Connect with us

Economy

Arctic and subarctic straits and seas in trade and geostrategy

Published

on

Global climate change opens up new opportunities for international transport networks, particularly with the trend towards glacier retreat around the North Pole.

If the trend continued, Arctic routes could be used more reliably, at least during the summer months and for longer periods of time.

The North Sea route to the Arctic coast of Russia is likely to be ice-free and would reduce sea travel between Europe and East Asia from 24,000 kilometres, using the Suez Canal, to 13,600 km, thus reducing transit time by 10-15 days.

Furthermore, the Northwest Passage through the Canadian Arctic Ocean could become usable on a regular basis within the next few years, thus reducing shipping distances significantly.

Instead, the sea voyage between East Asia and Western Europe requires to travel 24,000 kilometres, also through the Panama Canal.

The Northeast Passage is the shortest sea route from Europe to Asia. Its only disadvantage is that it is located in an icy area for a period of about six months a year and cannot be crossed. This, however, seems to be changing. Global warming is changing the rules of the game, opening up new and – in some cases – unexpected opportunities for freight transport.

The increasing use of this hitherto neglected route provides many opportunities for commercial shipping. The Arctic and subarctic sea route is also considered to be the shortest sea passage between the Pacific Ocean and the Atlantic Ocean.

Arctic routes can save much time and fuel, as well as reduce fuel waste emissions, which is particularly important in an era of fierce competition between shipping companies and of ever increasing attention paid to environmental issues and ecology.

A further advantage is that this route allows ships to circumvent areas where piracy is rampant (such as the Straits of Malacca and the Red Sea region).

There are certainly many advantages, but also a major disadvantage. The route is only used by a relatively small number of ships. There are more ships passing through the Suez Canal every day than those sailing along the route between the Barents Sea and the Bering Strait.

The reason is simple: due to frost, ships can only navigate between early July and late November. Even in this short period of time the route is complicated; Russia charges taxes for crossing the territorial waters and you need to use icebreakers to clear the way in difficult weather conditions.

This entails additional costs. Moreover, fast climate change, sudden ice formations and irregular icebergs can also cause severe problems.

Since the infrastructure in Russia’s Northern ports has been in poor condition since the collapse of the Soviet Union, emergency situations could endanger ships.

Owing to global warming, this relatively short time window for traffic would become longer in the coming decades. In the past decades, the size and thickness of the Arctic ice cap have shrunk significantly. On August 29, 2008, the Northeast and Northwest Passages were even free of ice for the first time. Since then, the ice cap has further shrunk and thinned.

For example, an Asian icebreaker conducted a research expedition from the Pacific to the North Atlantic in August 2012. It encountered less ice than expected and the return journey took less time than the outward journey.

In the future the Northeast Passage could be completely ice-free in summer. From a historical viewpoint, this region has always been considered a harsh environment and its development is an important pioneering achievement.

As early as the 12th century, the Russians set off for Eastern Siberia by navigating in sight of the coastline. In the 16th and 17th centuries, the Netherlands, Great Britain, Sweden and Denmark often tried to find another way to Asia, but they never succeeded.

It was only in 1878-79 that the Swedish explorer, Adolf Erik Nordenskiöld (1832-1901), made an expedition with the sailing ship Vega, leaving from Göteborg to the Bering Strait, sailing along the Northern coasts of the whole Eurasia and solving once and for all the problem of the Northeast Passage. Previously, in 1875 and in 1876, he had only managed to reach the mouth of the Yenisey river and was forced to come back because of ice.

Strictly speaking, however, it is not really correct to call it a success – at least from a theoretically commercial viewpoint–as the ship Vega was blocked by ice and trapped in the Bering Strait for ten months.

It was only in 1932 that the Soviet icebreaker Aleksandr Sibirjakov made his first successful passage in a single season. In the summer of 1967, that route was finally opened to the international shipping industry.

Later, before the collapse of the USSR caused a sharp drop in the volume of shipments in the Northeast Passage, nuclear-powered icebreakers cleared the route and enabled ships to transit (at the latest since 1987, 331 times).

In 2009, the Bremen transport and shipping company was the first to use that route again with two cargo ships, thus causing a sensation. According to the shipping company, the two icebreakers leaving Vladivostok at the end of summer 2009 were both class E3 – therefore suitable for sailing through the North Pole.

In September 2018, the Danish container ship Venta Maersk crossed the Northeast Passage in 37 days: It was the first container ship to do so. As it is a large container ship, its class is 1A (it can cross up to one-metre thick ice). It is specially designed with a reinforced hull for being used in cold water (minimum -25°C).

The maiden voyage of the Venta Maersk revealed a serious flaw, so it is unlikely that a large 40,000-ton container ship will sail along this route in the near future. The problem was that some parts of the route have a draught of only 11 metres, which is too low for a large container ship.

The cargo carrying capacity of the Venta Maersk is usually less than 3,600 TEU, but the shallow water means that it can only hold 600 refrigerated containers.

The construction of large container ships does not meet ice breaking standards, and is also constrained by more unfavourable factors such as length. Hence the Northeast Passage will never be comparable to the Suez Canal in terms of transport volume.

Great progress is currently being made in the construction of flexible cargo ships capable of crossing ice and cope with difficult environments without icebreakers clearing the way to them. This type of vessel can be used for certain types of goods that cannot take longer traditional routes.

Although it will take time, the global economy is expected to reap many potential benefits from shorter supply routes to production sites and sales markets in Europe and Asia.

Crossing the Arctic Ocean risks becoming a decisive factor in the fierce price war between major shipping companies.

However, environmentalists have warned against the damage caused by increased traffic. They fear that this will have a lasting negative impact on the extremely sensitive Arctic ecosystem.

Moreover, the more ships on the route, the greater the risk of severe accidents in this region rich in natural resources.

However, the world’s joint efforts to tackle global warming will put an end to such plans before then. A case in point is the expedition of the German research icebreaker Polarstern, which started on September 20, 2019 and came to an end this autumn.

The MOSAiC research (Multidisciplinary Drift Observatory for Arctic Climate Research) was conducted by the Alfred-Wegener-Institut Helmholtz-Zentrum fuer Polar und Meeresforschung.

The results of MOSAiC will contribute to a better understanding of the regional and global consequences of Arctic climate change and sea ice loss and will improve weather and climate forecasting, as well as the opportunities of exploiting this potential economic and trade route in the future.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Continue Reading
Comments

Economy

The free trade vision and its fallacies: The case of the African Continental Free Trade Area

Published

on

The notion of free trade consists of the idea of a trade policy where no restrictions will be implemented on imports or exports in the respected countries that have signed such an agreement. Some economists argue that free trade is understood through the idea of the free market being forced through international trade. The African Continental Free Trade Area (AfCFTA) is a trade area that was founded in 2018, and it is the most ambiguous project in the history of the continent. This project has plenty of potential successes, as well as fallacies. Particular African nations are either in favor or against this project, and it is a matter of time before the world understands if this project will reflect the true notion behind the idea of a free trade policy.

The African Continental Free Trade Area: The European Union Vision in Africa?

The African Continental Free Trade Area was founded in 2018 in Kigali, Rwanda. It is believed to be the most prestigious project ever created on the continent. It was created by the African Continental Free Trade Agreement and it was signed by 44 countries. Some of the general objectives of this agreement include: The creation of a single economic market, the establishment of a liberalized market, the allowance of free movement of capital and people, diversification of the industrial development in the continent, e.t.c. In some ways, this project can be compared with the European Union and the vision that it represents for a single market and free movement of goods and people. However, due to the size and the geopolitical tensions of the African continent, there are a few obstacles to the achievement of this project. The European Union itself was a project that took more than half a century to be established in its current form, and still, we can see some problems that remain. With that being said, among the 27 member states, there seems to be more or less a coherent economic and political stability. In the case of the African Union, there are far more obstacles, ranging from huge economic differences, political and religious turmoils, and in general a neglected infrastructure; that might not be able to support a mammoth project like this. Any sort of optimism should be also approached with a realistic perspective when it comes to its implementation, which might not be happening anytime soon, certainly not before 2030.

The Relevance of the Free Trade Notion in Africa

It is important to remember that this project deals with the concept of free trade, and free trade itself is something that economists still argue about. Generally speaking, most economists seem to be in favor of free trade. There is an argument that supports the idea of free trade and any kind of reduction in government-induced restrictions on free trade which will be beneficial to economic growth and stability. On the other hand, some economists suggest that the policy of protectionism could be a more lucrative alternative for an economic policy. There is a suggestion that the liberalization of trade will result in an unequal distribution of losses and profit gains while economically dislocating a large number of workers in import-competing sectors.

In the case of the AfCFTA however, the opinion of Ha-Joon Chang, a South Korean economist, might be more relevant. He suggested that if there is going to be any kind of free trade liberalization in the African continent, some prior steps should be taken. For example, the improvement of the institutions in those developing African nations must be achieved to have sustainable economic growth and development. In addition, the idea of demanding from the developing nations to achieve institutional standards that we see in the developed nations such as the U.S or Great Britain, but have never before been achieved in those countries, will only hurt these nations since they might not need or even afford the implementation of these institutions that we see in the West. There is a valid point in the argument because the concept of the AfCFTA might indeed benefit some nations in Africa, but still, it will not develop to its full potential to benefit all 44 countries that have signed the agreement. This is because this project involves countries with different views and needs. Some of them see the AfCFTA as a blessing for the liberalization of the African economy, while other nations are more skeptical about it, thinking that this project will result in African states “biting off, more than they can chew”. This dichotomy is visually striking when we compare some African nations and examine the true reasons why they are in favor or against the AfCFTA.

The African Dichotomy

Rwanda is a small nation in East Africa, having at least 12.5 million people, with a total estimate of its GDP being close to $33.45 billion. A very impressive number, if someone considers the fact that in 1980 its GDP was barely $2.1 billion. It is also the nation that is strongly in favor of the ambitious free trade project in the continent. It is estimated that from 1994 until 2010, Rwanda’s economy grew an average of 6.6%. This is mostly based on the fact that the president of the country, Paul Kagame, led a strong campaign towards the liberalization of the country’s agricultural sector. His reforms allowed the producers to benefit from this liberalization boom while boosting productivity through capital investments. It is clear by now that any sort of project that aims to liberalize the economies of other African nations will be beneficial to Rwanda that aims, as President Paul Kagame mentioned before, to make Rwanda the “Singapore of Africa”.

However, some countries pose some key arguments that need to be addressed for the AfCFTA. There are concerns regarding the massive difference between populations in many African states, as well as the potential of the markets to sustain such a project. With that being said, there is still optimism from some experts that view this project as a win-win situation for Africa since it will allow a trade-led diversification away from Africa’s commodity dependence and focus towards industrial development. On the other hand, this optimism is being taken with a “pinch of salt” from certain African nations, like Nigeria. Nigeria is a nation of at least 205 million people with a total GDP of $1.087 trillion. Nigeria was one of the last nations to sign the agreement, but not before firmly opposing the deal. The strongest argument that Nigeria had against the deal, was the fact that Nigeria could do nothing to undermine the local Nigerian manufactures and entrepreneurs of the country. There was strong domestic opposition to regional trade liberalization and concerns about the government’s ability to implement it effectively. In the same line of thought, Togo’s Foreign Minister Robert Dussey did not hide his concerns. In an interview with Deutsche Welle, Mr. Dussey stressed the fact that many African countries will need to be firstly well-equipped with the right technical tools to meet the challenges of such an enormous project. He shared his views that some rich nations in the West are not so keen to see the potential industrialization of the African continent: “African development is foremost the responsibility of Africans. We have a problem with work for our youth. It is important that we have strong industries to have work for the young”, said Mr. Dussey for Deutsche Welle.

Can we safely say that the AfCFTA project complies with the economic policy of free trade? Theoretically, it does. The project has the potential to change the socio-economic status of all the countries involved. Even if some nations are more industrialized than others, and can take full advantage of the opportunities for manufactured goods, other nations that might not be so privileged can benefit by linking their economies into regional value chains. This can happen again theoretically if there is a reduction in trade costs and facilitating investments. However, one should not overlook the growing challenges of this project. It is not feasible to suggest a 90% tariff cut, a unified digital payments system, and an African trade observatory dashboard that the AU Commission promises in the next five years. For the simple reason that you cannot have this liberalized economic system when most of the African countries are suffering from socio-political instability. How can a system which in some ways is based on the European Union, work when there is such a striking inequality among African nations? There is a lack of industrial infrastructure to support such a project, and it will be more beneficial to address these regional problems before expanding in a global vision. One day Africa will reach its full potential, but not in the next five years and not in the next ten years. Such an agreement is a blessing, but it needs careful examination before being implemented; otherwise, we will talk about a disaster in the African continent that could potentially bring more inequality and regional tensions.

Continue Reading

Economy

Turning to sustainable global business: 5 things to know about the circular economy

Published

on

Due to the ever-increasing demands of the global economy, the resources of the planet are being used up at an alarming rate and waste and pollution are growing fast. The idea of a more sustainable “circular economy” is gaining traction, but what does this concept mean, and can it help save the planet?

1) Business as usual, the path to catastrophe

Unless we make some major adjustments to the way the planet is run, many observers believe that business as usual puts us on a path to catastrophe.

Around 90 per cent of global biodiversity loss and water stress (when the demand for water is greater than the available amount), and a significant proportion of the harmful emissions that are driving climate change, is caused by the way we use and process natural resources.

Over the past three decades, the amount of raw materials extracted from the earth, worldwide, has more than doubled. At the current rate of extraction, we’re on course to double the amount again, by 2060.

According to the International Resource Panel, a group of independent expert scientists brought together by the UN to examine the issue, this puts us in line for a three to six degree temperature increase, which would be deadly for much life on Earth. 

2) A circular economy means a fundamental change of direction

Whilst there is no universally agreed definition of a circular economy, the 2019 United Nations Environment Assembly, the UN’s flagship environment conference, described it as a model in which products and materials are “designed in such a way that they can be reused, remanufactured, recycled or recovered and thus maintained in the economy for as long as possible”.

In this scenario, fewer resources would be needed, less waste would be produced and, perhaps most importantly, the greenhouse gas emissions which are driving the climate crisis, would be prevented or reduced.

This goes much further than simply recycling: for the circular economy to happen,  the dominant economic model of “planned obsolescence” (buying, discarding and replacing products on a frequent basis) would have to be upended, businesses and consumers would need to value raw materials, from glass to metal to plastics and fibres, as resources to be valued, and products as things to be maintained and repaired, before they are replaced.

3) Turn trash into cash

Increasingly, in both the developed and the developing world, consumers are embracing the ideas behind the circular economy, and companies are realising that they can make money from it. “Making our economies circular offers a lifeline to decarbonise our economies”, says Olga Algayerova, the head of the UN Economic Commission for Europe, (UNECE), “and could lead to the creation of 1.8 million net jobs by 2040”.

In the US, for example, a demand for affordable, high-quality furniture, in a country where some 15 million tonnes of discarded furniture ends up in landfill every year, was the spur for the creation of Kaiyo, an online marketplace that makes it easier for furniture to be repaired and reused. The company is growing fast, and is part of a trend in the country towards a more effective use of resources, such as the car-sharing app Zipcar, and Rent the Runway, a rental service for designer clothing.

In Africa, there are many projects, large and small, which incorporate the principles of the circular economy by using existing resources in the most efficient way possible. One standout initiative is Gjenge Makers in Kenya. The company sells bricks for the construction industry, made entirely from waste. The young founder, Nzambi Matee, who has been awarded a UN Champion of the Earth award, says that she is literally turning trash into cash. The biggest problem she faces is how to keep up with demand: every day Gjenge Makers recycles some 500 kilos of waste, and can produces up to 1,500 plastic bricks every day.

4) Governments are beginning to step up

But, for the transition to take hold, governments need to be involved. Recently, major commitments have been made in some of the countries and regions responsible for significant resources use and waste. 
The US Government’s American Jobs Plan, for example, includes measures to retrofit energy-efficient homes, electrify the federal fleet of vehicles, including postal vans, and ending carbon pollution from power generation by 2035.

In the European Union, the EU’s new circular economy action plan, adopted in 2020, is one of the building blocks of the ambitious European Green Deal, which aims at making Europe the first climate-neutral continent.

And, in Africa, Rwanda, Nigeria and South Africa founded the African Circular Economy Alliance, which calls for the widespread adoption of the circular economy on the continent. The Alliance supports African leaders who champion the idea, and creates coalitions to implement pilot projects.

5) Squaring the circle?

However, there is still a long way to and there is even evidence that the world is going backwards: the 2021 Circularity Gap Report, produced annually by the Circle Economy thinktank, estimates that the global circularity rate (the proportion of recovered materials, as a percentage of overall materials used) stands at only 8.6 per cent, down from 9.1 per cent in 2018

So how can the world be made “rounder”? There are no easy answers, and no silver bullet, but Ms. Algayerova points to strong regulation as a big piece of the puzzle.

“I am proud that for the automotive sector, a UN regulation adopted at UNECE in 2013 requires 85 per cent of new vehicles’ mass to be reusable or recyclable. This binding regulation influences the design of around one quarter of all vehicles sold globally, some 23 million in 2019.”

“It’s a step in the right direction, but these kind of approaches need to be massively scaled up across all sectors”, she adds. “Shifting to the circular economy is good for business, citizens and nature, and must be at the heart of a sustainable recovery from the COVID-19 pandemic.”

Continue Reading

Economy

Pandemic: A Challenge for the Globalization

Published

on

The vaccination process across the world is underway, and after almost complete vaccination of the world population, we will see a post-pandemic world that is going to be different from the pre-pandemic world, especially in the context of Globalization and the role of states in the world. 

In the post-1980 world, Globalization became the prevailing phenomenon that impacted the whole world and its functioning. Whether it was the realm of society, power politics, or economics of the world, whether, in the context of domestic affairs or global affairs, Globalization has been unavoidable and un-resistible until the ongoing pandemic has erupted after which many changes have been brought to the world. Social distancing and travel restrictions protocols posed challenges but that is temporary, but what offered concerns to the policymakers and businesses of the world that how fragile the functioning of the global economy is, and how the economies of states are depending on this fragile mechanism. 

The interdependence and interconnectedness between national economies as well as multinational corporations and organizations in the global economy are in such a way that if only a single link breaks down, a series of collapses will occur. This has happened during the pandemic. 

When China was hit by the pandemic, two-third of its economy stopped working, consequently, the world witnessed a sharp decline in the global supply. The same happened when the pandemic was at its peak in the West. In this way, the worst impact on the global economy was in the form of a major recession, depriving people of employment, and increasing poverty, across the world as no nation could remain unaffected. 

When such pandemics exploded at a place somewhere before the era of Globalization, other parts of the world were unaffected economically. Another point of pondering is the fact that in the case of China it is not because of the involvement of Chinese firms in the rest of the world but because global companies have some of their production lines installed in China. Globalization lets it happen. This is well explained by famous sociologist Anthony Giddens, who says that it is the major characteristic of Globalization that distant localities are linked with each other in such a way that one event at a place shapes events at other places. 

Notice that if it is thought that virus pandemics erupt once in a lifetime and therefore most of the time Globalization will be dominating and decisive, it is not the case. The future of Globalization was at stake in the recent crisis when both the economic giants China and the USA engaged in a trade dispute because of which world economy faced contraction in its GDP which would have been turned into a global economic recession if the trade war continued. 

Like pandemic exposed the vulnerability in the economic structure of Globalization, so it did by revealing the dangers on the political front. In Globalization, governments were subjected to cooperation which reduced the political tensions between them, however, pandemic reactivated their political motives, which means that in case of an emergency governments failed to cooperate. Such a severe blame game was started when some countries lashed out at China, calling it responsible for the global spread of the pandemic, while China refused all accusations and blamed the US for politicizing the health crisis. The political tussle made faces at Globalization.

International and regional organizations which are the key aspects of Globalization failed too. The World Health Organization is the case in this regard that how it crumbled. It not only faced criticism but the US even withdrew its financial support from it. Likewise, other international and regional organizations could not maintain cooperation among nations. In this way, Globalization could not even handle the crisis adequately. 

Globalization brags about free trade but now people are asking the question that what is the benefit of free trade if it cannot even function when it is needed the most. When there was more need for cooperation between governments, Globalization failed again and it was also exposed in the role of organizations. That’s why one may argue that the post-pandemic world would be the era of de-globalization and states would strive to gain more and more power as they do not want to rely only on Globalization anymore. Likewise, people are now more careful in their spending, while corporations are now more conscious about their dependence on Globalization, therefore, they are going for precautionary measures.

Continue Reading

Publications

Latest

Energy News5 hours ago

Korea shares experience of electric vehicles and renewable energy with Thailand

The United Nations Industrial Development Organization (UNIDO) is supporting South-East Asian countries in combatting climate change through policy consultation and...

Style7 hours ago

Rolex Oyster Perpetual Explorer

Rolex is presenting its new-generation Oyster Perpetual Explorer. At 36 mm, it returns to the size of the original model launched...

Diplomacy7 hours ago

Biden-Putting meeting: Live from Geneva

19:00 The places of the flags on the Mont Blanc bridge on which President Biden and President Putin will pass...

Economy10 hours ago

The free trade vision and its fallacies: The case of the African Continental Free Trade Area

The notion of free trade consists of the idea of a trade policy where no restrictions will be implemented on...

Africa Today11 hours ago

Mozambique: Violence continues in Cabo Delgado, as agencies respond to growing needs

Civilians continue to flee armed conflict and insecurity in northern Mozambique, more than two months after militants attacked the coastal city of Palma, located in...

Americas14 hours ago

Who benefits more from the Biden-Putin summit in Geneva?

With the Putin-Biden summit in Geneva around the corner, the question is who actually benefits more from the meeting in...

Economy15 hours ago

Turning to sustainable global business: 5 things to know about the circular economy

Due to the ever-increasing demands of the global economy, the resources of the planet are being used up at an...

Trending