Free at last. Free at last. The Ever Given cargo ship stuck in the Suez Canal for the last week is free at last. Horns sounded off in jubilation after salvage teams in a flotilla of tugboats, with some help from the peak of high tide, successfully pulled the skyscraper-sized vessel toward the Great Bitter Lake. The 200,000-ton container ship will now undergo technical inspections, ending the chaos that cost global trade billions of dollars in delayed goods. As an autopsy is performed, a broader discussion has taken place: Is it time to start rethinking international commerce?
Is it time to kill off global supply chains?
Putting the Kibosh on Global Trade?
In the immediate aftermath of the coronavirus pandemic more than a year ago, worldwide trade had come to a screeching halt following a wave of shutdowns, lockdowns, and restrictions. Chinese exports plummeted in the first few months of 2020. Months later, imports from China plunged, too. Today, the world economy is playing catchup, with everyone demanding everything simultaneously. This explains the shipping container crisis unfolding, the higher cost of goods, and the growing fear of shortages.
The events sparked the question: Is it time to kill off global supply chains? Should countries quit depending on imports to become more self-sufficient in times of crisis? The murmurs of fervent anti-trade acolytes quieted down once the global economy reopened and everyone got their toilet paper rolls again. But the Suez Canal blockage restarted the conversation.
As Liberty Nation recently reported, the Suez Canal incident delayed $400 million in trade per hour. Estimates suggest that westbound-eastbound traffic is valued at approximately $5 billion each day both ways. It is the hub for liquid natural gas, crude oil, coffee, apparel, furniture, toilet paper, and a broad array of other goods. When hundreds of other cargo ships were immobilized in the world’s largest traffic jam, experts warned that it would apply pressure points in global trade, especially if it lingered on for weeks.
But the Ever Given was freed in less than a week, defying all expert prognostications. Plus, as the Egyptian authorities were working to liberate the ship, workers had cleared the way for other freighters to be rerouted on an old canal that is rarely used. Suffice it to say, if this were any other time, the Panama-flagged and Japanese-owned ship’s accident would have generated mild irritation rather than the doom-and-gloom opinions floated around in recent days amid a commodities supercycle.
It is typically opined that leftists will never let a good crisis go to waste. But it is the neo-mercantilist crowd – a blend of populists, conservatives, and progressives – who exploit these one-offs to fulfill their goal of abandoning multilateral trade and embrace snow globe economics. The last time there was a crisis in the busy maritime passage was in 1956 when Egypt nationalized the Suez Canal and engaged in battle. It has been a calm waterway of trade ever since.
Government Is the Problem – Not Trade
Global trade, international supply chains, and multilateral commerce have spawned incredible prosperity for everyone around the world. Whether it is creating new employment opportunities for impoverished families in Southeast Asia or selling cheaper goods and services to middle-class households in the United States, total global wealth surged at a record pace of $36.3 trillion, or 8.5%, to about $400 trillion for the first time on record in 2019. This has happened even as a growing number of countries embrace trade protection, launch trade wars, and enter into cronyist agreements that benefit special classes.
Governments’ responses to the COVID-19 pandemic have hampered economic growth. But the long-term trend, particularly over the last two decades, has highlighted increasing prosperity in nearly every corner of the planet. This should cease to exist because of the state’s overreaction to a respiratory illness and a ship paralyzed for less than a week in a busy waterway?
“Sometimes, bad things simply happen,” Jeff Deist, president of the Mises Institute, wrote last year. “The best hope is market incentives, the rapid application of individual human ingenuity and self-interest to the situation. Liberty is better, not perfect.”
Shipping Containers: The Next Crisis to Exploit
Indeed, the next problem that the neo-mercantilists will inevitably exploit is the shortage of steel shipping containers. With simultaneous demand across the globe, there are not enough containers to transport various goods, forcing some large-scale companies to pay hefty premiums that will inevitably be passed to the consumer. Businesses could manufacture additional containers, but the cost would be exorbitant since steel prices have skyrocketed 150% over the last 12 months. A mix of tariffs and slowing output has led to the loss of jobs, higher prices, and greater costs on steel-consuming industries.
It is one thing to oppose political globalization, but economic globalization has been a boon. The anti-trade folks are a Groucho Marx joke: “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.”
Read more from Andrew Moran.