Global Trade Challenges In 2024
Source: How two choke points could turn into a perfect storm for global trade; The Indian Express, January 1
- Shipping Routes Suspended: Maersk, a major shipping company, stopped its ships from using the Red Sea route. This happened for 48 hours. The reason was attacks by Houthi rebels in Yemen.
- Key Canals at Risk: Two crucial choke points, the Suez Canal and the Panama Canal, are both at risk. They are critical for global trade. If blocked, they could affect more than one-third of global trade flows.
- Economic Pressures: Western countries are buying less. There is also a big property problem in China. Due to these issues, the World Trade Organization (WTO) has cut its prediction for world goods trade. They reduced the forecast by up to 50%. This suggests trade could face problems as 2024 begins.
Global Trade Crisis: Red Sea and Panama Canal Blockages
- Impact on Maritime Transport: The majority of the world’s goods are shipped over the oceans. This is especially true for developing nations like India. Now, two critical shipping paths face disruptions.
- The Bab-el-Mandeb Strait Situation: Linking Asia and parts of Africa to Europe, the Bab-el-Mandeb Strait feeds into the Suez Canal. Problems here mean detours and increased shipping costs.
- The Panama Canal Challenge: The Panama Canal, over a century old, is a vital connection between the Atlantic and Pacific. Its blockage also has significant implications, necessitating lengthy alternative routes.
- Economic Consequences: For instance, blockages in the Red Sea could cause the prices of Indian farm products to rise significantly. This comes as ships might have to navigate around Africa, adding to the journey time and cost.
Panama Canal Trade Decline
- Drought Impact: The Panama Canal has seen a decline in ship traffic. This is because there is drought along the canal’s route. The water levels are low.
- Alternative Routes: Ships usually going from Asia to the U.S. are now diverted. They are using the Suez Canal instead. This route takes an extra six days.
- Seasonal Challenges: Panama is experiencing its least rainy season in years. This unusual weather is causing delays. There is worry about lasting problems for the canal.