2024-01-08 19:29:04
The years pass and crises accumulate in international trade, affected following the pandemic and the war in Ukraine by the risks of a conflagration in the Middle East which weaken it while forcing it to redesign its routes.
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Growth in international trade is expected to be lower than that of global GDP in the next ten years, a study by the Boston Consulting Group (BCG) showed on Monday, “a major reversal from the trend observed since the end of the Cold War » according to the consulting firm.
This situation comes following three years of profound questioning of the very functioning of globalization, once morest a backdrop of major international crises and a surge in inflation.
In 2020, the Covid-19 pandemic had severely affected global distribution chains with ships parked for weeks off the coast of the world’s main ports, stifled by worker shortages and health constraints.
The Russian invasion of Ukraine in February 2022 then aggravated tensions on supply chains and inflation which reached unprecedented levels in fifty years.
This has been declining for several months but threatens to take off once more as geopolitical fears focus on the Middle East and the risk of a regional conflagration, several economists warn.
Conflagration in the Middle East
The war between Israel and Palestinian Hamas has been followed by attacks by Houthi rebels in the Red Sea which prevent ships from transiting peacefully through the Suez Canal, one of the main world highways through which 12% of world trade passes.
Vessels now circumnavigate Africa via the Cape of Good Hope, which extends the journey between Asia and Europe by 10 to 20 days, and is already increasing prices to cover the costs associated with this detour.
The average tariff between China and the Mediterranean has increased by around 15 to 20%, according to Niels Rasmussen, chief analyst for Bimco, the world’s leading association of maritime carriers. Brands like Ikea have already announced delays.
This will have less effect on expensive or luxury products where the cost of transport weighs proportionately less, but the overall effect on inflation might peak at +0.7 points at the end of the year, assuming that “the Red Sea was closed to boats for several months and transport costs remained around twice the December price,” assessed the economic firm Oxford Economics in a recent note.
In this situation, “a conflagration in the Middle East, growing insecurity in Red Sea traffic (…) would call into question international stability and have a lasting impact on world trade,” the French Minister of Foreign Affairs warned on Monday. Economy Bruno Le Maire, adding to this list the risks of a potential incident between China and Taiwan.
Recent incidents between Manila and Beijing in the South China Sea might also disrupt trade in this vast maritime area through which a large part of trade between Asia and the rest of the world now passes.
Faced with repeated geopolitical shocks, the fierce commercial confrontation between the United States and China and protectionist reflexes, the highways of trade are changing, moving from “a Formula 1 circuit logic where the level of production costs shaped the value chains to a rally logic where the insurance and resilience of the chains are priorities,” analyzes BCG.
In this game, the countries of Southeast Asia will be among the big winners of this new order, according to the study by the consulting company, and should see their trade grow by 1,200 billion dollars over the ten coming years, due to the emergence of this region as a key destination for companies seeking to reduce their dependence on China.
A sign of “friendshoring”, an Anglo-Saxon term that became fashionable during the pandemic to designate the priority of trade with its allies in order to limit risks, Europe should increase its trade with the United States by 38%, just like with India (+66%) and Turkey (+23%) by 2032, according to BCG.
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