U.S. Export-Import Bank Remains Bullish

SAN FRANCISCO—Consistent with the direction of G-20 leaders to improve trade finance for emerging markets, Secretary Henry M. Paulson, Jr. and Chinese vice Premier Wang Qishan recently announced a new partnership for increasing trade related finance to emerging markets. Together, the United States and China expect that their efforts will generate total trade financing for up to $38 billion in exports over the next year.
As LM readers know, everyday trade in raw materials, intermediate goods and consumer goods is dependent upon the availability of trade financing. Shortages of trade finance can immediately retard economic output and employment through reductions in trade flows, and can restrict financing for capital goods necessary for world economic growth.
Granted, current financial stresses have impaired access to lending instruments designed to help emerging market businesses and consumers purchase imports of late. But to support exports of products from the U.S. and China to emerging economies, both countries are making additional resources available to increase access to affordable trade finance.
“Critical Cargoes” applauds the remarks by Secretary Paulson, who stated: "These new sources of financing will send an important signal to emerging markets that we are committed to sustaining trade flows, the lifeblood of the global economy.”
Specifically, the United States, through the U.S. Export-Import Bank, announced its intention to provide $4 billion in new short-term trade finance facilities and $8 billion in new medium- and long-term trade finance facilities for export of U.S. goods and services to emerging markets. China, through the Export-Import Bank of China, is providing $8 billion in short-, medium-, and long-term trade finance facilities for export of Chinese goods and services to emerging markets. Short term trade financing, typically 90 to 180 days in maturity, effectively supports three or more times the value of financing in trade volume during a year. Both countries will also coordinate with the International Finance Corporation and the Regional Development Banks to complement existing emerging market liquidity efforts.
At a time when most headlines carry grim financial projections, this comes as welcome news indeed.