Tag Archives: trade

ports, shipping lanes, and grand geopolitical strategy?

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This article says Panama, Greenland, South Africa, and even Somalia are all important to sea-based trade and naval control of sea lanes in the event of war. I don’t doubt this, but this also feels like a grand strategy cooked up by somebody’s armchair general uncle just reading stuff on the internet and looking at Google Maps. I also found this interesting:

While the United States dominates global maritime security, there is a huge disparity in the other direction when it comes to influence over maritime trade. Unlike the PRC, which controls around 12.6 percent of global port throughput through COSCO and CMP, the United States has no state-backed firms among the world’s leading terminal operators. In terms of global port influence, the United States would likely rank behind not only the PRC but also the United Arab Emirates (DP World), France (CMA CGM/Terminal Link), and Singapore (PSA International).

U.S. ports and port operations seem to be way behind the leading edge elsewhere in the world. So one thing we could do is focus on learning how to build and operate modern, highly automated, large-scale ports. This would sound like part of a sound “industrial strategy” to me. And it makes sense that we wouldn’t want China or any other country controlling trade and sea lanes to the detriment of free trade. We shouldn’t be trying to do this either. It would make sense to me to focus on international agreements to keep access to ports and shipping lanes open and fair to all countries.

April 2024

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Most frightening and/or depressing story: Peter Turchin’s description of a “wealth pump” leading to stagnation and political instability seems to fit the United States pretty well at this moment. The IMF shows that global productivity has been slowing since the US-caused financial crisis in 2008. In Turchin’s model, our November election will be a struggle between elites and counter-elites who both represent the wealthy and powerful. That sounds about right, but I still say it is a struggle between competence and incompetence, and competence is a minimum thing we need to survive in a dangerous world. In early April I thought things were trending painfully slowly, but clearly, in Biden’s direction. As I write this in early May I am no longer convinced of that.

Most hopeful story: Some tweaks to U.S. trade policy might be able to significantly ease the “border crisis” and create a broad political coalition of bigots, big business, and people who buy things in stores.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: If the singularity is in fact near, our worries about a productivity slow down are almost over, and our new worries will be about boredom in our new lives of leisure. It doesn’t seem like a good idea to count on this happening in the very near future, and therefore stop trying to solve the problems we have at the moment. This would be one of those “nice to have” problems. If it does in fact materialize, the places to be will be the ones that manage to shut down Peter Turchin’s wealth pump and spread the newfound wealth, rather than the places where a chosen few live god-like existences while leaving the masses in squalor.

free trade vs. migration

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“Free trade” seems to have gone out of fashion at the moment. But this article in The Conversation makes the point that easing trade restrictions with countries sending large numbers of migrants to the U.S. could help. And not just at the margins – the study this article says that reducing restrictions on just textiles from just six countries could potentially reduce migration to the U.S. by two-thirds. This seems like a political win-win to me – there is something in it for the anti-immigration racists, the pro-cheap-labor big business interests, and the average Joes who just want cheap stuff. This worked brilliantly when we were trying to support our Cold War allies in Japan, Korea, and Taiwan back when they were developing countries. It worked when we were trying to rebuild Western Europe. It can work again.

a ship being built

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It’s fun to watch construction cameras in fast forward. This is a ship being built at Philly Shipyard Inc. (and by way, you can argue whether it is lazy to use the abbreviation for Philadelphia and whether “ship yard” should be one word or two, but this is the actual name of the company.

Youtube

I learned from this (paywalled) Philadelphia Inquirer article that U.S. shipyards are not competitive in the market for international oceangoing cargo vessels. However, there is something called the Jones Act that requires domestic trade to be done on U.S.-built and U.S.-crewed ships. So this includes trade between the U.S. mainland, Hawaii, and Guam for example. This seems a bit inefficient to me, but I can also see an argument to maintain the ability to build technology domestically with obvious military use. The shipyard also has military and government contracts which, and so sorry I just can’t resist the terrible pun, keep it afloat. I am a dad after all, and I have to keep my dad jokes at the ready.

IMD World Competitiveness Ranking

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The United States fell from 3rd to 10th in the IMD World Competitiveness Ranking this year, after being 1st just a couple years ago. Asian tigers (Singapore, Hong Kong) and Scandinavia/Northern Europe (Denmark, Switzerland, Netherlands, Sweden, Norway) make up most of the top 10, when Canada and UAE making the cut, and Taiwan just edged out at #11.

For the second year in a row, the USA failed to fight back having been toppled from its number one spot last year by Singapore, and coming in at 10th (3rd in 2019). Trade wars have damaged both China and the USA’s economies, reversing their positive growth trajectories. China this year dropped to 20th position from 14th last year.

IMD

City-states tend to do well, so my quick reaction is that it might make more sense to compare Singapore and Hong Kong to, say, the New York City or Toronto metro areas rather than the U.S. and Canada as a whole.

Belt and Road

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The Council on Foreign Relations has a primer on China’s Belt and Road initiative here.

Xi’s vision included creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, to Pakistan, India, and the rest of Southeast Asia. Such a network would expand the international use of Chinese currency, the renminbi, while new infrastructure could “break the bottleneck in Asian connectivity,” according to Xi. (The Asian Development Bank estimates that the region faces a yearly infrastructure financing shortfall of nearly $800 billion.) In addition to physical infrastructure, China plans to build fifty special economic zones, modeled after the Shenzhen Special Economic Zone, which China launched in 1980 during its economic reforms under leader Deng Xiaoping.

Xi subsequently announced plans for the 21st Century Maritime Silk Road at the 2013 summit of the Association of Southeast Asian Nations (ASEAN) in Indonesia. To accommodate expanding maritime trade traffic, China would invest in port development along the Indian Ocean, from Southeast Asia all the way to East Africa.

illegal oil trade

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This article from Yale says there is a large illegal trade in oil. My first thought was that if countries or companies are producing oil, don’t they have the right to sell it to whoever they want? It turns out, oil is being stolen and sold by groups or even individuals who are not the actual producers in some cases, and in other cases it is being smuggled or laundered by producers who are under international sanctions.

In some cases, subnational actors openly export oil despite official prohibition by central governments. The Kurdistan Regional Government in Iraq maintains it is their region’s constitutional right to export oil independently, in defiance of the central government. With Baghdad withholding the region’s 17 percent of budget share, the regional government sought economic independence through hydrocarbons and found a degree of international sympathy, given its role in combatting ISIS and hosting 1.9 million refugees and internally displaced people. The unrefined product was sent via pipeline through Turkey’s Ceyhan port, loaded by various Greek shipping companies on tankers, then stored in Malta or Israel until buyers were found. Shifting routes of Kurdish oil tankers can be observed on sites like tankertrackers.com…

With 90 percent of the world’s goods, 30 percent of which are total hydrocarbons, traded by sea, much of the illegal fuel trade is conducted on water. Two thirds of global daily oil exports are transported by sea, reports the UN Conference on Trade and Development, and a staggering 64 percent of international waters are areas beyond any national jurisdiction. Non-state actors offshore West Africa, Bangladesh or Indonesia take advantage of loopholes created by international law and the law of the sea. Transfer of illegal fuel is often done ship to ship on neutral waters – with one ship commercially legal, recognized as carrying legitimate imports at the final port of destination. Thus, illegal crude from countries such as Libya or Syria finds its way to EU markets.  Recently Russian ships have been found involved in smuggling oil products to North Korea through ship to ship transfers.

Armed theft and piracy also occurs. Hijackings off the coast of Somalia resumed in 2017, the first since 2012, after the international community reduced enforcement. Beyond jurisdictional issues, many governments are overwhelmed by other maritime security threats and cannot prioritize the illegal trade. In fact, fuel traders have reported that the problem is so pervasive that many companies calculate in advance for losses up to 0.4 percent of any ordered cargo volumes.

 

WTO withdrawal could spark recession…or not

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Axios quotes economists who think a U.S. withdrawal from the World Trade Organization could spark a recession…and economists who do not.

Thus far, Trump has mostly damaged U.S. prestige with his anti-globalization actions, including withdrawing from the Trans-Pacific Partnership and the Paris climate agreement, as well as threatening to pull out of NAFTA. He’s also caused global stock markets to gyrate by imposing tariffs on Canada, Europe, and China; and oil prices to rise by pulling out of the Iran nuclear deal. But “the financial shock would be very, very large” should he withdraw from the WTO, said Gary Hufbauer of the Peterson Institute for International Economics…

“Business confidence in the system would be severely shaken,” Hufbauer told Axios, and there would be “quite a hit” to long-term investment in plants and equipment. “You don’t need much of a slowdown in these areas, and you have recession…”

The White House seems to be showing little understanding of the WTO’s history, originating in 1947 along with the World Bank and the International Monetary Fund as vehicles to prevent any future global war by buoying the economies of the world.

Not everybody likes the WTO, but it seems to be the best of many imperfect options for resolving trade disputes, and for not letting trade disputes escalate to be about more than trade.

U.S. recyclables sent to China

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I had no idea this was going on, but it turns out a lot of what I put in my curbside recycling bin has been sent to China. According to Bloomberg it works something like this: Because of the large trade imbalance between the U.S. and China, container ships that bring manufactured goods from China to the U.S. would end up going back to China empty. Rather than doing that, they are willing to take recyclable trash back to China to next to nothing. And Chinese factories are very happy to have it as raw materials to manufacture more things to send to us. An interesting implication, to me, is that the volume of trade between the two countries must be roughly equal, but the weight and dollar amount must be very unequal.

Another interesting factoid is the top export categories (from the U.S. to China) by dollar amount:

The U.S last year exported more than 37 million metric tons of scrap commodities valued at $16.5 billion to 155 countries, said Adler of the Institute for Scrap Recycling Industries. China accounted for almost one-third of that total—about $5.2 billion.

By comparison, the top two export categories to China in 2016 were miscellaneous grain, seeds, and soybeans ($15 billion) and aircraft ($15 billion).

The focus of the article is actually that China is changing its rules to require cleaner materials before it will accept them, and that could disrupt this market. How dare they! I also heard on the fake news that giant killer hurricanes are actually a hoax created by the Chinese government.