WSJ: On the High Seas, a Pillar of Global Trade Is Under Attack

Global trade rests on a rule so old that hardly anybody alive can remember a time before it: Ships of any nation may sail the high seas. Suddenly, that pillar of the international order shows signs of buckling.

In the Red Sea, Houthi rebels have stormed onto cargo ships, causing freight rates to quadruple and setting a precedent that American vessels aren’t welcome across one of the world’s most vital transport lanes. Russia’s invasion of Ukraine has turned the Black Sea into a gauntlet of warships and mines, navigated by grain-laden bulk carriers sailing under the fragile consent of two warring states.

Near the Horn of Africa or the Strait of Malacca, pirates who had once seemed quelled have roared back, crimping sea traffic. In the South China Sea, Beijing has asserted sovereign control over parts that have long been international waters, while its push to reunite Taiwan with the mainland raises questions about future transit through the Taiwan Strait.

“Throughout my long career as a naval officer…I have never seen such intense competition on the oceans of the world,” said retired U.S. Adm. James Stavridis, who served as NATO supreme allied commander and wrote his doctoral thesis on the United Nations’ Law of the Sea treaty.

Open oceans allowed a global economy to emerge from the wreckage of two world wars. The freedom for all container ships to safely ferry goods on the high seas helped lift China from poverty, turn the U.S. into a country of middle-class consumers and cement the dollar as the world’s reserve currency. Until the 20th century, trading nations competed in blood for the right to ship merchandise to foreign ports; these days they compete on price and quality.

Ships handle more than 80% of global goods, according to the U.N. Not long ago, the world’s most powerful navies cooperated to secure the seas. When Somali sailors seized two Chinese vessels in 2008, Beijing sent warships to help the U.S. patrol the Horn of Africa. After the Cold War, Russia teamed up with the U.S. military to clean nuclear waste from the Arctic Sea, before melting ice opened new shipping possibilities. For now, there is little chance those three world powers could summon common cause.

The U.S. can still call on allies in Europe or Japan, whose navies once spanned the globe. But today they are lightweights with few warships or skilled personnel they can mobilize in a crisis: The British navy has fewer sailors than it did during the Revolutionary War 250 years ago, when its total population was one-seventh its current size. The U.S. Navy, sidelined during decades of counterterrorism campaigns, is stretched securing not just shipping lanes but also undersea data cables and gas pipelines that have become equally important to economic output.

The upshot: The oceans, once calm, are back on the agenda. An interlocking set of maritime security crises from Europe to East Asia has thrown up a troubling question, say U.S. and European officials, insurers and analysts: How much has freedom of navigation been a historical anomaly, unlikely to endure?

“It’s very worrying,” said Dutch Defense Minister Kajsa Ollongren. Freedom of navigation “is a matter of principle.”

For much of maritime history from Columbus onward, pirates, privateers and powerful navies set the rules on whose ships could sail where—enforced within cannon range of prowling warships. Which flag fluttered above deck mattered: Barbary pirates from the 1780s onward preyed on American ships after they lowered the British banner for the new Stars and Stripes, prompting the young nation’s first foreign war.

The alternative concept—“freedom of the seas”—dates to at least the 1600s, holding that ships of any nation should be permitted to travel the open ocean. But it only took hold after the U.S. Navy emerged victorious over Imperial Japan in 1945.

At the time, the U.S. Navy boasted about 7,000 ships—alongside a political class populated with former Marines and sailors—and if any foreign adversary harbored a different vision of how the seas should work, it lacked the gunboats to impose it.

Today, America’s navy can field fewer than 300 ships and the world’s largest fleet belongs to Beijing, which is reinforcing its unilateral claim on the vast South China Sea by creating and fortifying artificial islands. Stavridis called it “a preposterous claim that has been rejected by international courts,” but he predicted China will continue “and challenge anyone seeking to conduct freedom of navigation.”

Governments from Europe to Asia that have grown prosperous and accustomed to safe seas want to keep maritime chokepoints open, particularly the Suez Canal, the Taiwan Strait and the Horn of Africa. But they aren’t budgeting for enforcement, said Jacques Vandermeiren, chief executive of the Port of Antwerp-Bruges, Europe’s second-largest.

“Who is securing free trade in the world now?” said Vandermeiren. “Is it always the U.S.? A global coalition? Who will organize this and who will pay for it?”

In the sweep of history, only eight decades separate the present from a past when most manufactured goods moved by land and a ship was only as safe as the state protecting it. Less than 500 million tons of dry cargo crossed the seas annually in the 1950s. The world was dotted with small manufacturers serving local buyers.

Today, container ships carry about 23 times more tonnage, integrating a global economy of mammoth conglomerates targeting whichever customer on earth offers the most profit, soonest. That integration has driven down costs, allowing IKEA to cheaply sell identical sofas in 59 countries and McDonald’s to fry Idaho’s Russet Burbank potatoes around the world.

But it has also made car factories, big-box retailers, fashion houses and electronics dealers significantly more vulnerable to even the smallest snags: Witness the tens of billions of dollars in trade held up when a single cargo ship, the Ever Given, ran aground in the Suez Canal for six days of 2021. Or the supply-chain breakdown that unfolded as the Covid-19 pandemic left container ships log-jammed outside Asian and American ports.

These might have been a harbinger of how easily the oceans can close.

Since the Houthis seized the Galaxy Leader, a Japanese-owned car-carrying cargo ship, in November, freight rates from Shanghai to Genoa have quadrupled. Worldwide, the average cost of shipping a 40-foot container has jumped 2.7-fold in that time, to $3,964, according to London-based Drewry Shipping Consultants. Manufacturers from Tesla to Volvo have had to suspend car production at German and Belgian plants while they wait for parts.

The creature comforts of which fresh clothes Europeans will wear in spring—or which new phones they will buy—hang in the balance. More critical damage is creeping in: “The crisis is also reverberating in global food prices,” the U.N. Conference on Trade and Development warned recently.

The U.S. and British navies have stepped forward to try to secure safe passage for ships transiting the Suez Canal, whatever their flag or destination. The last time the U.S. Navy provided such extensive security for non-American ships, the threat was from German U-boats and Japanese torpedoes, said Salvatore Mercogliano, chair of the Department of History, Criminal Justice and Politics at North Carolina’s Campbell University. “You’d have to go back to the world wars for that,” he said. “This is a big change.”

The trouble is, ships linked to, flagged in or owned by America and its allies are targets for Houthi rebels. Last week, shipping company Maersk said it would stop sending U.S.-flagged vessels through the Red Sea.

That means the Red Sea passage that the U.S. is protecting is increasingly being used by ships either carrying Russian oil or flying a Chinese flag. On Monday last week, a senior Houthi leader told a Russian media group chaired by Vladimir Putin’s reputed girlfriend that Chinese and Russian vessels would be spared. Moscow and Beijing have both held back from engaging militarily, emerging as easy winners of a new era where the provenance of a ship matters.

If the Houthi example stands, a belligerent actor will have set the precedent of choosing whose vessels can cross which ocean passage: “Others might take what they are doing as a template, as role models, for the future,” said Christian Bueger, professor of international relations at the University of Copenhagen.

France has sent its navy to escort French cargo ships through the Red Sea—lifting a page from the age of Caribbean pirates when Spanish galleons led gold-laden treasure fleets across the Atlantic. India dispatched a guided missile destroyer on Friday to help 22 Indian sailors put out a fire on an oil tanker that was hit with an anti-ship missile. Other bulk carriers and cargo ships are simply turning off their transponders as they pass through.

Even if those ships can evade Houthi missiles, they can’t hide from insurers. The rate for war insurance through the Red Sea, once a tiny percentage of the total value covered, has ballooned to 1%, a difference that many shippers deem cost-prohibitive. The 10,000-mile-long alternative, circumnavigating Africa, is so fuel-intensive that cargo ships pay steep climate taxes on arrival in Europe and risk scoring failing grades on the International Maritime Organization’s carbon report index.

Insurance rates for plying the Black Sea, the principal export route for much of the world’s grain, have grown so high that the cash-strapped government of Ukraine has had to effectively help underwrite the insurance policies on foreign vessels. The chaos there has made the world’s ability to feed grain-importing countries dependent on an unstable combination of fleeting agreements between Moscow and Kyiv—and the latter’s supply of sea drones and NATO-donated anti-ship missiles that have pushed Russian warships back from the coast.

Russia has already built six Arctic naval bases to strengthen another advantage: Melting ice is opening a new sea route across the top of the world, a shortcut from Europe to China that Moscow could easily close to ships trading with any nation arming Ukraine.

“We really have to think about freedom of navigation and the connection between that and global trade,” said Swedish Foreign Minister Tobias Billström.

“As a nation very much dependent on global trade, we believe that global trade is the way forward,” he said. “Without global trade, and the possibility of maintaining the benefits of global trade, this world would be a much more difficult one for us to live in.”

Source: The Wall Street Journal

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