World cannot depend on US to keep trade peace

Financial Times has published an article saying relying on American military power to protect Red Sea shipping routes is risky. Caliber.Az reprints the article.

When it comes to giving pirates a hard time to keep the arteries of global trade flowing, the US is definitely your go-to country. For decades, America’s navy has patrolled the world’s shipping lanes to deter maritime marauders, a job deserving great credit.

The Houthis, whose attacks on container ships and US navy vessels in the Red Sea have severely limited commercial traffic through the Suez Canal, are a much tougher challenge. The current situation underlines that the US’s most critical work protecting supply chains is in hard-edged geopolitical and military situations. But its motives are more strategic than economic, which can make its actions only ambiguously useful — and subject to political shifts.

For a country that ostensibly cares little about the multilateral system — it hasn’t even ratified the UN’s Law of the Sea treaty — the US certainly provides some vital global public goods to defend it. The Center for Global Development think-tank says the US spends 0.21 per cent of gross national income on patrolling shipping lanes, three times higher than the UK in second place. True, in some pirate-infested regions like the seas off Somalia it has been joined by other dozens of other countries — including in the EU, which in 2008 launched Atalanta, its first-ever collective naval operation. Somali pirate attacks, of which there were once hundreds a year, have been virtually eliminated.

But it’s relatively easy to assemble a posse to pursue criminals. Even the geopolitically fractured EU can unite behind a dislike of marine brigands; even Hungary’s disruptive prime minister Viktor Orbán isn’t actually pro-pirate.

And the US actually provides the most benefit to the trading system where it’s dealing with state antagonists, such as China over Taiwan and Russia over Ukraine. Pirates off Somalia and in the Malacca Strait are a nuisance, but China invading Taiwan would play utter havoc by breaking the global semiconductor industry apart. The integrity and internal politics of the EU, never mind its ambitions to spread its single market eastward, would be plunged into turmoil by a destabilising conflict involving a hostile force along its eastern border.

In these situations, the US is frequently an indispensable power but isn’t involved mainly to reap direct economic benefits. Washington has an interest in a united and prosperous Europe, but the marginal benefits to the US economy of pushing back Vladimir Putin hardly justify its sustained support to Ukraine. And Washington has backed Taiwan for decades, well before (with US help) it built a vital role in the electronics and semiconductor supply chain. US foreign policy may coincidentally be good for global trade in these cases, but it’s not necessarily by design.

This brings us to events in the Red Sea. The Houthis are not a bunch of scruffy thieves in motorboats. They’re ideologically-motivated militants with land bases backed by a powerful state, Iran. They can inflict damage remotely through missiles and drones and are prepared to take heavy losses themselves.

Their attacks are dealing a serious blow to global trade by reducing Suez Canal traffic, and few countries inside or outside the region are fans of them. But there’s a sense that the Houthis probably wouldn’t be attacking ships had the US not provided such support to Israel during its assault on Gaza. As such, given the widespread international condemnation of Israel’s tactics, the US has relatively few reliable allies prepared to join a shooting war.

The US’s initial strikes on the Houthis also involved the UK, plus non-operational support from some longstanding allies, Australia, Canada and the Netherlands. But Bahrain was the sole contributor from the Middle East. The EU and other European countries say they will help, but mainly with support and escort operations.

China and India, which both have a clear commercial interest in keeping the canal open, are not militarily involved. It’s Egypt above all which is suffering — its revenues from canal transit fees, a major source of foreign exchange, are down 40 per cent this year. But it daren’t publicly join an offensive against militants who declare support for the Palestinian cause.

In other words, the US military is trying to keep a trade route open, but it’s motivated more by geopolitics than by direct economic interest — US trade relies more on the Panama Canal than on Suez — and its gang of allies is accordingly limited.

Such motives are, worryingly, also affected by political changes in Washington. Protecting Europe from Russia and backing Taiwan against China have been consensus US policy for decades. But, as with so many security issues, another presidential term for Donald Trump might see this change.

Trump has said he will withhold US backing for Ukraine, a move which will undoubtedly embolden China. And his isolationist instincts plus resentment at Taiwan supposedly taking semiconductor business from the US might encourage him to withdraw US support for Taipei.

This could be catastrophic for the trading system, even more so than Trump’s protectionism. It shows the risk of having global trade underpinned by the US, which has a foreign policy only intermittently aligned with commercial interests. But with no other major trading or military power seemingly willing or able to take on its role in protecting vulnerable points in the global economy, that’s the risk the world is running.