ICC calls for G20 action on trade financing
As leaders of the G20 nations began their meeting, the International Chamber of Commerce is calling on them to “honor previous promises to reject protectionism, and restore trade financing to more normal levels.”
'Trade is the lifeblood of the global economy and the world needs more of it at this critical moment, not less,' said ICC Chairman Victor K. Fung. 'The G20 summit in London provides the perfect opportunity for the international community to reassert its confidence in the multilateral trading system.”
The ICC noted, “World trade depends heavily on trade credit, which has all but collapsed during the current financial crisis, effectively throttling the flow of goods. A new survey by the ICC Banking Commission shows overall decreases of more than 40 percent in both trade credit volume and value.”
It said there was “evidence of a major economic crisis, spreading and deepening across the global economy. The ICC study confirms the anecdotal evidence gathered over the past few months, as the financial problems are now impacting trade as a whole.”
ICC said, “Trade finance to and from emerging markets in Asia appear to have been particularly hard hit,” with data from the Society for Worldwide Interbank Financial Telecommunication showing “the Asia Pacific region is severely impacted. Low-income countries are affected through lower commodity prices and lower remittances.”
“Supply chains have produced undesirable side effects. Exporters in international supply chains are better shielded from financial turmoil because they have access to credit from buyers. However, with their own access to finance drying up, global buyers will become more restrictive in providing finance along their supply chains,” the ICC said.
The ICC study can be viewed here.
Last week the World Trade Organization said its economists are forecasting a 9 percent decline in world trade in volume terms this year, which it said would be “the biggest such contraction since the Second World War.” The WTO said the contraction in developed countries would be particularly severe with exports falling 10 percent this year. In developing countries, which are far more dependent on trade for growth, exports will shrink by some 2 percent to 3 percent in 2009, said WTO economists.
“Signs of the sharp deterioration in trade were evident in the latter part of 2008 as demand sagged and production slowed. Although world trade grew by 2 percent in volume terms for the whole of 2008 it tapered off in the last six months and was well down on the 6 percent volume increase posted in 2007,” the WTO said.
'Trade can be a potent tool in lifting the world from these economic doldrums. In London G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measure which will render global recovery efforts less effective,' said Pascal Lamy, director-general of the WTO.
The ICC’s Fung also said 'a rapid conclusion to the Doha Round is one of the most direct ways to rebuild confidence. It will send a clear signal to businesses, investors and consumers the world over that countries can and do work together in their common long-term interest.'
'There is a grave danger, already manifested in some ways, that new measures of protectionism will creep in while the Doha Round remains in abeyance,' Fung added.