Financial crisis squeezes trade credit

By Jonathan Lynn

GENEVA (Reuters) - The financial crisis is squeezing the trade credit that oils the wheels of commerce, forcing exporters and importers to pay stratospheric prices for the loans that allow them to ship their goods.

But while anecdotal evidence abounds of ships riding empty outside harbours and goods stuck on the quayside, it is hard to find actual cases of exporters unable to ship their products.

"We're not getting the examples per se of it being stopped. We've got concerns being expressed about the difficulty of obtaining liquidity," said Australian Trade Minister Simon Crean.

Crean noted that merchandise trade was by no means the only sector finding it hard to get funds in a crisis that has dried up sources of credit but said the squeeze was undermining efforts to use trade as a stimulus for the world economy.

"The difficulty in obtaining finance for transactions that are committed to acts as a disincentive to the very thing that we're trying to get going and that is the freer flow of trade," he told Reuters.

In Chicago, one grain trader said his firm had been readying for the worst but so far the crisis did not appear to have stopped any grain shipments.

"We are loading stuff out and they are paying in a timely manner. (There has been) no hold up on sales because of letters of credit. They talked about it as a possibility but so far it is not an issue," he said.

ANECDOTAL EVIDENCE