Peak trade

By Ian Page - 

I had a recent issue with the assumption that trade in ships would continue to increase massively in the future.

My major drivers are that the two key links Panama and the Suez canals are at their limits and in the case of Panama decreasing. In addition, the bulk carriage of oil and coal decreases with electrification, and localization of value added for minerals has a large effect on the amount of shipping needed.

Gail Tverberg shows that world trade is actually decreasing as a proportion of GDP. 

We can think of many reasons, strategic/defense/ costs of transport and the above, and it may be that the trend has started.

Economists like trade as it theoretically maximizes the efficient use of resources. However, this is only true if the transport costs and infrastructure are ignored as these have to be taken off the advantages of trade. These in turn are affected significantly by the cost of diesel.

Localization allows a different optimization based on minimizing transport. In particular, when different stages in the overall production of a product occur in widely separated countries local optimization of each stage can lead to suboptimal global optimisation and lack of rapid flexibility. This counters the local advantage of having for example one gigantic manufacturer of number 8 screws in the world!



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