Gloomy thoughts on the future of trade

In the short run, the financial crisis is increasing the cost of financing trade.  Tim Bennett, an editor with MoneyWeek, reports: Is International Trade Grinding to a Halt?

Steve Rodley, director of London-based shipping hedge-fund Global Maritime Investments, puts it bluntly: "The whole shipping market has crashed." The trouble is that credit is the lifeblood of commerce, but it is built entirely on trust. And that has evaporated. As such, many ship owners can't get banks to issue letters of credit, particularly on cargoes of price-volatile commodities that no longer look like adequate collateral. Even those who can get letters of credit are finding that their counterparties may no longer trust the credit rating of anything other than large, well-established banks, many of which are now charging big premiums. Letters now cost three times the going rate of a year ago, according to Lynn.

At the WTO, Director-General Pascal Lamy has created a task force on trade finance: Lamy creates WTO task force on financial crisis

ht to Tyler Cowen

In the long run, the financial problems should gradually clear themselves up...

But Marc Levinson argues that there are more fundamental factors that will constrain future trade growth in the longer run (even aside from increasing fuel costs): Freight Pain.  Levinson is the author of The Box.  How the Shipping Container Made the World Smaller and the World Economy Bigger.  Jonathan Dingel lists the key points: Rising trade costs despite falling oil prices.