“Any disruption to sea routes has serious consequences”

Professor Erhardt, what prompted the ifo study, and why is the topic of maritime trade of interest to you personally?
Katharina Erhardt: For us as foreign trade economists, maritime trade is of course a very exciting topic – it accounts for the largest share of both global and German international trade. Anyone who wants to understand the flow of goods has to look at maritime trade. The crises of recent years have also made us more aware of how vulnerable this sector is. At the same time, we have realised that there is hardly any reliable data on how dependent we actually are on certain routes and maritime bottlenecks.
This is exactly what we wanted to quantify. That’s why we were commissioned by the Federal Ministry of Economics to conduct a study to estimate the extent to which all imported and exported goods are dependent on various bottlenecks at sea.

Your study shows: Germany’s prosperity depends heavily on free sea routes. What makes merchant shipping so indispensable for our country?
Erhardt: The global exchange of goods enables us as an economy to achieve greater prosperity: our export industry can serve international markets, and we as consumers can use goods from all over the world. In a globalised economy with complex production processes, enormous opportunities arise when we can source and use machines and technologies from the best companies worldwide. At the same time, however, these global value chains also make us more vulnerable if access to certain goods is restricted – free sea routes are therefore of critical importance.

Which sea routes are particularly important for the German economy and why?
Erhardt : In terms of the portion of trade that passes through them: the Suez Canal, the Strait of Malacca and the Taiwan Strait are particularly important. Almost ten per cent of German imports pass through the Suez Canal, just under nine per cent through the Strait of Malacca, and more than seven per cent through the Taiwan Strait.
These figures depend heavily on what countries Germany has the closest trading ties with, and which routes are typically used for transport. A large portion of the maritime transport does not occur on the most direct route but along standardised, fixed routes and hubs. For example, a significant proportion of imports from and exports to Asia – our data relates to 2023, i.e. before the start of the Houthi attacks – is typically transported via the Suez Canal. In addition, many Asian countries are key trading partners of Germany.

The dependency on a few maritime bottlenecks is high. What economic and social consequences would blockades or disruptions have?
Erhardt : As German foreign trade is heavily focussed on a small number of bottlenecks, a blockade or disruption would have an immediate impact: The transport costs of many trade flows would increase directly. There are also indirect effects, as detours at sea also drive up costs on routes that are not directly affected. Global trade in goods will become more expensive as a result, companies will no longer be able to serve certain markets as easily and cheaply and will be restricted in their choice of suppliers. In the end, we feel these increased transport costs both as workers and as consumers.

In your view, how should Germany react politically and strategically in order to secure the security of supply by sea in the long term?
Erhardt: Germany has benefited massively from a rules-based world trade order and international cooperation. It is therefore in our best interest that international cooperation is further strengthened for the future and continues to enable us to interact globally. At the same time, we are currently heavily dependent on specific countries and consequently on very specific sea routes for a secure supply of goods. Greater diversification of our trading partners would reduce this dependency.

What role can close cooperation between the government and the shipping industry play in this respect?
Erhardt : The starting point of our analysis was the fact that there is hardly any publicly available information on existing dependencies. Better data would enable policymakers to identify critical dependencies in a more targeted manner and respond to them strategically.

© Tobias Koch

“The importance of maritime shipping and the associated infrastructure cannot be overemphasised for a trading nation like Germany. The supply of raw materials, essential goods and other commodities requires reliable sea routes. This is especially true in the event of a crisis. In addition to traditional national defence, our security policy must also consider economic security, and in particular, shipping and secure trade routes. We urgently need them in an emergency. The aim of the German government is to maintain a strong German-based fleet and to expand it where possible.”

Dr Christoph Ploß, Maritime Coordinator of the Federal Government