The Suez Canal Obstruction in Review — FOREIGN AFFAIRS REVIEW

Apr 24

Apr 24 The Suez Canal Obstruction in Review

It has been a month since the Suez Canal Obstruction captured the attention of people around the world. The six days in which the Ever Given blocked the canal inspired much chatter on social media, but more importantly, exposed a key weakness in economic security of the European and Asian trading system.

The Suez Canal is important because it is the only place where shipments can travel from Europe to countries in the Asia Pacific without going around the entire continent of Africa. Over 80% of global trade is moved by sea, and disruptions to the movement of goods cost billions of dollars in supply chain costs. The Suez canal in particular handles 12% of the world’s shipping cargo. With billions of dollars of cargo passing through the Suez Canal every day, it is a contentious and significant maritime location for the global economy.

With sea travel being so significant to the world economy, and thus the Suez Canal being essential for many companies, this disruption has had a far greater impact on the world than at first appearance. While the jokes and memes inspired by the event brought smiles and laughter to millions, many did not realize the impact that this seemingly ridiculous situation presented. When the Ever Given got stuck, it is estimated that the obstruction held up $400 million every hour. The Ever Given itself was holding goods valued over $3 billion. This put an incredible amount of pressure on an industry already struggling. The shipping industry was already under extreme pressure due to the coronavirus, and this stoppage only exacerbated current stressors.

The demand for goods during COVID-19 has skyrocketed. Companies are struggling to keep up with the growing economy while infrastructure remains the same. As the demand for consumer products has grown, so has the size of ships passing through the canal. The Ever Given may be the size of the Empire State Building, but that is not unique nor uncommon for cargo boats. In fact, larger ones are currently under construction. This speaks to a potential new problem for trade and the world economy. Can the current infrastructure for shipping withstand the growing demand for consumer goods and an increasing globalized economy? Many are doubtful.

China in particular faces a real concern when it comes to the shipping industry’s limitations. The obstruction delayed thousands of empty containers needed for Chinese exports. China has been experiencing a shortage of containers, and the stoppage put further pressure on Chinese companies. And that is not all. As China becomes increasingly dependent on foreign policy networks like the Belt and Road Initiative, which connects them with regions far across the globe, maritime “choke points” will likely increase in geopolitical tension. If China wants to continue their Foreign Policy initiatives in Africa and South America, they will be increasingly dependent on vessel transportation. While the blocking of the Suez Canal was fortunately a peaceful and quickly resolved issue, the weakness it exposed may foreshadow greater conflict if adjustments are not made.

In the direct future, it is apparent that there will be a multitude of legal steps moving forward to handle the repercussions of the Ever Given’s situation. “When blame gets assigned, it will likely lead to years of litigation to recoup the costs of repairing the ship, fixing the canal and reimbursing those who saw their cargo shipments disrupted.” This is a given. However, what is more concerning is that what is not yet known. As previously discussed, some have pointed to this event as a calling card to future conflict and instability. However, one cannot yet assume how corporations and countries will adjust in the long term. Will more ships begin to take the route around the southern tip of Africa? Or will they begin to traverse the Arctic, as global warming continues to melt the ice?

If one boat could stir up this degree of political, financial, and consumer concern, what does this say about the nature of the world economy? According to Washington Post journalist Ishaan Tharoor, the whole ordeal “highlighted the fragility of the global economy.” With so many businesses and lives dependent on the use of the oceans to transport global goods, there serious consideration is needed regarding how to best alleviate the economy’s weaknesses and protect central shipping hubs from political tension before they become a point of severe political concern. Money and time should and can be invested to prevent future crises that have yet to occur, but most likely will. In order to ensure a stable global economy and global trade relations, the world should not be dependent on one man-made waterway.