Libya’s Trade Risk Continues to Increase Yiwu’s Clothing Export Goods Detention Port

Since the massive military intervention of Libya by the multinational forces on March 18th, the conflict situation in Libya has been escalating and Yiwu's export trade to Libya has also been greatly affected. Due to the turbulent environment in Libya, a garment company exporting Libyan goods in the city suffered detention in the port. Due to the continuous increase of trade risks in Libya, industry insiders suggested that exporting companies and business households need to be cautious or suspend their trade practices against Libya.

Although some countries in the Middle East have been turbulent since December last year, successive demonstrations initiated by the opposition have taken place in countries including Egypt, Algeria and Libya. In February this year, a garment company in the city exported a batch of clothing to a Libyan seller. The agreed settlement method is that the seller pays 50% of the purchase price before shipment, and the balance is paid by the bill of lading. However, the Libyan situation deteriorated rapidly after the goods arrived in Hong Kong. As the conflict escalated, Libya’s buyers said that the current external risks were too high to deliver goods to the port. As a result, the apparel company reported losses to Yiwu Marketing Service Department of China Xinbao.

According to the analysis of China Export Credit Insurance Corporation, military intervention by multinational forces such as the United States, Britain, France and France will have a major impact on Libya’s politics and economy.

- Libya fears becoming the second Iraq. In addition to the United States, Britain and the United States, Canada, Italy, Spain, Norway, United Arab Emirates, Qatar and other countries participate in this military action. According to the existing military strength, the Libyan government forces can hardly resist the use of Western force. However, once the Qaddafi government moves into guerrilla warfare, the Libyan war will take a long time. Given the complexity of Libya's opposition political structure and its fragmented nature, even if Qaddafi’s regime is overthrown, Libya may fall into a state of separatism by many armed factions and the risk that the country will be demoralized.

- International oil prices will increase. Libya's daily output of crude oil reached 1.8 million barrels, and its export volume was 1.3 million barrels, of which 85% was sold to Europe. Although other OPEC member states will increase their reserve capacity to make up for the deficiencies caused by the suspension of Libya’s crude oil exports, the supply of crude oil in many European countries will still be affected. The Libyan armed conflict has escalated into a war that has caused a tense international situation and will therefore push up the price of the international crude oil market.

- The European financial market will experience temporary turmoil. As Libya is closer to Europe in geopolitics, war factors will aggravate the panic in European financial markets, investors' hedging demand will increase, and market turmoil will be inevitable. At the same time, the war will increase the financial expenditures of some of the warring countries and run counter to the current tightening fiscal policies and requirements that must be implemented. At present, the sovereign debt crisis has shrouded the euro zone, and Libya’s war terrorism has triggered the eurozone sovereign debt crisis again. In addition, the deterioration of the situation in Libya will push up the price of imported crude oil, which will cause inflation in European countries to rise generally, which will weigh on economic growth.

In view of this, people in the industry reminded the city's exporting companies and market operators that they should carefully or temporarily suspend economic and trade relations with Libya and neighboring countries and regions in order to avoid unnecessary losses in foreign trade. For contract orders that have already been signed, the goods can be insured prior to export. (Lu Jingjing)

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