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APEC leaders, OECD move to ease credit crunch

Asia-Pacific leaders and the OECD, a forum of the world’s richest countries, have sought to ease extremely tight trade credit for export-driven regional economies amid financial turmoil.

The move came on growing concerns that the credit crunch would hit the mostly developing economies in the region, which have to keep exports roaring to spur economic growth and help prevent a global recession.

US President George W. Bush, Chinese President Hu Jintao (胡錦濤) and other heads of the 21 economies of the APEC forum on Saturday called for trade credit lines to remain open, as they met in Lima to finds ways to contain the financial crisis that is taking a toll on economies.

The leaders backed efforts by export credit agencies, international financial institutions and private banks to “ensure that adequate finance is available to business, including small and medium-sized enterprises, and to keep trade and investment flowing in the region,” a statement said.

Rapidly growing East Asia’s developing countries depend heavily on trade credit for finance which has been severely hit by a global liquidity crunch stemming from a financial market meltdown.

Experts speaking at a chief executives forum in conjunction with the APEC summit in Lima warned that a trade credit squeeze was threatening to freeze productive sectors of the economy, especially small and medium-sized businesses unable to rely on large balance sheets.

“The issue of trade credit has become an urgent issue of the global economy over the last eight weeks,” said David Hale, an influential US-based global economist who advises investment management and multinational companies.

“If we don’t address the issue of trade credit, we would see a worsening deterioration of the global trade in the next several months and will have an adverse effect on the Asian economies and large economies and will make this the worst, if necessary, global recession in 2009,” he said.

Ninety percent of global trade valued at US$14 trillion was fueled by trade credit, he said.

The World Bank said recently it would double the limit on trade guarantees to US$3 billion to address the problem “but the reality is we need” as much as US$50 billion, Hale said.

“The only place that can come is from the rich nations,” he said, adding that US Treasury Secretary Henry Paulson should use a portion of a US$700 billion rescue package to help banks ease the trade credit problem.

OECD Secretary-General Angel Gurria said that the forum, which represents the world’s richest developed countries, would today reinforce its commitment on trade guarantees.

“We are going to come up with a statement — by all the members of the OECD — and we are going to have about, I hope, 10 of the largest emerging market economies also committing to the statement,” he told the business forum in Lima.

“We are not going to backtrack on trade credit, on export credit … this is making a huge hole in the world economy and this is something which is very critical, especially for countries that have a high import content on their exports, where you need financing and there are not,” Gurria said.
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