Small and medium-sized enterprises (SMEs) could be increasingly pushed out of international trade by giant corporations if the rise of protectionist trade policies continues. That’s the opinion of Marc Levinson, a leading author and economist who was a guest on the latest episode of the Dimerco-sponsored podcast, The Freight Buyer’s Club, hosted by Mike King.
Levinson’s rationale is that new tariff regimes add complexity that smaller businesses can’t manage. He said on the podcast, “If you’re a giant company, you’ve got a whole staff of compliance people that can help you find the best way around trade barriers. They can make sure that you’re in compliance with this rule or that rule…and they can keep your goods flowing.
“If you’re a tiny manufacturer, you can’t do any of this stuff. You don’t have that kind of staff. You can’t afford that sort of expertise….(As a result, international trade may) become the province of just giant corporations, with the smaller market participants forced to the edges.”
Should that scenario play out, the winners might be global forwarders like Dimerco Express Group that can not only manage the physical movement of goods around the world but advise SMEs on the trade compliance and tariff implications of doing business in particularly countries.
Are container ships too big?
During the podcast, Levinson also questions whether the largest container vessels are fit for the purpose if future trade growth is regional rather than global.
“I don’t think that these enormous vessels are really so practical, aside from the fact that they don’t really seem to have the economies of scale that were promised,” he said. “We’ve seen that they really lack flexibility in the face of a changing world economy.
“The average distance of international trade is becoming shorter… Some trade is regionalizing. In other cases, you’ve got a lot of great growth in new countries (such as the Asia-Pac region) where the distance to trading partners is relatively short.
“So you might want a 25,000 TEU ship to carry freight between Shanghai and Rotterdam, but is it really the most efficient way to carry freight between Shanghai and Mumbai, or Singapore or Indonesia? In those cases, I think the time required to deal with these giant ships in port will outweigh any advantages that may come from the size of the vessel.”
Mr. Bronson Hsieh, consultant to Dimerco and former Chairman of Yang Ming and Evergreen, echoes Levinson’s thoughts in regard to today’s mega-vessels.
“The pace and quantity of new builds should be reduced,” he says. “Most new vessels should serve as replacements for older ships and those on long-term leases. Carriers need a more cautious approach to fleet expansion considering changing trade patterns.”
A Return to Mercantalism?
Levinson also talked about a shift toward protectionist trade policies being a “threat to trade,” citing as an example some of Donald Trump’s presidential campaign rhetoric on increasing tariffs on U.S. imports, particularly on goods from China.
But Levinson said fears in some quarters of a return of mercantilism or a new Cold War were overblown.
“I think mercantilism is probably a bit strong,” he said, “but we’re definitely moving to trade in some parts of the economy being much more driven by governments.”
Explore Solutions with Dimerco Express Group
Visit The Freight Buyer’s Club to subscribe to the Dimerco-sponsored podcast, which is produced for anyone with a professional interest in international trade, shipping, procurement, logistics and air cargo. The podcast features leading decision-makers, analysts, journalists, operators, and shippers who share their take on current freight and logistics markets and the challenges and opportunities.
Do you want to explore the impact of protectionist trade policies on your business, or do you have a current global logistics challenge? Reach out to Dimerco for solutions and expert guidance. Our team is ready to navigate these challenges and ensure resilience against potential supply chain risks.