Over the past decades world ocean trade has expanded almost exponentially as major manufacturing outsourcing from USA and European corporations has blossomed under the advent of economic globalization. The result has been that Asia, most especially China, has become the essential manufacturing source for everything from iPhones to antibiotics and everything in-between. The creation of the World Trade Organization to impose new rules on the trade has been a key driver. It has also made global supply chains for delivering goods more fragile than ever in history. The rise in cost of ocean container shipping indicates the growing crisis. Compounding the growing crisis are enormous labor shortages owing to global COVID measures.
Origins of the Crisis
According to German-based Statista Research Department, some 80 percent of all goods globally are carried by sea including oil, coal, grains. Of that total, in terms of value, global maritime container trade accounts for some 60 percent of all seaborne trade, valued at around 14 trillion US dollars in 2019. This ocean shipping has become the arteries of the world economy for better or worse.
This is a direct consequence of the 1990’s creation of the WTO with new rules favoring out-sourcing of manufacture to countries where production was far cheaper, that is as long as ocean transport was cheap. After China became a WTO member in 2001, they became the greatest beneficiary of the new rules and within a decade China was called the “workshop of the world.” Entire industries such as electronics, pharmaceuticals, textiles, chemicals as well as plastics were transferred to China with then the world’s lowest wages, for factory assembly. It worked because the cost of shipping to Western markets was comparatively low.
As the economic output of China grew, China became a world shipping giant, shipping their goods cheaply to places such as Long Beach or Los Angeles, California in the US or Rotterdam in Europe. The Walmart retail giant was destination for a huge share of the China goods with as much as 80% of its products of China origin. This is not small beer as they say in Texas. Walmart is the world’s largest company by revenue, with annual sales of $549 billion. Today as a result of this globalization China has 8 of the world’s 17 largest ports in terms of shipping volumes to handle its exports.