Friday, January 9, 2009

Collapse of global trade - Bank caused

Global trade collapses, why? Because banks are failing to do their job. Banks are the problem in this crisis!

Chris Lytle, chief operating officer of the port of Long Beach, Calif., took in a panorama of the slumping world economy from his rooftop observation deck one day this month.

Shipping cranes stood still, truck traffic trickled and a cargo vessel sat idle, moored to a pier.

"You never see that," Lytle said. "It's quiet. Too quiet."

Port traffic is slowing around the world -- everywhere from North America to Asia -- as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than two per cent next year, the most since the World Bank began measuring it in 1971. Idle ports are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches.

September and October are typically Long Beach's busiest months as U.S. retailers take deliveries for holiday sales. This year, September imports fell 15.8 per cent from a year earlier, October's dropped 9.5 per cent, and November's slid 13.6 per cent.

"Everybody expects 2009 to be a bleak year," said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. "Now, it looks like 2010 is going to be just as bleak."

At the Mozambique port of Maputo in Africa, coal is piling up. Exports from the port in Singapore, the world's busiest for containers, fell 1.5 per cent in November from a year earlier, its first decline in seven years. And at the port of Rotterdam, Europe's largest, shipments are likely to remain stagnant this year compared with 2007, said Jan Westerhoud, chief executive officer of Europe Container Terminals BV.

"The problem is that people can't get financing, no matter what their credit situation," said Ed Rice, president of the Coalition for Employment through Exports, which represents companies such as Boeing Co., Caterpillar Inc., United Parcel Service Inc. and BNP Paribas SA. "Banks are cancelling credit lines even for creditworthy customers."

The Baltic Dry Index, a measure of shipping costs for commodities, is down 93 per cent from a record in May, a sign that traders expect export volumes to stay depressed.

Slowing trade is both a cause and an effect of the first simultaneous contraction in the world's largest economies since the Second World War. Throughout this decade, trade grew by an average 12 per cent a year, reaching $13.6 trillion in 2007 and propelling growth in nations including Germany, China and Chile. Now the evaporation of financing and collapse in demand threaten an activity that accounts for a quarter of the $54-trillion global economy.

"We are having this dramatic reversal," said Michael Finger, a trade economist in Geneva since the early 1970s. "I'm a long time in this business, but this is unique."

Governments and international lenders are stepping in to fill the gap. China and the U.S. pledged $20 billion to aid their exporters. The World Bank tripled funding, to $3 billion, for banks that help emerging-market companies to sell abroad. South Korea pledged $16 billion for its exporters after banks there couldn't secure international credit lines for them.

In Germany, the world's top exporter, trade abroad slipped 0.5 per cent in October, the fourth drop in six months. The same month U.S. shipments fell 2.2 per cent to the lowest level in seven months. In China, the November decline of 2.2 per cent was the first decline in seven years, while in Japan, exports decreased a record 26.7 per cent that month.

Exporters worldwide are short $25 billion in trade financing that either isn't available or costs too much, according to Pascal Lamy, the head of the World Trade Organization.

Trade credit insurance, which protects sellers against losses and typically covers as much as 40 per cent of trade in Europe and five per cent in the U.S., is also harder to get.

Atradius NV, an Amsterdam-based insurer that covers about a third of global trade receivables, is raising prices by as much as 50 per cent and reducing coverage on thousands of companies. That includes 12,000 in the U.K. and all the suppliers to the biggest U.S. automakers -- General Motors, Ford and Chrysler.

One 57-hectare tract at Long Beach is filled with more than 25,000 new Toyotas that dealers can't sell.

Toyota, the world's second-largest automaker, recently forecast its first operating loss in 71 years on weak demand.

Nearby, scrap metal meant for export to Asia piled up behind a fence. From the observation deck, Lytle pointed to piles of empty containers stacked four high and numbering in the thousands.

Some of the dockside cranes "haven't turned a wheel in months," he said.

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