The halting of traffic through the Suez Canal in 2021 highlighted the significant cost and disruptions to global commerce, bringing attention to the vulnerabilities of major shipping lanes. However, beyond the well-known canals of Suez and Panama, there exist more critical choke points situated 5,000 miles away, capable of crippling global trade in the face of disasters, says an article published on the economic times website.
Summary
- The Suez Canal incident in 2021 highlighted the vulnerabilities of major shipping lanes.
- Beyond the Suez and Panama canals, there are more critical chokepoints capable of disrupting global trade.
- The Malacca Strait, a 25-mile wide stretch separating Indonesia from Singapore and Malaysia, carries more than a quarter of global goods transport. Its value exceeds that of the Suez Canal.
- The South China Sea, northeast of the Malacca Strait, is claimed by seven nations, posing military conflict risks. It handles trade equivalent to 5% of global GDP.
- There are disagreements over the precise amount of trade passing through the South China Sea.
- Past incidents, like the closure of the Suez Canal by the Ever Given cargo ship, have had significant ripple effects on global trade.
- Closure of lesser-known chokepoints, like the Ombai Strait and Gibraltar Strait, could lead to substantial drops in traffic.
Malacca Strait, A Pivotal Artery For Global Commerce
More than a quarter of global goods transport navigates a 25-mile wide stretch known as the Malacca Strait, separating Indonesia from Singapore and Malaysia. Research by Professor Lincoln Pratson reveals that, by value, the merchandise traversing this passage far exceeds that of the Suez Canal, emphasizing its crucial role in the global supply chain.
South China Sea, Military Risks And Trade Importance
Situated northeast of the Malacca Strait, the South China Sea is claimed by seven nations, posing military conflict risks. Pratson notes that the Malacca Strait and South China Sea are estimated to carry the most trade in terms of both total value and weight. The South China Sea alone handles trade equivalent to 5% of global GDP, making it a vital economic player.
Trade Dynamics And Disputed Numbers
Disagreements exist over the precise amount of trade passing through the South China Sea. The Washington-based Center for Strategic and International Studies and Pratson provide differing estimates, yet the exact figures are less critical than understanding the potential severity of the impact of a disaster in these waterways.
Impact Of Chokepoint Closures, Lessons From Suez And Beyond
Examining past incidents, such as the closure of the Suez Canal by the Ever Given cargo ship, Pratson emphasizes the significant ripple effects on global trade. Closure of lesser-known chokepoints, like the Ombai Strait and Gibraltar Strait, could lead to substantial drops in traffic. However, the most substantial impact could result from the closure of the Malacca Strait or South China Sea, redirecting trade through the Lombok-Makassar Strait, whose capacity remains uncertain.
Diverse Risks And Challenges In Asian Waterways
Beyond military conflicts, the risks to Asian waterways include earthquakes, tsunamis, typhoons, chemical spills, and nuclear accidents. The region, spanning from South China to Indonesia, is already identified as the most treacherous globally, with a quarter of ships lost in 2022 occurring in this area, as per Allianz Group’s analysis.
A Potential Threat To Global Trade
The global system of logistics and transport heavily relies on a few hotspots, constituting a tiny fraction of the Earth’s surface. Just 21.5% of global trade avoids one of the 13 chokepoints. While supply chains have proven resilient to smaller crises, preparedness and diversification are crucial in case of major events that could have devastating knock-on effects for port operations, global manufacturing, and energy security.
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Source: the economic times
