Assessing the International Risk to National Economies Posed by a Marine Chokepoint Shutdown
Abstract
The major economic theories of trade (absolute advantage, comparative advantage, factors of production, and new trade or intra-industry theory) focus on the rising benefits that nations derive from increasing trade with one another, but the theories do not address whether economic risks for a nation also rise with its increasing involvement in international trade. Among the most important of these risks is access to advantageous trading routes, and at present there may be no greater potential threat to such access than the shutdown of the constricted seaways and manmade canals relied on in global shipping known as marine chokepoints. These chokepoints, which include the Strait of Hormuz, the Strait of Malacca, theSuez Canal, the Bab el-Mandeb Strait, the Turkish Straits, the Panama Canal and the Danish Straits, expedite ship-borne trade through rather than around continents and island chains, and if one were shutdown, trading distances, trading costs, and thus international trade would be significantly affected.We hypothesize that a marine chokepoint shutdown poses the greatest risk to nations with economies that are heavily reliant on raw material exports (e.g., petro states) for revenues to purchase needed commodities and goods produced elsewhere (e.g., agricultural products), nations that we refer to as having absolute advantage economies. We also hypothesize that a marine chokepoint shutdown poses the least risk to nations that trade the same types of goods with other countries, such as cars and appliances, because these nations, which we refer to as having intra-industry economies, have the capacity to supply domestic needs for a range of goods even if a chokepoint shutdown raises the cost of access to foreign markets or even impedes it. In using the term national risk to a marine chokepoint shutdown, we mean the amount of a nation~s exports and imports that have to be moved through a chokepoint, including the collective contribution of these exports and imports to the nation~s GDP (measured as %GDP).We will evaluate our hypothesis by first using international trade data to classify every trading nation as having either an absolute advantage economy, an intra-industry economy, or intermediate type (defined in the proposal) that we refer to as a comparative advantage economy. We will then use the trade data along with international shipping data and GIS software to map out and quantify the fraction of every nation~s trade that passed through each of the major marine chokepoints over the course of at least three different years, these being 2007 (the commodity bull market), 2009 (the Great Recession) and 2014 (low international oil prices and slow world economic growth). The national-level data for these years will then be statistically compared on the basis of each nation~s assigned economy type to establish whether absolute advantage economies have been most reliant on trade through the chokepoints and intra-industry economies the least reliant. Finally, we will use the international trade and shipping data along with GIS and macroeconomic modeling to simulate how the international trade during the three years analyzed might have been affected if each marine chokepoint were shutdown. The goal of this last stage of our analysis is to model the economic resilience of each nation by identifying the nation~s possible trading options in the face of a chokepoint shutdown. Again, the national level results will be compared based on each nation~s assigned economy type to establish which is at greatest economic risk and by extension potentially societal and political risk to a chokepoint closure.Our proposed research directly bears on themes of interest to the Minerva Research Initiative under Topic#2: Contributors to Societal Resilience and Change by addressing the significance of marine chokepoints to nations~ security and stability in terms of: (i) changes in ownership and/or access to natural resources and goods; (ii) internat
Document Details
- Document Type
- DoD Grant Award
- Publication Date
- Mar 03, 2017
- Source ID
- N000141712311
Entities
People
- Lincoln Pratson
Organizations
- Duke University
- Office of Naval Research
- United States Navy