Safer Oceans and More Trade Lead to Complex Tradeoffs

The following was written by Seamus Duffy as part of his work for his Microeconomics Class.

In the aftermath of World War II, the United States emerged as the only superpower with a truly massive navy. No other country on the planet possessed a navy which could claim to support maritime operations anywhere on the high seas simultaneously. In the modern day, this fact is no less true, as the United States possesses half of the world’s aircraft carriers, eleven of its twelve nuclear carriers (the only type capable of continuous operation), and the only supercarriers in the world. The remarkability of such a grand navy has allowed the United States to step in as a guarantor of global security, notably in the global shipping market. Historically, one of the major challenges of shipping goods over water from point A to point B had been the presence of political threats in between, some of which may be able to deny access to the commerce passing through. The result was the meager use of maritime transport, and the relative isolation of national economies from each other. The United States’ uniquely large naval strength, combined with its historic commitment to freedom of navigation, changed all of that. Currently, 90% of all trade passes over oceanic links, primarily because of the stability that the US Navy provides. No longer would an unstable geopolitical environment threaten the security of shipping. In doing this, the world’s economy became truly globalized.

This service to the global economy has typically been provided free of an explicit cost, and for good reason too: the ability to control the world’s oceans gave the United States unparalleled political power. The US did demand something in return during the Cold War, as the access to this system often times precluded no small amount of political and military support to the United States. The problem is that this cost of access does not reflect the economic value of such access, especially in the post-Cold War era. The result of this relatively free access to commerce is that trade among nations has exploded in the last eighty years, as the cost of that trade is no more than the cost of the ships required for said transport. It is obvious that oceanic transport has become a common resource, open to all who wish to use it. As with all common resources, however, there lies a tragedy in its overuse.

If there is a principal symptom of this overuse, it is global warming. Nearly two-thirds of all petroleum, a prominent greenhouse gas contributor, produced in the world is traded via the oceans. Global energy supply as the world knows it would not exist without the protection of the US Navy, as there would be no assurance that oil tankers could safely make it from point A to point B. More than just the supply for petroleum, though, the oceanic access provided by the United States also impacts its demand. The principal means of economic growth for developing economies, the greatest contributors to pollution and consumers of petroleum, in the past eighty years has been the presence of export-led growth. Due to their inherently cheaper labor, undeveloped nations can export consumer products to developed nations at a cost far lower than domestic producers in those developed nations. Yet, implicit to this system is maritime security; for without it, the products produced could not safely reach their end markets. Therefore, naval protection also drives demand for petroleum. The high consumption of petroleum is thus fueled by US naval protection of global commerce without charge.

If global naval protection is one of the causes of global warming, then ending global naval protection might curtail a large amount of greenhouse gas emissions. While such a policy would preclude the loss of significant political power, the US is uniquely positioned to do so economically: most of its energy is sourced domestically, and its non-maritime bilateral trade represents only 8% of GDP. The economic consequences, therefore, of ending global commerce are relatively small for the only nation that assures it.