It is a normal rule of thumb that the volume of world trade tends to grow at double the rate of growth of world GDP. Between 1990 and 2008 global real GDP expanded at an average annual rate of growth of 3.2% while world trade volume grew at an average of growth of 6%. However, in the last two years world trade volume has risen by 4.8 per cent while real GDP has risen by only 4.0 percent. If the normal 2:1 ratio had applied, trade growth would have been about 3.2 per cent higher. The slowdown in the growth of world trade can be partly explained by the economic difficulties in the euro zone in 2012 and more latterly in the BRIC economies. In addition there has been a growth in protectionism since the start of the economic crisis in 2008.

1. Robert Nutter Watford Grammar School for Girls
October 2013
Sea transport and its impact on globalisation
It is a normal rule of thumb that the volume
of world trade tends to grow at double the
rate of growth of world GDP.
Between 1990 and 2008 global real GDP expanded
at an average annual rate of growth of 3.2% while
world trade volume grew at an average of growth of
6%. However, in the last two years world trade volume
has risen by 4.8 per cent while real GDP has risen
by only 4.0 percent. If the normal 2:1 ratio had applied,
trade growth would have been about 3.2 per cent
higher. The slowdown in the growth of world trade
can be partly explained by the economic difficulties
in the euro zone in 2012 and more latterly in the
BRIC economies. In addition there has been a
growth in protectionism since the start of the
economic crisis in 2008.
World trade growth, despite the current slowdown,
has contributed significantly to globalisation in the
last 25 years, and the growth in trade carried by sea
has been a big part of this. Trade carried by sea has
grown fourfold since 1970. There are now at any
given time 100,000 ships at sea and 6,000 of these
are container ships carrying in total 20 million
containers. Before container ships transport costs
were on average 25% of the value of the goods
carried. Since then containerisation has slashed the
transport cost so much that a sweater being sent
from its place of manufacture in the Far East to the
USA has transport costs of only 2.5c. Fish caught in
UK waters such as Scottish cod, prawns or cockles
can now be sent thousands of miles to low cost
countries such as the Philippines to be processed.
Huge container ships gain significant benefits from
economies of scale; more precisely the economies
of increased dimensions where the transportation
cost per container has fallen as the size of vessels
has increased. The largest container ships can carry
15,000 boxes and in 2014 Triple E Class ships will
be launched which can carry 18,000.
The significance of growth in trade by sea to
globalisation will be enhanced further by the
widening of the Panama Canal due to be completed
in 2015 and the possibility of a new Central American
canal being built through Nicaragua. The proposed
Inter-Ocean Nicaragua Canal is being planned by a
Hong Kong based consortium. These two projects
will give ships from the Far East quicker and easier
access to ports on the north-east seaboard of the
US.

2. Robert Nutter Watford Grammar School for Girls
However, as container ships grow ever larger there
are doubts as to whether the canals or even some
of the US ports can cope with their huge capacity.
Of additional significance is global warming in the
Arctic which is likely to free up the famous NorthWest Passage from ice at least in the summer. A
large freighter completed a voyage through the
hazardous Northwest Passage for the first time in
October 2013, showing the potential for cutting
shipment times and costs as global warming opens
up new routes. The 75,000 ton Nordic Orion left the
Canadian Pacific port of Vancouver in early September
and was scheduled to arrive in the Finnish port of
Pori on October 7. The North West Passage across
the Arctic is shorter than the traditional route
through the Panama Canal and thereby has the
potential to generate important savings in time, fuel
and CO2 emissions. The fuel savings alone add up
to approximately $80,000. In addition this new route
can mean full utilisation of a ship’s capacity allowing
more cargo to be carried than through the Panama
Canal where there are draft limits due to the canal’s
depth.
There are also significant container port developments
all over the world, many of which are operations
funded by DP World (Dubai Ports). Operating more
than 60 terminals across six continents, DP World
is expanding its container-handling capabilities
worldwide, including London Gateway which is
scheduled to open in late 2013. DP claim that the
logistics offered by London Gateway give savings
in haulage costs of $300 per container for goods
distributed around London and $94 per container
for goods to the Midlands. There is thus little doubt
that larger capacity vessels, improvements in sea
routes and continued developments in port handling
facilities will enable containerisation to extend its
contribution to globalisation in the years ahead.
Further reading on this subject can be found in Rose
George’s book: Deep Sea and Foreign Going: Inside
shipping, the invisible industry that brings you 90%
of everything.