London: World Bank president Robert Zoellick announced a $50 billion global trade liquidity program on Tuesday and urged G20 leaders to support the effort to reverse a sharp drop in trade due to the global economic crisis.
In a Newsmaker speech at Reuters ahead of the Group of 20 summit in London, Zoellick said the World Bank expects world trade volumes to fall by 6% this year, the largest decline in 80 years.
While he offered few details about the programme, which is being considered by the World Bank board later on Tuesday, Zoellick said the drop in world trade was exacerbated by a shortfall in trade credit, which allows exporters and importers to settle accounts.
“These public funds can be leveraged through a risk-sharing arrangement with major private sector partners, ” Zoellick said.
Working with the World Trade Organization, the World Bank could also tap resources and the experience of national export credit agencies, he said.
In updated forecasts, the World Bank now projects the global economy to contract 1.7% this year, the first decline since World War II, Zoellick said. Previously, the poverty-fighting institution said the world economy would likely shrink somewhere between 1% and 2% this year.
Growth in developing economies was expected to slow to a tepid 2.1% this year, Zoellick said, as global demand, private capital flows and remittances all fall.
To address the crisis, Zoellick said the G-20 should begin by reforming and empowering existing institutions like the World Bank, WTO and the International Monetary Fund, including by giving rising emerging powers a bigger say in decisions.
The G-20 should also give the institutions greater oversight of national policies to improve transparency, accountability and ensure better policy coordination.
They should do this by endorsing a WTO monitoring system to prevent a further build up of trade restrictions even if the measures do not necessarily violate WTO rules, and should accept the “moral suasion” of public reviews that name and shame countries.
“No one should want isolated infringements to become a pattern, eroding one of the most important bulwarks between this crisis and the 1930’s,” said Zoellick, the US’s former trade representative.