Financing Global Trade: A Sea Change

Has a state-directed economy succeeded in diffusing wealth to a greater extent than a free market?

This guest article was written by William Laraque who is the Managing Director of US-International Trade Services

The e-commerce platform represents an extraordinary opportunity to cross-sell concomitant trade finance services. As an alternative to serving an aristocracy of companies which many a trade finance bank has undertaken, the world would be well-served by the multitude of small enterprises which conduct a raft of global trade transactions online.

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While it is true that large multinational corporations conduct the bulk of trade and accumulate the greater share of profits, the world of trade has been indelibly and profusely impacted by the rise of the micromultinational, the relatively small firm whose managers have the knowledge necessary to succeed in markets throughout the globe.

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These firms would, with the appropriate financial support, diffuse wealth instead of concentrating it. In China, such firms account for much of the employment, the profits and the growth. The great irony is that a state-directed economy may have succeeded in diffusing wealth to a greater extent than a free market that encourages monopoly, oligopoly, oligarchy, plutocracy and most dangerously, the inequalities that ensue from this concentration of wealth.

The intellectual error in other locales has been to discourage global entrepreneurship with bureaucracy and mind-wrenching regulations which limit the solution to financing this relatively new way of engaging in global trade through e-commerce platforms. Ultimately, supply chain finance (SCF) and factoring providers will dominate global trade. Some will depend on banks to fund their platforms and intriguingly, some will not.

Mass Merchandising Across Borders

There are a number of firms that finance mass merchandisers across borders. They are supply chain financiers and international factors. They are Infor, Taulia, Factors Chain International, Orbian, Prime Revenue and proprietary bank asset-based lending operations.

In coming articles we will examine both the virtues and limitations of each of these alternatives. We will do this with a constant eye on the objective which is to encourage the growth of economies, employment and the diffusion of wealth.

 

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