Trade Finance Drives Export-Led Growth

by Amit Jain, Vice President, Global Trade and Supply Chain Product ManagementBank of America Merrill Lynch

Exports are an important catalyst for economic growth.  Yet, in times of economic contraction, the actions necessary to grow exports—such as allocating liquidity and assuming risk —  can contradict what companies view as mission critical to survival:  that is safeguarding liquidity and conservatively managing risk. Trade finance resolves this dilemma by helping businesses grow exports to capture the demand of buyers located outside their country, while minimising the impact to their liquidity and risk profile. This, in turn, supports a broader economic recovery.

This article explores:

• macroeconomic dynamics supporting a resurgence in global trade;
• the role of exports in business and economic growth;
• key challenges for companies looking to increase exports; and
• trade solutions that address challenges to export growth.

The savings paradox parallels the exports paradox

The Keynesian savings paradox asserts that what’s good for the individual can be bad for the economy. Namely, where an individual may succeed in saving more, a collective attempt to save — based on lack of economic confidence — will trigger lower demand and a decline in economic output. This creates a downward spiral that thwarts collective success at saving.

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