The global shortfall in trade financing has expanded by up to four times since November to around US$100 billion, with emerging markets feeling the pinch due to the credit crunch, a trade source said on Wednesday.
“The magnitude of the gap has increased by three-fold or four-fold,” said the source after a WTO meeting that brought together experts and bankers on trade financing.
A similar meeting in November estimated the shortfall in cash to finance trade at US$25 billion, or 0.25 percent of the overall market, which is worth US$10 trillion.
A drought in liquidity is now not only affecting industrialized markets such as the US but also hitting emerging markets including India and South Korea.
“What started as a problem on Wall Street and London that was directly linked to the liquidity crisis — that problem has moved gradually to emerging markets,” the source said. “It’s no longer about north-north trade financing, it’s about north-south, and south-south trade financing.”
Trade financing has been described as the “lifeblood” without which global trade would stall. It comes in the form of credit issued and guaranteed by banks to importers and exporters.
Key banks active in the field of trade finance such as HSBC, JP Morgan, Royal Bank of Scotland and Commerzbank sent representatives to Wednesday’s meeting, sources said.
Amid the liquidity crunch, trade financing has dried up, with financiers now requiring more collateral before issuing credit and charging higher interest rates.
The trade source said that while interest rates averaged 15 basis points above central bank rates in the past, charges now ranged from “120 basis points for the best bank in India to several thousand basis points for central Asia.”
Governments and international institutions have been taking action to fill gaps, the source noted, saying that there has been a “mushrooming of initiatives.”
“At the same time, as they manage to fill that gap, then another gap is created somewhere else around the globe,” the source said.
One plan led by the World Bank and its associates is a “global trade finance liquidity pool” that would offer a US$10 billion to US$11 billion package in financing at the G20 summit in April, he said.
“In terms of gap filling, it’s a race against time,” he said.
He noted however that the situation has improved lately in China, but there is a “huge need for support to Africa.”
Meanwhile, EU leaders were set to rebuff calls to pump more taxpayer money into their ailing economies at a summit yesterday and today focused on tackling the increasingly dire economic crisis.
European governments have mostly turned a deaf ear to calls for more action, insisting next month’s G20 London summit should have a firm focus on revamping the global financial architecture they put at the heart of current problems.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS