Global protectionism fears were heightened after the US Senate voted to keep a “Buy American” clause in the huge US stimulus Bill, as more dismal corporate news signalled deepening economic woes.
Britain and Japan have both voiced their concern over the controversial provision, which would bar using funds in the roughly $900-billion package to buy foreign steel and other products for infrastructure projects.
Lawmakers voted 65-31 late on Wednesday to defeat an amendment by Republican Senator John McCain that would have cancelled the spending restriction, which has angered US allies and sparked warnings of a coming trade war.
“Should we enact such a provision, it will only be a matter of time before we face an array of similar protectionism from other countries — from ‘Buy European’ to ‘Buy Japanese’ and more,” McCain warned before the vote.
Amid rising international outcry over the clause, British Prime Minister Gordon Brown warned that “the biggest danger that the world faces is a retreat into protectionism”, at a weekly question session in the House of Commons.
Japan has been another vocal international opponent to the “Buy American” provision, saying on Wednesday that it would cause global trade to shrink.
Concerns that an economic slowdown would trigger the raising of trade barriers are particularly strong for Tokyo, which relies on international trade for economic growth.
“Protectionism withers the global economy as a whole,” said chief Cabinet secretary Takeo Kawamura, the Japanese government spokesperson.
The European Union and Canada also have fiercely attacked the clause.
While US lawmakers continued to debate the stimulus Bill, the approval of the Australian government’s economic package was delayed by opposition over the scale of its spending.
The Aus$42-billion ($27-billion) package includes spending Aus$28,8-billion on schools, housing and roads over four years, tax breaks for small businesses and cash handouts of Aus$12,7-billion dollars to eligible workers, farmers and students.
Opposition leader Malcolm Turnbull said he was not willing to saddle future generations with massive debts by rubber-stamping the government’s plans.
“It’s too much money, too much debt,” he said.
Dismal corporate earnings reports meanwhile continued on Thursday with the biggest German bank, Deutsche Bank, posting its first ever annual loss.
The bank said it had suffered a net loss of €3,9-billion for 2008, a figure which had reached €4,8-billion in the fourth quarter.
“Operating conditions in the quarter were completely unprecedented, and exposed some weaknesses in our business model,” a statement quoted Deutsche Bank chairperson Josef Ackermann as saying.
The world’s biggest reinsurer Swiss Re said it expected to post net losses of €672-million in 2008, as it turned to Warren Buffett’s Berkshire Hathaway for fresh capital.
Berkshire Hathaway injected three-billion francs in the reinsurer while the group said another two-billion Swiss francs may be raised from shareholders to prevent a downgrade of the reinsurer’s current rating.
More evidence also emerged of the financial turmoil’s deepening impact on Asia’s airlines, which have seen profits plummet.
Struggling flagship carrier Japan Airlines is reportedly considering asking for an emergency public loan to restore its finances as it is hit by a sharp decrease in business and holiday travellers.
Transport Minister Kazuyoshi Kaneko told industry executives that the government “promised to offer a package of aid measures by the end of this fiscal year in March”, a ministry official said.
Japan Airlines, Asia’s biggest carrier, and rival All Nippon Airways are suspending or reducing flights and switching to smaller planes in their efforts to ride out the crisis.
Shanghai Airlines became the latest Chinese carrier to reveal it is in talks for an emergency government capital injection.
Trading in Shanghai Airlines shares were suspended as the company’s board and shareholders discussed ways to reduce its debt, the airline said in a filing with the Shanghai Stock Exchange.
The airline had total debts of $1,9-billion as of the end of September, representing a debt-to-asset ratio of 91,35%, according to the most recent financial statement from the company.
The major Asian markets were mixed on Thursday. Tokyo closed down 1,11% while shares in Hong Kong were up 2,7% at midday. — AFP