Global Choke Points: A Confluence of Challenges Threatens International Trade and Migration

Since the outbreak of the Israel-Hamas war in October, Yemen’s Houthi rebels have been attacking container ships and energy tankers in the Red Sea. These attacks, carried out in solidarity with Hamas, have already started to wreak havoc with global trade. At least 18 shipping lines have started rerouting their vessels to avoid Houthi attacks. The US and UK have even threatened a wave of airstrikes in response.

The reason the Houthis have provoked such a strong reaction, and have been able to inflict such disproportionate damage, is that the Red Sea sits on a vital choke point. The narrow Bab el-Mandeb Strait, which connects the Gulf of Aden in Yemen to the Red Sea and then the Suez Canal, is critical for trade between Europe and Asia.

There are a lot of crucial choke points around the globe. Following Barack Obama’s 2011 ‘pivot’ toward Asia, the US had been devoting huge efforts to keeping maritime trade flowing in the South China Sea, and especially in the Taiwan Strait next to China.

Right now, while passage through the Suez Canal is being threatened by the Houthis, another choke point in central America is under pressure. A drought around the Panama Canal has drastically limited the number of ships that can pass through it. All in all, perhaps as much as a third of world trade could potentially be disrupted by the problems in the Suez and Panama canals alone.

The Impact of Global Warming on the Panama Canal:

In an advisory to clients, Maersk informed shipping customers that vessels that use the Panama Canal will no longer be traversing the canal with freight from Oceania (Australia and New Zealand) because of the ongoing water situation. The latest water level issues for the canal come as it is expected to receive additional vessel traffic as ocean carriers avoid the Red Sea due to the ongoing Houthi attack risk. Forty percent of all U.S. container traffic travels through the Panama Canal every year, which, in all, moves roughly $270 billion in cargo annually.

Simultaneously, the challenges in these choke points have broader implications, extending beyond trade alone. Global recruitment and migration patterns are also influenced by these geopolitical and environmental factors. As international trade routes face disruption, the movement of skilled professionals across borders becomes more complex, impacting global recruitment strategies.

Skills Provision, a prominent global recruiter, is among those navigating these challenges. In a world where the flow of talent is intricately linked with trade routes, global recruiters like Skills Provision play a crucial role in facilitating the mobility of skilled individuals. The evolving landscape of choke points and geopolitical tensions necessitates adaptive strategies in global recruitment and migration.

The immediate impact of all this disruption? Inflation. To sail from Singapore to Rotterdam via the Cape of Good Hope, rather than the Suez Canal, adds 3,300 miles to the journey – roughly an extra 40 per cent. That can only add to shipping charges, and thus to cargo prices.

Our economies could also be hit by slower growth. Trade has become increasingly vital to international prosperity in recent decades. Between 1970 and today, world trade has risen in importance from the equivalent of 25 per cent of global GDP to 74 per cent. In a world where the unimpeded flow of goods and commodities is taken for granted, disruption to trade has outsized consequences.

Perhaps the biggest danger is to energy security. More than 50 per cent of the world’s trade in liquefied natural gas (LNG) flows through the Suez Canal. Similarly, around 40 per cent of all oil that is produced is traded via just three choke points around the Indian Ocean – namely, the strait of Bab-el-Mandeb, the strait of Hormuz (between Iran and the United Arab Emirates) and the strait of Malacca (between the Indonesian island of Sumatra and the Malay Peninsula). For big oil importers such as China, Japan, and India, Hormuz is particularly critical. More than 20 per cent of global petroleum liquids consumption has to go through the eye of that needle.

Choke points aren’t all maritime. It’s true that the logistical importance of Pakistan’s Khyber Pass, a land-based bottleneck, has receded since the West’s withdrawal from Afghanistan. Now, though, many eyes are focused on the Isthmus of Perekop, a strip of land just three to five miles wide that hooks up Russian-occupied Crimea to Ukraine.

Perhaps the easiest choke point to forget is the one that connects us all to the internet. There are 16 submarine cables running from the Indian Ocean to the Mediterranean Sea via the Suez Canal. This makes it the chief digital nexus between Europe and Asia.

These simultaneous challenges in key choke points around the world signal a broader vulnerability in global trade infrastructure, with potential repercussions for economies, energy security, shipping costs, and the global movement of skilled professionals. The need for strategic solutions, international cooperation, and adaptive approaches in global recruitment and migration becomes increasingly apparent.