I was reminded this week of just how hard it is to escape from trade finance.

I've been reading a book about Captain Kidd, the rather notorious (though debatably so, I’m learning) 17th-century pirate. Mixed in with the stories of his voyages and some hints at the surprisingly democratic nature of the era’s privateers, I've found myself, yet again, reading about bills of exchange and letters of credit. 

After returning from a two and a half year expedition and finding out that he had been declared a pirate and therefore wanted by the authorities, Kidd found himself needing to dispose of the cargo he'd acquired en route. Naturally, this involved a couple of Caribbean merchants, some gold, a replacement ship, and – drumroll please…– a bill of exchange drawn on merchants in Curaçao (and worth 4,200 Spanish pieces of eight, for those wondering). Some of Kidd's contemporaries, meanwhile, were using another all too familiar instrument (yes, the letter of credit) to finance their own legally ambiguous high seas undertakings. Even piracy in the age of sail, it seems, had its fair share of financial paperwork.

Anyway, back to the 21st century, and it seems that some of those familiar instruments are still causing headaches. One of our stories this week follows a legal dispute in Dubai involving bills of lading, allegations of fraudulent commodity trades, and a decades-long banking relationship that suddenly came to an abrupt end. Intrigued? A court has now ordered Bank of India to produce records explaining why it closed the trader's credit lines. It's one worth keeping an uneyepatched eye on.

Our slow read, meanwhile, takes a rather critical look at the state of international trade. Despite its importance to economic growth, is there enough political and business leadership behind the effort to modernise the systems that keep it moving? The author certainly doesn't think so, and makes a compelling case for why the industry needs to be aiming higher.

Elsewhere, we look at the growing role of credit insurance in global trade, what resilience means in an increasingly unpredictable world, and why smaller businesses still struggle to access the FX risk management tools available to their larger counterparts.

And from the studio, back at ITFA in Split, we brought together a group of industry experts for a good old-fashioned debate on whether AI could close the SME trade finance gap within five years. Both sides had plenty to say, and we've now published our video recap as well as a short report exploring the arguments. We've also got conversations on European payments and efforts to modernise trade finance management.

As always, there's plenty to read, watch, and loot… I mean learn.

Until next time — batten down the hatches. 

Carter Hoffman, Deputy Editor

Country of the Week: Germany

Did you know that the fall of the Berlin Wall on 9 November 1989 set the stage for one of history’s largest currency changeovers? As East and West Germany prepared to reunite, East Germany began the enormous task of adopting the West German Deutsche Mark. To make the transition possible, the Bundesbank transported around 440 million banknotes and 102 million coins into East Germany, while banks worked to convert some 25 million accounts and update payment systems. The new currency officially entered circulation in East Germany on 1 July 1990, helping bring two previously separate economies together.

Germany trade stats (2024):

Slow Read

International trade suffers from a lack of vision, ambition and leadership

Trade so often gets lost in the political narrative or board level priorities of investors and companies. Why is this when it is so fundamental to economic growth and competitiveness? No more so than the UK which is 60% dependent on trade and, arguably, more hard wired into the international trade system than any other economy.

In today’s highly disruptive world, agility is critical to ensuring supply chains are more resilient and competitive, and companies have the working capital they need to grow their businesses. Today, companies need real-time information at the click of a button and to have the ability to move capital and goods at speed to avoid unnecessary cost and risk.

This is not possible in a fragmented, paper-based system that is overly complex, slow and inefficient. Put simply, we are expecting businesses to meet the needs of 21st century trade in a system that operates in the 20th century and is unfit for purpose. It is a car crash. Given a choice, no-one would design a trade system like the one we have yet we are choosing to accept it, instead of modernising it to meet the needs of today.

At a domestic level, the importance of an attractive business environment is well understood yet at international level it is not prioritised. This is particularly perplexing in economies, like the UK, that are dependent on international trade for economic security and the prosperity of every citizen.

Trade dialogue so often focuses on tariffs, trade agreements and market access as the answer when all of these fail to grasp the importance of the need to modernise the overall trade environment where the benefits dwarf all of these combined. Where is the vision, ambition and leadership to take us to where we need to be?  Nowhere is the answer. 

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