SINCE the recession of 2008 the main debating point of the investment community has been over the possibility of a sustainable recovery in the global economy, but increased protectionism has caused world trade to grow slower than global GDP and this has had a direct impact on the shipping and airline industries.
Over the last few months, three highly regarded institutions have highlighted the increasing growth of protectionism in the global economy. The World Trade Organisation director-general Roberto Azevedo outlined that the WTO would downgrade world trade growth estimates for 2013 from 3.0 per cent to 2.5 per cent. In addition, 2014 estimates would be cut from five per cent to 4.5 per cent.
A report the EU produced highlighted a "worrying increase in the adoption of certain highly trade-disruptive measures." Interestingly, the emerging markets appear to be the worst culprits with Brazil, Argentina, and India cited in the report's conclusions.
The International Air Transport Association (IATA) argued that almost 500 protectionist measures were taken in 2012 alone. Furthermore, data from the IATA clearly demonstrates that airplanes' cargo revenue and passenger revenue have diverged since the recovery took place.
Cargo revenue is particularly susceptible to protectionism. The immediate consequences can be seen in air cargo and transportation companies with FedEx undergoing a remarkable transformation in profitability in recent years.
In recent years, FedEx has had to retire planes in its express segment because international express and cargo revenues have been less than hoped for. The company still has good long-term growth prospects from e-commerce demand and its internal productivity improvement programme. However, if a trade war escalates, then FedEx is likely to be a loser, according to the US multimedia financial services company, the Motley Fool.
Shipping has also struggled, and shipping companies will be inordinately hit by a trade war, because they rely on future cash flows to at least offset the depreciation in the value of their shipping fleet.
WORLD SHIPPING
16 January 2014 - 22:08
Growing protectionism curtails trade, reduces transport demand: WTO
SINCE the recession of 2008 the main debating point of the investment community has been over the possibility of a sustainable recovery in the global economy, but increased protectionism has caused world trade to grow slower than global GDP and this has had a direct impact on the shipping and airline industries.
WORLD SHIPPING
16 January 2014 - 22:08
Growing protectionism curtails trade, reduces transport demand: WTO
This news 7334 hits received.
These news may also interest you