European Commission President Jose Manual
Barroso Monday called for a global push on trade finance after a meeting with
British Prime Minister Gordon Brown here.
"The voice of developing
countries must be heard also in the G20 process. We need now a strong
multilateral initiative on trade finance," Barroso said, addressing a key
demand of India
and other emerging economies at the Group of 20 (G20) nations.
Emerging economy members
of G20, led by India, China, Brazil
say a combination of dwindling credit and protectionist steps by industrialised
countries is impacting on global trade, hitting emerging economies particularly
G20 finance ministers at a meeting
last week stressed the need for tapping the resources of international
financial institutions such as the International Monetary Fund (IMF) to put
more money into trade finance - the oil that lubricates global trade.
India, whose delegation to the
meeting was headed by Planning Commission Deputy Chairman Montek Singh
Ahluwalia, has been worried by increasing evidence of financial protectionism
in some of the world's leading industrialised countries.
These include steps to encourage
their major banks to restrict lending to domestic markets.
Barroso's comments came ahead of a
meeting of European heads of government next week, aiming to lay down a common
European position for a summit of G20 leaders April 2, expected to be attended
by Prime Minister Manmohan Singh.
According to a new IMF survey, the
cost of trade financing has risen sharply, hitting emerging economies.
More than 70 percent of banks
surveyed by the IMF have increased costs connected with letters of credit and
about 90 percent have increased prices of short- and medium-term loans in which
goods being traded serve as collateral.
"Although higher costs of trade
finance are global, the decline in availability has occurred more in the
emerging markets, especially in Asia,"
Thomas Dorsey, the IMF's division chief for strategy, policy and review, wrote
in the latest edition of its Finance & Development magazine.
He said emerging market banks
reported on average a six percent decline in trade finance transactions in the
closing months of 2008, compared to end-2007.
More than half the respondents said
that financing exports to the Middle East and North Africa
has actually increased. But a similar proportion of banks said that financing
of imports from South Asia, Korea,
has sharply decreased.
According to the World Bank, global
trade financing decreased by about 40 percent in the last quarter of 2008
compared with a year earlier.