Maritime Trade: Political Economy and Economics of Defence

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Abstract: This article explains the emergence of maritime trade in post-cold war world when among two of the competing ideologies one was defeated by the west, this defeat was swift and was not preceded or followed by a bloodshed that can halt the introduction of new system or frameworks to conduct world affairs. The beginning of world after the dissolution of USSR was good for the maritime trade, the world’s high seas fall into the hand of the United States and Europe, the new standard operating procedures were friendly that ensured free and safe access to all maritime vessel to conduct trade, stringent rules and frameworks were introduced. These developments were central to what we see today; the world is more addicted to international maritime trade than ever and is more committed to neutralizing the threats it faces. 

Trade on land needs a network of roads; whether it’s on high mountainous ranges or in the vast deserts, but all these road networks on land have stringent limitations, because of country’s location and geography. Countries with coastal lines are considered blessed nations that can conduct their trade via sea and can double their fortune. But sea trade also offers some daunting tasks, as nations conduct trade the volume is supposed to grow along with the size of the vessel, the crew needs to be trained well and have technology that can allow them to have sufficient merger with international maritime trade agencies. This web of maritime shipping companies is the bedrock of modern day international trade. The new economic system in place at the peak of the cold war allowed free nations from around the globe to sign up for free market economy, commonly known as the globalization. The globalization allowed its sellers and buyers free will to buy and sell without any restrictions[1].

Socialist economic system was all about limitations on both sellers and buyers. This particular open trait of globalization appeals to many nations around the globe to sign up for a system that can ensure their growth and thus they can get out of the artificial jingoism which was at a peak in the later years of the cold war. The countries balance of payments plunge amid a crisis between the two major powers as the business was volatile and the international market was all about rivalry rather than for buying and selling[2]. The sharing of goods and services in the open market allowed nations to flourish, and purchase services from the advanced nations to build sufficient expertise so they can jump higher on the international front.

Maritime trade was about ensuring access to world markets after establishing the robust infrastructure to conduct trade and buy and sell goods in the international market. Island countries located on the high seas are now the most robust economies in Asia because of their high tech seaports. Maritime Trade network like any other international agreement is working like a fine tuning machine. No nation whether it’s major power, middle power or a tiny island nation like Maldives or Sri Lanka afford the disruption of maritime trade network. Ports are addicted to freight; the number of containers that passes through a port shows the global maritime trade activity. The best way to measure port vitality is to look at the number of TEU it handled.

Twenty-foot Equivalent Unit

A measure of container capacity still used by some institutions

1 FFE = 2 TEU[3]

International Maritime Trade consists of many components, which make it a perfect engine of the world economy. The world today is heavily dependent on this machinery of oceanic vessels, their organizations, harmony at chokepoints, and the artificial canal cuttings (e.g. Canals to join two oceans together, like Panama Canal and the planned Nicaragua canal by China to raise alternatives to Panama Canal[4], the purpose of these canals are to minimize the time of sea travel, the transiting country, and the operator will charge transiting fee per vessel passing through Panama canal) maritime expertise, perfect competition over monopoly, asymmetric or threats like naval blockades to merchant shipping and the innovation that can minimize any mega future incident or mishap at the ocean.

Without viable maritime trade network, the global economy will go into a nose dive. A similar scenario was experienced by the world in 2016 when the global maritime trade saw a plunge in the first quarter[5]. The plunge didn’t mean that maritime trade is losing its luster but it was because of global economic volatility and slow growth of China, and the uncertainty surrounding US Presidential elections. Maritime Trade is the backbone of Energy Security of a nation; from hydrocarbons’ delivery to the most modern fuel Liquefied Natural Gas (LNG) to escape the traps of energy insecurity, from large Oil Tankers to most modern and sophisticated LNG tankers, countries need these energy packets to stay afloat on the global scale, and keep producing their goods to thrust their economy. Statistics show that World Maritime trade is increasing every year, and countries are ganging up to find ways for the neutralization of these asymmetric threats posed especially by the pirates. The recent attack on LNG tanker near Yemen shows a horrific scenario that how the world will face up to the event like an LNG tanker explosion at sea[6]. The worries are not only related to threats or the non-state actors’ operations on high seas, or the individual onboard (as these modern tankers need less human input) but the question is also an economic one, and the suffering on part of economics to major powers will actually dwindle their political control in the global economic system. The US once heavily dependent on Gulf oil, is the largest producer of it, and also a shale gas and LNG power. The expanded Panama Canal[7] which is now open for the transiting ships can now allow the post-Panamax ships to transit in the easiest way, meaning the cargo in and out of America is almost tripled, whether its material objects, machinery or fuels. In this scenario, any asymmetric threat to shipping posed a huge risk to these multi-million dollar ships and it can take years to build just one vessel. The destruction of a single vessel will send shockwaves around the globe and will hurt the US and Western economies trying to raise an alternative energy order against Russia. Russia is an established energy power, which pumps natural gas to various countries around the globe and is now penetrating Asian Market through “Power of Siberia” pipeline in China[8]. To feed and maintain the energy flow of Liquefied Natural Gas to countries signing up for LNG order the US will need anything that can ensure their place in the market which will soon convert to their political power over other energy giants and influence over those who buy their fuel to run their countries.

From the last several years, Chinese ports are declared as the best ports, 4 out of 10 ports are from China alone, which allowed huge amounts of cargo to go in and out of their country. The robust port infrastructure can create a huge economic impact that will allow a country to attract huge foreign buyers; the ports TEUs will rank it regionally and globally thus creating a huge market factor which shows the political robustness of that state economic system which can influence global actors.

The system formulated by the West was inherited by its Asian peers, the Asian Century in offing, the new mergers and shipping alliances are here, and the monopolistic intent is clearly discouraged as no nation is supposed to control all the maritime warehouse and expertise. Denmark, for example, is considered as a maritime superpower, the country has no large military, no nuclear weapons, and no large population, but it develops a maritime infrastructure both at land (sea ports) and sea going, (maritime vessels). [9]

The Chokepoints offer another bright or grim picture for the maritime transport; all the key chokepoints are located around Muslim countries. These channels are considered vital points of trade in ocean,

Strait of Hormuz for Oil

Strait of Malacca for Global Trade Activity Including Oil

Bab el Mandeb for Transit to the Red Sea

Suez Canal into the Mediterranean

Bosphorus Strait into the Black Sea

These special structures are vital for maritime trade and any disruption can dip the balance of international trade. To ensure the swift operation of the maritime vessel the global powers constituted some rules to keep these vital structures away from geopolitical upheavals. These rules are vital for weak states because in time of conflict major powers can maintain their transit by any means possible, but weak states will suffer a lot, maritime trade agreements and UN body The United Nations Conference on Trade and Development (UNCTAD) is vital in convincing all states to comply with these rules and keep these structures safe and open for trade. UNCTAD has 194 member states and is headquartered in Geneva, Switzerland. Pakistan falls into the list A of this UN body. [10]

In international trade small countries are faced with cost dilemma, they can’t afford to buy ships and then conduct trade; it will not allow their economy to flourish. The container shipping countries from around the globe offer their expertise, to these nations, to carry and bring their goods, they will charge for their services, making it convenient for that nation to be a part of the maritime trading system, without spending on these vessels.

Conclusion: The International Maritime trade network is a capitalist world contribution to the global trade management system, like any other ideology capitalism have some flaws, but this system of global growth in the form of international trade, and international maritime trade, run primarily by the post-cold war institutions and some of its vital bodies under United Nations, shows that it’s a vital contribution to human prosperity. The system is the best example of cooperation, though under the umbrella of profits, but it’s open to all. Like any other international system, it is fraught with dangers, but the threat here is not from actors involved but from the outside factors such as pirates, unlawful trade practices, and asymmetric armies, (like Tamil tigers Navy, Somalia Pirate Army, Al-Qaida Terrorists. The Institutions involved in the safety of international maritime trade evolved well over time. New trade practices, special trade relations, harmony at sea are vital contributors of oceanic trade. There is a very strong political side to this economic activity. Like Gilpin said that no market is neutral, the market creates power that one can use against the other, in international maritime trade unlike any other competition, opportunities double when you open your market and allow others to take benefit out of it. Core countries are short of many vital resources, only peripheral partners can ensure their vitality, the international maritime trade proved to be the cornerstone of the international economy, and classical malpractices like naval blockades are now history.

References:

[1] Grammenos, Costas Th., and Gunnar K. Sletmo. The handbook of maritime economics and business. London: LLP, 2002.

[2] “The Balance of Payments – Yale Economics.” Accessed April 02, 2017. http://www.bing.com/cr?IG=F9A0A6AB7C384E66AD066E6DC448254E&CID=194404FC501860872A910E9F51886134&rd=1&h=VV71SK4dYhNMCbFSj0JMU8ZkRISukDGWq05aW2PtOZM&v=1&r=http%3a%2f%2fwww.econ.yale.edu%2f%7eka265%2fteaching%2fUndergradFinance%2fSpr11%2fSlides%2fLecture1-2%2520Balance%2520of%2520Payments.pdf&p=DevEx,5107.1.

[3] Shipping glossary. Accessed April 02, 2017. http://www.maerskline.com/en-bs/help/shipping-glossary?t.

[4] “Nicaragua Plots a Rival for the Panama Canal – Newsweek.” Accessed April 02, 2017. http://www.bing.com/cr?IG=9819F4250FFC4A6AA55049492FDE770E&CID=3BFD8B7E32526B760314811D33C26AB0&rd=1&h=xn_6lOSlYjAGs0cbjfOmg5OV9sLmvdxPXHMG8NToibY&v=1&r=http%3a%2f%2fwww.newsweek.com%2fnicaragua-canal-panama-china-shipping-257815&p=DevEx,5063.1.

[5] “New Low in Sea Trade Growth – maritime-executive.com.” Accessed April 02, 2017. http://www.bing.com/cr?IG=66BAEE54C629470185619B3051394CF6&CID=021AAE4F91D167ED1E5CA42C904166DD&rd=1&h=tmqXHshLOToJhSB0uzdZF0cgdgX3JQAtTObc5qtkYSM&v=1&r=http%3a%2f%2fmaritime-executive.com%2farticle%2fnew-low-in-sea-trade-growth&p=DevEx,5076.1.

[6] Saul, Jonathan. “Gas tanker attacked near key shipping lane off Yemen.” Reuters. October 26, 2016. Accessed April 02, 2017. http://www.reuters.com/article/us-yemen-shipping-attack-idUSKCN12Q1UQ.

[7] Mufson, Steven. “An expanded Panama Canal opens for giant ships.” The Washington Post. June 26, 2016. Accessed April 02, 2017. https://www.washingtonpost.com/world/the_americas/an-expanded-panama-canal-opens-for-giant-ships/2016/06/26/11a93574-37d1-11e6-af02-1df55f0c77ff_story.html.

[8] “Power of Siberia Gas Pipeline to Start Delivering Russian …” Accessed April 02, 2017. https://www.bing.com/cr?IG=6C9A90A3AF7A45BC9D838DCBFAF4D4D4&CID=0C70E01567BA6FAF14B9EA76662A6E3F&rd=1&h=DVx-kAFDBxlnMWttulpcrpocQbIIk5DPEPBE7qHP1Gg&v=1&r=https%3a%2f%2fsputniknews.com%2fbusiness%2f201610041045980213-pipeline-siberia-china-gas%2f&p=DevEx,5105.1.

[9] “Tiny Denmark Is A Maritime Superpower | The Huffington Post.” Accessed April 03, 2017. http://www.bing.com/cr?IG=17D61C21ED4B4DF1BD5A5BCE01B4FE5F&CID=02FBF8086F9D6A0A16EDF26B6E0D6BAC&rd=1&h=rKXTpYSN9QEigGXVdRugixSKHWlTdCDU0nrDMvqY3OM&v=1&r=http%3a%2f%2fwww.huffingtonpost.com%2fanne-h-steffensen%2ftiny-denmark-is-a-maritim_b_12156442.html&p=DevEx,5064.1.

[10] “Unctad.org | Home.” Accessed April 03, 2017. http://www.bing.com/cr?IG=855ECF5AA9CD4F7587F4CB38A5BB12B1&CID=3E5FE63E6467653626CAEC5D65F764E5&rd=1&h=0kAyvBez1pFR8fvBQvR0A00fQzICLzkO5ivaGwfdhhc&v=1&r=http%3a%2f%2functad.org%2f&p=DevEx,5063.1.

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is a freelance writer, geopolitical issues interests him the most. He can be reached at [email protected]

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