Alan M. Field | Jul 02, 2009 10:51AM EDT
Many exporters are still struggling to get the loans they need to ship their goods, World Trade Organization director-general Pascal Lamy said in a new report, requiring a greater effort on the part of the international community to make funding available.
"Anecdotal evidence shows that the global market situation remains tense, with increased payment defaults and high costs of credit," Lamy said. The global economy remains "fragile" and 10 percent fewer goods will be traded this year than in 2008, he said. Wealthy nations are set to suffer a 14 percent merchandise trade drop in 2009, with cars and machinery performing worst, Lamy said in the report.
The report raises questions about when the G20 nations and international lenders will disburse the $250 billion in trade support funding they proposed in April. The full text of the report will be discussed at a July 6-7 WTO meeting that will bring together the heads of major lenders, the World Bank, and the International Monetary Fund.
According to the report, interventions from the Brazilian, Indian and Chinese central banks and national governments have stabilized trade finance costs that shot up because of the credit crunch. However, "In other areas of the world, the situation has not improved." For example, the African Development Bank has experienced a 50 percent drop in trade finance deals since January 2009, and many Asian exporters now rely on the Asian Development Bank and the World Bank's private sector arm "to facilitate their trade transactions due to the deterioration of the country risk."
Beyond that, "In Latin America, some of the smallest Central American countries, or larger but poor countries, also need support," Lamy said, adding that several eastern European countries currently have no access to new trade credit in the markets. "Even in the United States, spreads on opening new letters of credit are up, at 100-200 basis points depending on the quality of risk," he said, adding: "The WTO, along with partner institutions, will continue to monitor the market situation."
Contact Alan M. Field at afield@joc.com.
