Trade's Lending Lifeline
World economic leaders will gather in Washington Saturday for a summit to address the global financial crisis. It is no coincidence that Brazil, China, India and other emerging-market nations have not only been invited to the summit but are expected to play meaningful roles. The credit crunch, which began in the United States, has quickly spread to the developing world. The summit agenda will be dominated by monetary policy coordination and new roles for international institutions such as the International Monetary Fund.</br></br>In his Nov. 3 op-ed, "Fairness for Emerging Markets," Kemal Dervis made the case for "making massive credit lines available" to most emerging-market economies. But if we are to limit the depth of the looming global recession, trade finance must also be on the agenda. Cross-border lending by banks based in developed countries fell at a record pace in the second quarter and continued its decline at an accelerated rate in the third quarter.</br></br>One casualty is the drying up of trade finance, the lifeblood of $14 trillion annually in global commerce. Wachovia's recent troubles, for example, have already led to a sharp reduction in short-term trade finance lines to Latin America. Other banks are reassessing credit lines for trading with Asia, Africa and Eastern Europe. The credit crisis has moved into trade finance as largely a funding problem.</br></br>If bank lines are shut off, it would be devastating for the economies of the developing world. It would also have a boomerang effect on the United States and Europe, as key export markets -- and the jobs that go with them -- disappeared.</br></br>Fortunately, there are institutions already built to promote trade finance: export credit agencies. The Export-Import Bank of the United States was established by President Franklin D. Roosevelt in 1934, in the midst of the Great Depression. It is a "lender of last resort" that provides credit lines when private financial markets are not lending. Last year, the bank authorized more than $12 billion in guarantees and insurance to support U.S. exporters.