Wool exporter Lempriere said European wool contracts and sales are at risk because it is impossible to get export credit insurance. Credit insurance offers protection against default when exporters sell goods overseas. The credit crisis means that commercial providers are leaving the market, leaving customers with no insurance.
Lempriere trading manager, Eric Durand, said if the federal government doesn't step in, the entire European trade is at risk. The provision of wool credit insurance is an integral part of securing contracts with European buyers.
Countries such as New Zealand, Italy, Canada and China have moved to support their exporters following a reduction in the availability of credit insurance, and Durand is calling on the Australian government to also provide some sort of assistance.
Simon Crean, federal trade minister, said the Export Finance and Insurance Corporation, Australia's export credit agency owned by the federal government, is one option being considered to fill the short-term credit insurance gap.
Rick Powers, Lempriere USA, in discussions with the American Sheep Industry Association's executive board in July, drew attention to the struggles the wool trading industry is facing due to the world financial crisis. In the past, credit insurance provided a level of payment security for wool buyers and sellers working in international markets. Companies are no longer willing to write credit insurance policies leaving the letter of credit as the only tool available today in a risky environment of business failures.
Reprinted in part from ABC Rural Australia