographical spread – beaten only (I hope) by next years’ survey, thanks to the encouragement offered from such widespread participation in 2014. Could this be another positive outcome of the financial crisis – the realisation that we need to work in partnership to protect an industry that’s so vital to the world’s economic health?

Certainly, the appetite is there, meaning that our aim now is to advance the partnership ethos for the benefit of all stakeholders in international trade facilitation.”