World trade little hit so far by financial crisis

FE Team | Published: September 29, 2008 00:00:00 | Updated: February 01, 2018 00:00:00

GENEVA, Sep 28, (Reuters): Trade flows are likely to slow this year as consumers worried about the financial crisis cut back spending and a cyclical downturn bites into exports and imports, economists said.
But the crisis itself has so far had only a moderate impact on trade.
Exports and imports have been slowing markedly since the second quarter after growing strongly in the first, said Michael Finger, senior economist at the World Trade Organisation (WTO).
"What we know already from the first seven-eight months is it's not a catastrophe, it's weakening. I don't see any panic or huge changes, it's relatively gradual," he told Reuters.
Trade would of course be vulnerable to a prolonged seizing-up of the banking system as commerce is financed by credit.
The picture is not quite as favourable as at first sight, because export and import figures earlier this year were inflated by record fuel prices.
In addition, business confidence has fallen to a three-year low in Germany, Europe's biggest economy which is powered by exports, and has also tumbled in the second biggest economy, France.
The head of shipping firm Excel Maritime Carriers Ltd warned last week that banks were no longer lending to fund trade, and cargoes were being left stranded on docks even though the demand for goods is there.
But the slowdown in trade reflects a cyclical economic downturn rather than the immediate impact of the financial crisis, economists said.
"So far we've been fairly lucky when it comes to the effect on fundamental trade from the financial crisis," said Fredrik Erixon, head of Brussels trade policy think-tank ECIPE.
"I think trade volumes are certainly going down but that has principally been a consequence of the global economic slowdown rather than early signs of financial problems."
True, there have been some warning signs.
Japan announced its biggest monthly trade deficit in 25 years last week as exports to the United States fell a record 22 percent in August.
But U.S. exports are on a roll, up 18.3 percent so far this year despite a trade deficit fuelled by record oil prices.
Consumers in many rich countries are cutting their spending because of worries about their financial assets and pensions, falling house prices and recent record fuel prices.