5 ms·

Keeping the Sea Lanes Open: A Cost-Benefit Analysis

15 points by Thevet 11y ago

SixSigma 11y ago
While the cost of open/closed routes concludes with "little impact", what about the sea piracy aspect? The Somalis already showed us what can happen : in 2013 The World Bank said $18bn a year of increased costs by route changing and insurance. [1] IBM / Rand performed a similar analysis in 2014 [2], they concluded > the total cost of piracy off the coast of Somalia at US$7–US$12 billion in 2010; US$6.6–US$6.9 billion in 2011 42 and US$5.7–US$6.1 billion in 2012. > “While over 80 per cent of these costs were estimated to be borne by the shipping industry, 20 per cent were estimated to be borne by governments,” the report reads. [1] http://edition.cnn.com/2013/04/12/business/piracy-economy-world-bank/ http://edition.cnn.com/2013/04/12/business/piracy-economy-wo... [2] http://worldmaritimenews.com/archives/134829/annual-global-cost-of-piracy-measured-in-billions/ http://worldmaritimenews.com/archives/134829/annual-global-c...
ant6n 11y ago
The author claims the cost for the UK of the navy is 0.6% of GDP, and the cost of not being able to access the Suez canal is 0.06% - ten times lower. My problem with that argument is that the Suez canal is not on the only shipping lane that the UK is using, and thus interested in 'protecting'. Maybe the proportional cost for 'protecting' the Suez canal as part of the whole navy budget is much lower than 10%, in which case the economic calculation may come out ahead.
- cbsmith 11y ago
  None of this figures really have any notion of precision, and yet we're dealing with impacts that are a fraction of a percent. There's more than enough room for fudge factor that it could go either way.
ufmace 11y ago
Interesting, if maybe questionable. The author assumes that all of the non-Chinese trade through the South China Sea could take routes around it - is this the case? Even if it is, if we were to allow even partial blockage, wouldn't that also encourage China and any other regional actors to block anything else they felt like blocking? And if it isn't, what's the economic effect of halting that trade entirely? Particularly on smaller nations in the area whose economies may be more heavily based on sea trade.

15 points by Thevet 11y ago

While the cost of open/closed routes concludes with "little impact", what about the sea piracy aspect? The Somalis already showed us what can happen : in 2013 The World Bank said $18bn a year of increased costs by route changing and insurance. [1] IBM / Rand performed a similar analysis in 2014 [2], they concluded > the total cost of piracy off the coast of Somalia at US$7–US$12 billion in 2010; US$6.6–US$6.9 billion in 2011 42 and US$5.7–US$6.1 billion in 2012. > “While over 80 per cent of these costs were estimated to be borne by the shipping industry, 20 per cent were estimated to be borne by governments,” the report reads. [1] http://edition.cnn.com/2013/04/12/business/piracy-economy-world-bank/ http://edition.cnn.com/2013/04/12/business/piracy-economy-wo... [2] http://worldmaritimenews.com/archives/134829/annual-global-cost-of-piracy-measured-in-billions/ http://worldmaritimenews.com/archives/134829/annual-global-c...

ant6n 11y ago

The author claims the cost for the UK of the navy is 0.6% of GDP, and the cost of not being able to access the Suez canal is 0.06% - ten times lower. My problem with that argument is that the Suez canal is not on the only shipping lane that the UK is using, and thus interested in 'protecting'. Maybe the proportional cost for 'protecting' the Suez canal as part of the whole navy budget is much lower than 10%, in which case the economic calculation may come out ahead.

cbsmith 11y ago
None of this figures really have any notion of precision, and yet we're dealing with impacts that are a fraction of a percent. There's more than enough room for fudge factor that it could go either way.

ufmace 11y ago

Interesting, if maybe questionable. The author assumes that all of the non-Chinese trade through the South China Sea could take routes around it - is this the case? Even if it is, if we were to allow even partial blockage, wouldn't that also encourage China and any other regional actors to block anything else they felt like blocking? And if it isn't, what's the economic effect of halting that trade entirely? Particularly on smaller nations in the area whose economies may be more heavily based on sea trade.