By: Kira Tian
How it Reveals Shortcomings of Globalization
Starting on March 23rd, the Suez Canal, the world’s busiest shipping chokepoint, was completely blocked for a week by Ever Given, one of the world’s largest container cargo ships. Extending from the Mediterranean to the Red Sea, the Suez Canal gives passage to merchant ships carrying goods or commodities that account for at least 12% of global trade. According to German insurer company Allianz, “analysis showed the blockage [of the canal] could cost global trade between $6 billion to $10 billion a week and reduce annual trade growth by 0.2 to 0.4 percentage points.” Immediate international transportation is a crucial part of globalization, and the Suez Canal plays a major role in that process. While globalization can decrease costs and expenses, the world ought to recognize its disadvantages––especially since unforeseen events similar to the Ever Given blockage can disrupt globalization, all while unsettling the global economy.
The Suez Canal blockage reveals the downsides of globalization. In the past, the globalization of manufacturing has promoted the rational global allocation of resources, reduced production costs, and stimulated the development of international trade. At the same time, it has also resulted in an excessively long supply chain for product production. An accident at any link in the supply chain creates a chain reaction affecting a highly demanded final product. Oftentimes, manufacturers only see cost and expense reductions while ignoring potential economic disasters. Nevertheless, the Suez Canal blockage does not reveal the only threat in the transportation chain. Other risks include possible worker strikes or natural disasters at raw material extraction sites. Advocates for greater globalization must remember the potential dangers that globalization’s long supply chain brings.
Globalization also results in the concentration of production of goods and commodities in only a few countries and regions (outsourcing); the timely satisfaction of the world’s demand for these commodities depends entirely on the situation in those manufacturing countries. Overdependence on specific locations can make the entire world more vulnerable to unpredictable events. At the beginning of COVID-19, the production of masks occurred almost entirely in China. Since there was an explosive increase in global demand during a short period of time, it became impossible for China alone to meet the worldwide demand for surgical masks in a timely manner. As a result of the shortage, as well as poor planning, medical personnel around the world did not have enough protective equipment to help in combating COVID-19. In spite of the benefits of outsourcing, powerful nations should not use outsourcing with the sole purpose of cutting production costs.
Around the world, the Suez Canal blockage has caused considerable economic fallouts as well as shock. On March 29, although the Ever Given has finally been set free with a crisis averted, as New York Magazine argued, “it’s officially time to start worrying about the next crisis which could involve big ships.” According to U.S. Navy admiral James Stavridis, “There is another fundamental lesson to be relearned here, and it is about more than just the Suez Canal. It is the criticality of a handful of so-called ‘choke points’ around the world upon which the global navigational grid depends.” While depending on globalization seems enticing with its lower production and transportation costs, unforeseen events or accidents can endanger the global economy and its prosperity. The world must not overlook the hidden risks of globalization, but rather, take them into consideration when deciding the best trade and production practices.
