Freedom of the Seas

Having just returned from a voyage that included a stop at Gibraltar, I was reminded of just how dependent the world is on ocean traffic and the existence of several major, potential choke points, such as Gibraltar, Suez and the Straits of Hormuz. The US, accounting for more than 20% of the world’s goods and services, probably has the largest stake and the most to lose if there were a material disruption on a major trade route.

Between 1815 and 1914, Great Britain maintained the freedom of the seas as a natural adjunct to its far flung economic interests. Early in the 20th Century it was said, “That the sun never sets on the British Empire.” Keeping the world’s trade routes open was a must. “Pax Britannica” continued to benefit world commerce until the beginning of WWII when German U-boats dominated the North Atlantic and the Japanese exercised significant control over large parts of the Pacific. After WWII, with England a shadow of its earlier economic pre-eminence and both Germany and Japan in ruins, the US., with the world’s largest blue water navy, became the de facto inheritor of Britain’s previous role of guardian of the seas. A job we neither sought nor are particularly comfortable with.

Now what? Many Americans believe that we can no longer afford to be the world’s “policeman” for both financial and political reasons. However, individuals, businesses and investors, are all highly dependent on the free movement of goods and services over the world’s oceans and airways. Someone has to be in a position to effectively address potential disruptors of international trade, whether they be Somali pirates or whomever.

If not us, who?

All comments or suggestions are welcome.

Walter J. Kirchberger, CFA