Serving the trade needs of a global society in times of crisis
The title of this year’s Global Maritime Forum’s Annual Summit, 22-23 September in New York was inspired by recent global challenges. More than 200 maritime leaders explored how the maritime industry can brave the rough seas of the future.
December 07 2022
Collaboration across the value chain is required to build more resilient supply chains and safeguard the benefits of global seaborne trade. For this working group, ensuring the steady and fair distribution of critical goods might offer a start.
COVID-19 and the war in Ukraine have created disruptions across global supply chains, with the resulting food, energy and cost-of-living crises carrying disproportionate impacts across the world.
This working group explored the lessons learned from cascading disruptions and the partnerships needed to create more robust supply chains in times of emergency, particularly for critical goods.
Resilient supply chains for critical goods
The working group explored potential emergency procedures for safeguarding essential supplies such as food and energy. One of the ideas put forward was “reverse sanctions,” in which the shipping of certain basic goods would be carved out from sanction policies. Corridors for critical goods were also mooted, akin to green corridors where specific trade routes enable the deployment of zero-emission shipping. Here, the steady and affordable provision of certain goods along set trade routes could help mitigate the price and supply distortions arising in crises and disasters. The group agreed that supranational oversight of any emergency response framework was needed to ensure credibility and transparency crucial to partnerships across the value chain.
Preserving the essential role of seaborne trade
Participants also discussed the impact of reduced shipping availability on developing countries, as capacity has been diverted to more profitable routes during the pandemic. In response, the idea of shipping as a public good was raised; given that seaborne trade is a critical driver of economic growth and food and energy access, all stakeholders have a stake in ensuring a robust and resilient system. This could inspire public-private collaboration toward building a more sustainable and equitable global trade system that would allow shipping to continue fulfilling its critical role in this.
Public-private dialogue to align incentives
Nonetheless, the working group acknowledged that building resilient supply chains to guarantee the steady supply of critical goods in times of crisis would challenge the way the industry operates. During a crisis, surfeit capacity is urgently needed. Yet, currently, there is no commercial rationale to hold excess capacity in a non-crisis, given the Just-in-Time model that shipping relies on. Additionally, inefficiencies often create opportunities for the industry. Several questions were raised: Is there an interest in ironing out supply chain volatility at the risk of eliminating commercial opportunities? Who would, and should, make the long-term investment into contingency? What business models could address such misaligned or split incentives?
Participants concluded that broader stakeholder engagement – in particular, public-private dialogue – is required to explore win-win solutions that improve resilience and ensure equity in times of crisis.
“What is that space that allows the maritime sector to articulate something brave to the conflicting countries, conflicting ideologies in the world? If we were to think of certain essential goods and services – for example, the transportation of food and fertilizer – that could become some sort of sanction-free items? Is it possible to perceive certain goods as global public goods under even different types of crises, whether they be infectious diseases, or war or a new kind of conflict?”
— Christine Loh, Chief Development Strategist, Institute for the Environment, Hong Kong University of Science and Technology
- Leverage the concept of shipping as a public good to inspire public-private collaboration in times of crisis
- Continue exploring opportunities for aligning industry incentives with the need for more resilient supply chains
This excerpt is taken from Braving rough seas, a new report summarizing ideas for collective action that emerged at the Global Maritime Forum’s Annual Summit 2022 in New York. Read the full report to learn more.