WE may have all started off the year hoping that the Houthi threat was going to be a short-lived addition to the growing list of global trade disruptions, but four weeks into the year it’s looking like this is no temporary diversion.

The Red Sea risk is going to last months, not weeks. Even if by some miracle a magic wand is waved over the Middle East chaos, the supply chain disruption is not going to be undone quickly.

And even if it was it’s only one of many interruptions to global trade right now.

The UN’s trade and development body, UNCTAD, this week raised profound concerns over escalating disruptions to global trade.

It says that recent attacks on ships in the Red Sea, combined with geopolitical tensions affecting shipping in the Black Sea and the impacts of climate change on the Panama Canal, have given rise to a complex crisis affecting key trade routes.

The cumulative effect of this triple whammy of blocked arteries threatens world trade is having — and is going to continue having — a pretty profound effect on global supply chains, 

These disruptions translates into extended cargo travel distances, escalating trade costs and a surge in greenhouse gas emissions from shipping having to travel greater distances and at greater speed.

The crisis is already impacting global food prices, with longer distances and higher freight rates potentially cascading into increased costs. Disruptions in grain shipments from Europe, the Russian Federation and Ukraine pose risks to global food security, affecting consumers and lowering the prices paid to producers.

Developing countries are particularly vulnerable to these disruptions.

If all this is starting to sound eerily familiar, it’s because we were discussion the same vulnera

bilities to the global supply chain in the wake of the global pandemic.

And that was the point at which governments and multinationals promised to address supply chain resilience. President Biden even appointed a supply chain Czar – so presumably that sorted everything out? 

Well, perhaps not entirely...

While politicians globally are fretting about how they can help industries retain access to critical products against an increasingly unstable geopolitical backdrop, the recent history of supply chains reveals an important and inconvenient truth.

Namely, that when bad things happen, markets can adjust fairly well despite the politicians. And even if they were effective in lending support (spoiler alert — they are not), planning for the worst is generally a case of adding cost.

As many economists and academics have pointed out over many years, to guarantee the resilience of any supply chain, you would need to be able to foresee what could happen to demand, and then have the capacity to meet it immediately. And you would need to somehow protect against disruptions that were not seen coming.

Doubling up on supply chains, decoupling, nearshoring, friendshoring or any variation in-between all come with their own risks and vulnerabilities.
The only guaranteed outcome of which will be the rising cost of doing business, and the absence of any political accountability when their interventions are proven to have resulted in very little.

So, where do we stand right? How is the market adapting amid the widespread acceptance that the current triumvirate of chokepoint blockers are likely not getting coughed up imminently? 

We have drafted in a couple experts this week to help me make sense of it all:

• Ryan Petersen, the founder and CEO of digital freight forwarder Flexport

• Jan Hoffmann, Chief of the United Nations Conference on Trade and Development (UNCTAD), Trade Facilitation Section