As the world grapples with the deadly effect of COVID-19 and the ongoing conflict between Russia and Ukraine, we are reminded of the precariousness of global trade. Trade experts and maritime enthusiasts have engaged in dialogues about enhancing the robustness of the global trade network. However, they emphasize that this does not mandate a shift towards protectionism, nor does it disparage the advantages of globalization.
While the terrestrial and aerial aspects of the Russia-Ukraine conflict have garnered attention, let us not overlook the remarkable maritime activities that are unfolding below the surface. From military manoeuvres to the trade of cereal crops, which are executed through a commercial pact brokered by Russia and Ukraine, the oceans are teeming with noteworthy events.
Recently, this columnist came across a confirmed report that shed light on the dire situation of over 2,000 seafarers hailing from countries like Ukraine and Russia, who were stuck in Ukrainian ports across the exotic Black Sea and Sea of Azov. Sadly, the escalation of the conflict between Ukraine and Russia plunged these sailors into more trouble, with a total of 331 crew members on 62 different ships still stranded across nine Ukrainian ports including the likes of Mariupol and Odesa.
Despite the Grain Initiative agreement that was signed between Russia and Ukraine in collaboration with Turkey and the United Nations (UN), these hapless sailors remain trapped on board their vessels. The reasons for this are manifold. Firstly, ships that do not meet the required standards for transporting grains are prevented from leaving about three out of the eighteen seaports.
Moreover, the situation has been further exacerbated by the presence of mines around many of Ukraine’s ports, making movements impossible. This grim reality has created a dire and distressing situation for these sailors, who have been left stranded and forgotten amidst the ongoing conflict.
In the midst of the ongoing Russia-Ukraine War, a watery aspect is raising concerns – the covert smuggling of Russian oil, onboard what is referred to by experts as “shadow tankers.” These vessels allegedly operate under the radar, without transponders or adherence to regulations, allowing them to slip past Western sanctions and haul Russia’s oil to countries like China and India.
This illicit activity represents a significant portion of global oil transportation, estimated to be taking place onboard over 500 vessels. However, this dangerous game of cat and mouse could have disastrous consequences for the global economy.
The Director General of the World Trade Organization recently warned against the dangers of “decoupling” the international market from the global economy, as mounting geopolitical tensions between China, the US, the EU, Russia, and Ukraine threaten to upend the era of globalization. Such a scenario could lead to steep economic losses, equivalent to the entire economy of Japan.
A recent report by the WTO revealed the potential economic consequences of a divided global trade market – a staggering 5% reduction in global GDP. Developing countries will be hit the hardest, with an estimated loss of around 12%. The Director General of the WTO emphasized the importance of globalization in reducing poverty, stating that it has lifted over a billion people out of poverty.
As the world grapples with these challenges, businesses must take it upon themselves to build resilience and compete effectively in an ever-changing market. Ultimately, more competition is a positive force that can drive innovation and growth.
A working paper released by the WTO in January emphasized the possible financial fallout of a “geopolitical rivalry” that could trigger a “bipolar trade war,” leading to a significant decrease in GDP and trade volumes. The paper examined two sub-scenarios – “full rivalry” where countries align with either the Western or Eastern trade blocs, and “partial rivalry” where some nations attempt to remain neutral and trade with both sides.
This scenario, the paper noted, is reminiscent of current developments within the shipping industry, with geopolitical tensions dividing the sector into two distinct sides – one led by the USA and EU and the other by China and Russia, with some countries attempting to maintain neutrality and keep their options open.
Amid rising tensions, China has taken concerning actions near the Taiwan Strait by deploying warships and aircraft in the area for several days. Additionally, Beijing has imposed sanctions while expressing displeasure over the alleged meeting between the Taiwanese president and a US House of Representatives Speaker.
Despite repeated warnings and a subsequent rebuke from the Chinese government, the meeting went ahead. In response, a government spokesperson declared that China is committed to safeguarding its national sovereignty and territorial integrity and will take decisive measures to do so.
A scholarly article titled “The Imperative to Integrate Food into Maritime Strategy” recently shed light on the alarming increase in global food prices. The article draws attention to the critical role of maritime and logistics in the global food supply chain and highlights the need to view food as an integral component of maritime strategy.
The author notes that the surge in food prices has hit many hard and warns that the world is on the brink of a global food crisis that could soon shift from a pricing issue to a problem of availability. The article serves as a clarion call for international bodies like the IMF and the World Bank to take action in addressing these pressing concerns.
According to maritime experts, Brazil and China are making strides to strengthen their trade relationship. Recent agreements include trading in their respective currencies to bypass the US Dollar. However, when we take a step back, it appears that the trade flow and shipping fleets are trending towards fragmentation. This fragmentation remains a significant threat, with the potential to impede economic growth and ultimately reduce living standards for the long-term – a warning reiterated by the WTO in their latest outlook.
Trade between Africa and world powers has been increasing in recent years. While there have been some challenges and imbalances, there are also many opportunities in the African market. In terms of trade between African countries and the USA, the African Growth and Opportunity Act (AGOA) has been in place since 2000, which allows for tax-free exports to the US for eligible African countries.
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Overall, AGOA has been successful, with African exports to the US increasing substantially since its implementation. However, there are still criticisms that the AGOA benefits mainly benefit the oil and gas sector, rather than promoting the development of other industries in Africa.
Regarding China, trade between China and Africa has also been growing rapidly. The Chinese government has invested heavily in infrastructure projects across Africa, leading to a significant increase in exports from African countries to China. However, there have been concerns raised over the terms of these investments, which some view as debt-trap diplomacy.
Trade between African countries and India has also increased significantly in recent years. India has recently begun to increase its investments in infrastructure development, energy, and agriculture in Africa, among other areas. As for Russia, trade between African countries and Russia is comparatively low, but there is a growing interest in expanding trade relations. Recently, an Africa-Russia summit was held, where Russia pledged to increase its economic ties with African countries.
In summary, there is significant trade between African countries and world powers such as the USA, China, India, and Russia. While there are some challenges to be addressed, there are also great opportunities for African nations to strengthen their economies through deeper trade relationships with these global powers, and sister African countries under the umbrella of African Continental Free Trade Area (AfCFTA). But will the “geopolitical rivalry” among global powers reshape trade worldwide? Your guess is as good as mine! Thank you.
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