Global Economic News

Brown Inveighs vs. Protectionism and for the WTO

Dec. 15 (EIRNS)—British Prime Minister Gordon Brown, at a press conference following the mini-summit he organized in London on Dec. 8, with French President Nicolas Sarkozy and European Commission President José Manuel Barroso, went all out with his free-trade agenda:

"We are all agreed that protectionism is something that we must both avoid and fight against in the course of the next few months. We believe that any resort to protectionism will delay any recovery and would be to repeat the mistakes of the past, and therefore we are convinced that a world trade deal that is within our grasp within the next few days is something that all countries in the world must now push with great priority. And we are in touch with Mr. Lamy, the director of the World Trade Organization, and with other countries, saying that we are at the eleventh hour and we must now work together to make sure that we send a signal against protectionism by signing the world trade deal."

Saudis, British Try To Reverse Oil Price Fall

Dec. 17 (EIRNS)—With OPEC oil ministers meeting in Algeria today, Saudi Oil Minister Ali al-Naimi announced that the Kingdom wants further immediate cuts in OPEC oil production of approximately 2 million barrels/day, in addition to the cut of 1.7 million barrels/day announced in October. The great majority of these cuts are, and would be in Saudi Arabia's own production. But, in addition, according to the Wall Street Journal, the Saudis are trying to organize additional cuts of about 1 million barrels/day from non-OPEC oil producers, including Russia and Kazakstan.

The prospect of this cut in world oil production of about 5% in two months has been joined by another strategy on the part of the British-headquartered giant oil multinationals. BP and Royal Dutch Shell have been putting oil out to sea, to circle in tankers; the amount of crude "parked" out there has more than doubled since October, to over 40 million gallons.

Thus far, in spite of the British and Saudi efforts, the price of crude oil has continued to fall, even this week as the dollar plunged, an unusual combination.

Asia-Europe Container Trade Drops for First Time

Dec. 18 (EIRNS)—The volume of container trade between Asia and Europe is dropping for the first time since the container mode first was introduced in the 1960s. Whereas containerized freight along this route grew by double digits annually over the past seven years, e.g., by 16.5% from 2006 to 2007, it is now in decline. This directly reflects the collapse of financing for production and purchasing of goods, and lack of lending for shippers.

Germany is especially hard hit, as over 35% of the world's container capacity is owned by German-based firms. Over 40% of global shipping financing in recent years has come from German banks, in the estimate of an analysis by the Dec. 18 Financial Times of London. But this has now crashed. HSH Nordbank, the world's largest ocean-freight lender, has sought $41 billion from the German government's bank rescue fund.

Container companies have tried to cut fuel and other costs by offering fewer sailings, waiting for containers to fill, and thus resorting to longer journey times. In the heyday of free trade, a typical Asia-Europe round-trip—which is done by a "string" of container vessels, with scheduled stops in ports along the route—would take 56 days, and eight ships. Now it takes 63 days and nine ships. The service to many ports has been reduced drastically. Drastic freight rate-cutting is in effect, but still cannot induce customers. For example, the spot-rate this Fall for shipping one container (40-foot) from Hong Kong to Rotterdam was only $200, way down from $2,700 in Fall 2007.

Volkswagen CEO Sees Grim Future for Auto Sector

Dec. 15 (EIRNS)—New car sales will collapse by 20-25% globally in 2009, according to German Volkswagen CEO Klaus Winterkorn, who claims that VW will do slightly better, with "only" a 12% drop in sales.

This would be the continuation into next year of what happened in third and fourth quarters 2008. But Winterkorn's forecast is much too "modest," because some individual suppliers of the big car-makers have already seen a drop in contracts by 80 or 90%, in the two months of October and November. Two of them in Germany, TDC and Tedrive, filed bankruptcy at the beginning of last week.