The wheels of trade finance.

• Author: Francis, Patricia

While bailouts for banks and help for homeowners hit the headlines daily, scant regard is given to the grit in the engine of growth: access to trade finance. The narrow focus during this wave of the financial crisis as it hits homes in developed markets, obscures the tsunami that threatens trade at a time when we simply cannot afford to see trade flows stall.

About 90% of the $13.6 trillion in world merchandise trade is funded by trade finance. But we are now facing a crisis of cash and confidence. Experts gathered at a World Trade Organization meeting on trade and finance raised the alarm, pointing out that demand for trade finance well outstrips supply. Regional development banks and export-import banks that finance trade are facing funding difficulties themselves, making it hard for companies to obtain trade finance. Even with a letter of credit, banks remain reticent to issue loans.

The crisis of confidence extends beyond obtaining trade finance to a closer scrutiny of letters of credit. The International Trade Center shares the concern of the International Chamber of Commerce, that...