Forget the economy, there’s a new threat to growth in global trade and to the manufacturers that produce it, the retailers that import it and the carriers that move it.
That protectionism isn’t a recent phenomenon — it’s existed for as long as trade across borders has — isn’t the point. That it’s seemingly thriving in this age of free trade only serves as another gust in the stiff headwinds global ocean and air carriers face in their fight for some semblance of supply-demand equity.
The evidence — and impact — is daunting. Within the last few months, several reports have surfaced pointing to the effects new protectionist measures are having. Roberto Azavedo, director general of the World Trade Organization, last fall told CNBC that the group was lowering estimates for global trade growth in 2013 and 2014 because of protectionism around the world. The downgrade came even as signs pointed to economic strengthening in moribund regions such as Europe and the U.S.
“Protectionism is going up, it’s going up slowly, gradually, inching up; but it’s also growing in different ways, it’s becoming more sophisticated, it’s become more complex, more difficult to detect,” Azavedo told CNBC.
Azavedo was speaking just days after the European Commission issued a report saying more than 150 new trade restrictions had been created in 2012-13, and nearly 700 since October 2008 at the dawn of the global financial crisis and the Great Recession it spawned.
The International Air Transport Association, meanwhile, cited the “almost 500 protectionist measures taken in 2012” alone as a primary reason for weakness in global trade. A sharp divergence in freight vs. passenger revenue tells the story. After being virtually evenly matched at approximately $75 billion in 2010, passenger revenue in 2013 was expected to reach more than $85 billion as freight revenue was on pace to sink below $60 billion, according to IATA.
And that leads us to the largest ocean carrier alliance in history: the P3 mash-up of the top three lines by capacity — Maersk Line, CMA CGM and Mediterranean Shipping. The alliance is all but sewed up in the U.S. and Europe, and its fate seemingly rests in the hands of China, a country that not only is increasingly looking inward, but also isn’t immune to protecting its state-owned interests. In this case, that would be Cosco and China Shipping, which compete on the very east-west trades the P3 is targeting.
A year ago, the exporting world was abuzz about China’s so-called Green Fence policy, ostensibly aimed at rooting out environmentally damaging contraband contained in shiploads of raw materials — that is, scrap and other products that feed the country’s industrial complex. It came with more than a few whispers that the policy was protectionism in disguise.
We’ll know soon enough if China allows the P3 to proceed, or if it puts up a seawall to protect its own.
We’ll also know soon enough the fate of the Trans-Pacific Partnership among the U.S. and 11 other Pacific Rim countries that, all told, account for some 40 percent of the global economy — and the U.S. and EU are just warming up on their own blockbuster free trade agreement that would boost two-way trade.
But we wonder: For all the benefits these deals could bring trade and transportation interests, the wave of protectionism across the globe will serve as a ball and chain on growth, so just how “free” is free trade?