5 March 2024 (Lloyd's List) - SHIPPING is in for a bumpy ride as wars, protectionism, and threats to freedom of navigation are set to continue impacting maritime trade, according to former US Secretary of Defense Robert Gates.
Speaking at the Journal of Commerce TPM 2024 conference in Long Beach, Gates warned that the “relatively relaxed environment” the industry has been operating in is likely “a thing of the past” amid global turmoil not seen in decades.
“There are going to be global tensions at a level we haven’t seen, and I think global danger at a level we haven't seen since the end of the Second World War,” he said.
Freedom of navigation, a pinnacle of maritime trade guaranteed by the US Navy since the end of Second World War, could “slowly deteriorate” unless the US asserts and maintains it, Gates said.
Without explicitly naming former US president and Republican front runner Donald Trump, Gates warned that an isolationist US administration will be “consequential” to freedom of navigation.
“The ease with which maritime trade has taken place over the last several decades I think is going to be something of a memory,” he said.
“But it depends on the role the US is prepared to play in continuing to assert and protect freedom of navigation around the world.”
While the industry is paying much attention to the Houthis — who Gates believe will not stop attacking ships in the Red Sea even if a ceasefire is reached in Gaza — the former secretary is also keeping an eye on Taiwan and the South China Sea as another major chokepoint where trade could be weaponised.
China’s President Xi Jinping responded to former US House Speaker Nancy Pelosi’s visit to Taiwan in August 2022 by ordering military exercises of both naval and air forces around Taiwan, disrupting commercial traffic in and out of the Island.
“The Chinese can declare those exercise areas anytime they want, for any length of period they want, at any length of time they want, and it’s not something that’s going to provoke a US military reaction or even a Taiwanese military reaction. But it could be very disruptive for Taiwan’s economy,” Gates said.
“And obviously, if there is an incident that escalates in the South China Sea, that would have an impact even more broadly. The good news is both President Biden and President Xi want to lower the temperature in the relationship between the US and China.”
However, this was more a tactical pause than a sea change in the strategic competition between the US and China, Gates said.
“I think that competition will continue and if we’re lucky, we will avoid a military confrontation with China and this long-term competition will be carried out using non-military instruments of power.”
Aside from kinetic threats, shipping and supply chains will have to contend with growing nationalist sentiment and a rise in protectionist policies.
The world of free trade is “behind us”, Gates said, as countries, including the US, are no longer interested in the “very broad” trade agreements that facilitated that trade for decades.
“I think you’ll see more and more countries, putting on tariffs and taking other protectionist measures,” he said.
“A good example is here in the United States, President Biden’s clean energy programs put significant tariffs on green energy supplies coming from Europe.
“Depending on the outcome of elections this year, in a number of different countries, you will see increasingly nationalistic policies that will disrupt the kind of trend toward free trade that was dominant globally, really, until just a few years ago.”
