IT should not need pointing out that the Chinese and US economies are dependent on global trade, but it is significant that Hank Paulson, the US Treasury Secretary, thought it necessary to state the apparently obvious.
Mr Paulson, who was in Beijing for an economic dialogue, confirmed that US and China’s export-import banks will make available an additional $20bn for trade finance, particularly for creditworthy importers in developing economies. This was by no means borne out of some festive charity. The targeted effort should support over $38bn in annual financing for exports from the US and China and will benefit the global economy by oiling the wheels of trade with a much needed injection of liquidity — or so the theory goes.
Mr Paulson is not alone in hoping this approach will work. Fear that infrastructure spending plans are unlikely to get past the drawing board anytime soon appear to have sparked a renewed interest from governments in trade and transport finance.
Australia, China, Korea, Thailand and Taiwan have flagged they want to spend a total of $660bn on building new roads, rails and ports to create jobs and help stave off recessions. The Indian government has also just announced that a large number of public-private-partnership infrastructure projects are now being cleared for implementation.
The long-term effectiveness of spending our way out of the financial black-hole we have found ourselves in is yet to be proven, but the importance of unconstrained trade to every economy is clear. Any policy that encourages a practical focus on the nuts and bolts of trade while promoting global growth and stability should be welcomed as a positive step forward.
