Global Trade Financing Squeeze and Supply Chain Impact

An article in the Wall Street Jounral (Oct 29, 2011) describes the increase in the margins fior trade finance by a factor of thirty since 2008.  Trade finance provides letters of credit, export loans etc that finance global trade given long lead times.  Of the $ 5 trillion in financing,default rates are low, reported to be less than 3,000 out of 11.4 million transactions. Rates are expected to rise as Basel risk related requirements become more stringent. Given the increased costs to finance global trade, is that significant enough to shift manufacturing locations ? Will captive financing by the potentially larger buyers, sometimes called supply chain finance, replace trade finance sources ? If so, what will be the correspondng supply chain transaction information required to be incorporated into such financing  decisions ?

About aviyer2010

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