Trade has become an important factor in promoting competition, encouraging innovation, increasing market specialization, and realizing higher economic prosperity for society. The arrival of globalization has increasingly pushed the importance of trade in international relations. This is because international trade will have a big impact, such as increasing the country’s foreign exchange and strengthening relations between countries.
World Bank data shows that global economic growth in the last 30 years has increased by an average of 1 to 1.5 percent. From 1990 to 2022, international trade has resulted in average income growth of 24 percent globally. In fact, international trade has succeeded in lifting more than 1 billion people out of poverty. This indicates that international trade is a crucial element in the welfare of people throughout the world.
However, international trade is currently facing a significant threat which is severe climate crisis. Moreover, in reality this is no longer a threat, but has already happened. Data from the UN Environment Program (UNEP) in the 2023 Emissions Gap Report states that the world is experiencing a temperature increase of 2.5-2.9°C as stated in the Paris Agreement. This temperature is far above the 1.5°C limit that can avoid the worst impacts of climate change.
According to scientific experts at NASA’S Goddard Institute of Space Studies (GISS), the summer of 2023 will be the hottest temperature on Earth since 1880. This record has had dire consequences around the world, such as very hot temperatures throughout the world, forest fires across Canada, flooding extreme conditions in Europe and Asia, even hampering international trade traffic. This phenomenon of the earth’s temperature also marks the occurrence of El Niño. El Niño is caused by warm air rising to the surface which is then released as additional heat into the atmosphere. Unfortunately, the UN World Meteorological Organization estimates that this condition will continue until April 2024.
This prediction certainly poses a major threat to international trade. Increasingly extreme weather could disrupt supply chains and damage critical transportation infrastructure for international trade. This lack of infrastructure can hamper trade routes and increase waiting times. This will cause disruption to the entire supply chain.
One example of a real phenomenon that has recently occurred is the drought that hit the Panama Canal. This dryness causes the channel to lack air. In fact, for more than a century, the Panama Ship Canal has been a strategic route for cargo from the Pacific Ocean to the Atlantic and vice versa, thereby helping speed up the international trade process.
Every day, around 13 to 14 thousand ships pass through the Panama Canal every year. In 2022, more than 14,000 ships will transit, both sea vessels and small ships, carrying 518 million tons of goods through the canal. This traffic process contributed $2.5 billion to Panama’s finances. The United States is the largest user of this canal, with 40 percent of all United States containers passing through this canal every year. The cargo carried was worth about $270 billion.
Every time a lock on the Panama Canal is opened, millions of liters of fresh water flow into the sea. As a result, the air level in the channel drops. This is eventually replaced by more water flowing in. But now residents, conservationists, and meteorologists are observing a decrease in rainfall in Central America as a result of climate change. This means less water for the canal. And if the fresh water flowing out of the canal locks cannot be replaced, it will be increasingly difficult for large ships to pass through.
This water shortage has hampered ship operations in recent years but will peak in 2023. Therefore, when there is little water that should be used to raise and lower ships, the number of ships passing through must be reduced. This creates big problems for shipping companies and countries that export or import. The profits obtained will automatically decrease.
For example, reductions in shipping lanes have reduced the Panamanian government’s annual revenues by tens of millions of dollars. Apart from that, shipping costs have also increased. If ships travel longer routes, this will ultimately increase greenhouse gas emissions.
Global growth is also experiencing a slowdown from 3.5 percent in 2022 to 3.0 percent in 2023 and is estimated to be 2.9 percent in 2024. This number is far below the historical average from 2000 to 2019 which was 3 .8 percent. In fact, developed countries experiencing a slowdown from 2.6 percent in 2022 to 1.5 percent in 2023 and is estimated to be 1.4 percent in 2024. Meanwhile, developing countries is also experiencing a slowdown from 4.1 percent. in 2022 to 4.0 percent in 2023 and 2024.
Therefore, it is necessary to reduce shipping lanes in the Panama Canal. Other sea routes are of course longer and more expensive, but are less likely to experience unexpected delays. One alternative is to transport goods between Asia and the United States via the Suez Canal to the East Coast and Gulf Coast. Another way is to ship goods from Asia to ports on the West Coast and then transport them overland by train or truck.
To conclude, the climate crisis has become a major threat to international trade routes. If drought continues to hit the world, water shortages become more widespread in other important routes, then it is not impossible that this will stop the entire international trade process. In fact, international trade plays a very significant role in the welfare of society and the progress of a country. Therefore, concrete steps are needed to overcome increasingly severe climate change.
Several things that can be done include promoting a green economy to reduce the risk of environmental damage through green trade barriers. Green trade barriers refer to actions to limit imports to protect natural resources, the ecological environment, and human health in international trade activities. In the end, handling climate change and international trade must be resolved together.