Global Financial Leaders Meet in London
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JUDY WOODRUFF: Just outside London today, Treasury Secretary Timothy Geithner and his counterparts from other countries gathered for a summit on a global response. Faisal Islam of Independent Television News looks at how the plunge in global trade is serving as the backdrop to this meeting.
FAISAL ISLAM: Just outside Singapore Harbor, you can see how rapidly the world economic crisis has moved beyond dodgy mortgage and bank bonus. The cargo crash, boating bust, or nautical nightmare, the fruits of a calamitous collapse in industrial production around the globe as the world’s busiest port bears witness to the wheels of the world economy grinding to a halt.
Here’s what world trade at a standstill looks like. There’s two giant car transporters over there; there’s specialist container ships; and over here, all the oil tankers and far more container ships over there, all lying idle. This is the world’s biggest parking lot.
Only last summer, the shipping industry was booming on the back of soaring world trade and China’s manufacturing exports and raw material imports. Cargo rates, ship rentals, and the price of ships were all going one way until last autumn, says one of the world’s leading shipping financiers. Then, collapsing trade left hundreds of ships surplus to requirements in the waters around the world’s major ports.
JOACHIM SKORGE, Managing Director, DnB NOR Bank Asia: Big companies are laying off vessels because there is simply not enough employment for them, and they’re trying to do this not really collectively, but, you know, individually to create a balance in the market.
FAISAL ISLAM: So they’re just parking them, leaving them?
JOACHIM SKORGE: They’re parking and taking off the — and some of them are even, you know, taking off the crew.
FAISAL ISLAM: In Germany, this global trade collapse saw exports drop by more than a fifth in January. In the same month, Chinese exports fell by more than a quarter. And Japan extraordinarily saw its exports collapse by 46 percent, down by almost a half.
As the world’s 20 most important finance ministers gathered in London to try to conjure a solution, it’s this trade collapse more than anything that led to the president of the World Bank today issuing his most dire warning.
ROBERT ZOELLICK, President, World Bank: Well, I think in the world economy, we’re in a dangerous situation. You know, I expect that you’re going to see growth actually drop this year, which would be the first time since 1945. It really takes you back to the ’30s.
FAISAL ISLAM: The worst trade collapse since the Great Depression has grown out of the worst financial crisis since then. Part of the problem is that trade finance — letters of credit that cover goods in transit — has dried up as banks run away from international risks. It’s precisely the sort of problem that can only be solved internationally.
ROBERT ZOELLICK: So far, we’ve been — while the governments may not have done everything as quickly as one would like, they’ve been trying to take stimulus actions, trying to address their banks.
You know, my view is it’s still too little, too late, and I think that the G-20 meeting can prod it forward. But we also need to avoid the bad actions, like protectionism or what we could see later in the year when unemployment increases, finger-pointing and starting to throw rocks at one another.
FAISAL ISLAM: As world trade volumes plummet and these stacks of containers remain half their normal height, the G-20 are struggling to come up with a coherent message.
European finance ministers have been rather sniffy about an Anglo-American push for coordinated tax-and-spending stimulus funded by government borrowing and for that stimulus to be renewed next year. The World Bank says a one-year fiscal boost isn’t enough.
ROBERT ZOELLICK: We’re in a scenario where, while countries have started to undertake various stimulus programs, they haven’t fully kicked in. And until you clean up the bad assets and recapitalize the banks, the stimulus programs really won’t have legs. They’ll be like a sugar high that’ll give you a boost, but unless you get the credit system working again, they won’t really be successful.
FAISAL ISLAM: Then there’s also the specter haunting finance ministers this weekend that, if bailouts and stimuli don’t work, a wave of protectionism that started with “Buy America” becomes “Buy Australia” or “Buy Algeria.” Then, the ghost ships of Singapore and many other harbors might well become an armada.