Rerouting on the Open Ocean?

By Charlie Briley | October 21, 2021

It is pretty widely known that with the development of the Covid-19 Pandemic came the quick and utter halt to international trade. Countries imposed isolationist policy, and exports and imports slowed heavily.

While some of this was due to the limit on foreign trade and travel, most was an inadvertent effect of closing businesses, as brick and mortar establishments no longer had demand for large amounts of inventory. Not by choice necessarily, rather as a result of a sharp decrease with in-person shopping. As stores like Macy’s and JCPenney saw a decline in sales, large e-commerce businesses grew (like Amazon), which slowed imports from other countries heavily.

However, within the past several months, as countries begin to reopen and consumer optimism grows, international trade is returning to the prowess it once was pre-pandemic. Unfortunately, severe roadblocks are standing in the way for many companies and countries.

Across the United States lie coastal ports equipped to unload large container vessels carrying goods ranging from food to clothing. Ports such as Los Angeles, Virginia, Savannah, and Oakland comprise some of the largest in the US, but they are struggling. With the return to ocean-going international trade, there has been a fight for ports, communities, and logistics companies to maintain adequate efficiency in the supply chain. In particular, the shipping lanes and routes from Asia to the US (California) prove to be the most hindered, as they are the largest by sheer volume of goods.

The west coast is home to many ports, including Los Angeles, Oakland, Seattle, and even Vancouver. Yet, container ships packed with millions in goods remain idle in the harbor waiting for their chance to offload. While a seemingly simple solution could be to redirect ships to more available harbors on the south or east coast, capital remains a challenge. Container ships are so large and costly that the extra time to travel through the Panama Canal and into US territorial waters is just too expensive. The world watched as earlier this year, as the Suez Canal was shut down for several weeks. Many ships decided to wait for the container ship to be dislodged from the Canal rather than reroute. Why? Remaining in place and waiting was the cheaper option. Shipping companies would rather wait – save money and reduce liability than detour around. The same principle is occurring now, which is why west coast ports are inundated with a traffic jam of ships.

While this is an indication of a rebirth in our economy, the large influx of goods could signal a scary shift in our post-pandemic economy. With imports rising significantly, the country could see a larger trade deficit on the horizon and the outflow of business to neighboring countries. While under “normal” (non-pandemic) circumstances, this might not be as impactful, our economy is still trying to recover from months of shutdown and a mountain of federal debt.

As the country enters into one of the most commercialized times of the year (i.e. the holidays), international trade should and will certainly be a top priority that needs to be considered as an economist along with the current administration grappling with recovering and boosting our economy, as well as ensuring supply chain efficiency.

Edited by Ahana Nagarkatti and Zachary Elias