WTO chief calls meeting to address trade credit bottleneck
The head of the World Trade Organization said he has called for a Nov. 12 meeting of international financial institutions, regional development banks and key commercial lenders to “see if we can find ways to break through the trade credit bottleneck.”
In a speech at Stanford University this week, WTO Director-General Pascal Lamy said he has also established a task force “to monitor the situation, and should things deteriorate we will consider holding a meeting to bring together the heads of the international organizations with responsibility for international finance and trade.
“As I see it, the financial crisis raises two potential threats to global trade,” he said. “The immediate problem we face is the credit crunch.” The second threat, “is a panic-driven slide towards protectionism.”
“Roughly 90 percent of international trade is financed with short-term credit,” Lamy said. “Trade finance is one of the oldest forms of credit, dating to the Middle Ages, and one of the safest since it provides creditors with obvious collateral — a boatload of cargo. Yet today, trade finance is being offered at 300 basis points above the London Interbank Offer Rate, and even at this high price has been difficult for developing countries to obtain.”
Indeed, he said “trade finance has become so difficult to obtain from commercial sources that the Brazilian government has been forced to provide some $20 billion of export credit to ensure their ability to sell goods overseas.
“As Europe and North America face an economic slowdown, the emerging economies of Brazil, India, Mexico, China, Egypt, Indonesia and South Africa continue to grow and they continue to grow in large measure because of trade,” Lamy said. “Should growth slow in the emerging countries, U.S. exports — the most vibrant part of the economy today — will be adversely affected. In this ever more interconnected world, prosperity in India, China, Brazil is very much in Washington’s interest.”
Lamy added, “In recent years, protectionist rhetoric has certainly increased, and we in the WTO have been keeping careful watch to see if such rhetoric leads to protectionist actions. Politicians faced with deteriorating economic conditions are fond of blaming foreigners for their woes. But the antitrade protestations have yet to translate into protectionist action, at least as far as trade is concerned.
“The presidential election is less than a week away so I don’t want to enter too forcefully into this debate, but I think it is clear that U.S. policymakers will need to find domestic solutions — rather than protectionist trade measures — to tackle the problems confronting American workers today,” he said. “In my discussions with advisors to both candidates, I have been reassured to see that both have indicated the importance of concluding the Doha Round and both have rejected protectionist solutions to US economic difficulties.”
WTO chief calls meeting to address trade credit bottleneck
