Piracy Ripples Across the Globe

If you live in Europe, chances are that the crisis in the Red Sea has already affected you. On account of the threat posed by Houthi pirates, the world’s largest shipping companies—including Maersk and Hapag-Lloyd—have stopped using the route leading through the Red Sea and the Suez Canal, which carries around 30 percent of global container trade. Freight rates from Asia to the Mediterranean have more than doubled since December; shipments are being delayed as container ships detour around Africa instead of bypassing the continent through the Canal.

This is no laughing matter. Back in 2021, an obstruction of the Suez Canal by the container ship Ever Given, which lasted for less than a week, had a dramatic effect on supply chains with extremely low time margins. Each day that the Canal was blocked disrupted $9 billion worth of goods that would have otherwise been passing through. For all the talk of on-shoring, friend-shoring, or near-shoring, our daily comforts and material prosperity still depend on trade flows from Asia being unmolested and safe from piracy. Moreover, should the crisis affect oil trade, the world would be in for another inflationary shock, stirring discontent ahead of key elections in the United States and Europe. 

Leading a coalition of over twenty countries in Operation Prosperity Guardian, the U.S. government is responding. “The Houthis will bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways,” a statement by the group’s leaders warns. On January 11, American and British forces in the region struck over sixty Houthi targets with precision-guided missiles. 

 The United States is doing the heavy lifting in the operation, as our allies’ capabilities are limited. Denmark and Greece are sending a frigate each, but Norway has pledged only ten staff officers. Yet, the U.S. Navy itself is increasingly overstretched and hollowed out. “Our fleet,” my AEI colleague Mackenzie Eaglen writes, “will shrink to 285 ships in 2025 and remain less than its size today, at 290 ships in 2030, as ship retirements consistently outpace new ship construction.”

The inauspicious start of the new year drives home an important, yet oftentimes overlooked, point. Globalization and international trade, which have lifted billions out of poverty, hinge on a benign, safe, and predictable geopolitical environment. Piracy or war can do more to disrupt the international division of labor than tariffs or quotas.

In September 2023, my former employer, the Cato Institute, launched an admirable project, “Defending Globalization,” led by Scott Lincicome, an expert on trade law. He promises to “[offer] a strong, proactive case for more global integration in the years ahead,” while seeking push back against old and new forms of trade protectionism and economic nationalism. It is a commendable effort, as is the fact that Cato provided a platform this week to the World Trade Organization’s director general, Ngozi Okonjo-Iweala, to make her case for an open, rules-based trading system. Nevertheless, the focus on minutiae of economic and trade policy and trade law overlooks the real elephant in the room: the threat to globalization from the erosion of “Pax Americana.” No matter how effectively Lincicome and his colleagues make the case for trade openness, the ongoing and the looming conflicts—from the Red Sea, through Ukraine, to the South China Sea—often leave policymakers with few appealing, market-friendly options. 

Strikingly, Cato scholars have little to say about the threat to globalization coming from revanchist powers such as Iran, Russia, or China. In 2020, Doug Bandow chastised as hypocrites those complaining about Iran’s arming of Houthi rebels. Instead of deterrence, the United States ought to “accelerate discussions with the Houthis in search of a diplomatic settlement,” he wrote. Likewise, “American interests in Ukraine are fairly limited,” Joshua Shifrinson assures us—as if the United States were immune to the disruption of the global grains market resulting from Russia’s behavior in the Black Sea. And while strengthening Taiwan’s defenses is desirable, another Cato report suggests, Washington should also give Beijing “assurances”—essentially a veto over what weapons systems are provided to Taiwan, not to mention a commitment to avoid any political gestures that the Chinese Communist Party might view as provocative.

This debate is as old as the nation itself. Thomas Jefferson, in his inaugural address, called for “peace, commerce, and honest friendship with all nations; entangling alliances with none”—seeking to embrace economic openness without embroiling Americans in conflicts in faraway lands. Nevertheless, while a proponent of U.S. neutrality in European conflicts, Jefferson took an unapologetically hard line on Mediterranean piracy, making the case for and leading the United States into a series of naval conflicts with Barbary powers. In doing so, he was different from the “pro-globalization yet anti-entanglement” thinking of today’s free marketeers, as he recognized that trade routes and freedom of navigation needed protecting with a dose of hard power.

It is not just the Right that has its blind spots here—most notably in its rejection of inexpensive military assistance to Ukraine. On the political Left, Israel’s response to October 7 is often seen through the misleading prism of a supposed anti-colonial struggle of Palestinian Arabs, abstracting away from the role played by outside actors hostile not only to Israel but to the West at large. For Israelis, a disproportionate response against terrorists and their sponsors is an existential question. For a small nation in a troubled neighborhood, survival depends on instilling fear in the hearts of their enemies, particularly of Iran.

In some ways, both Israel and Ukraine’s war efforts—just like Operation Prosperity Guardian in the Red Sea—are aligned. Both aim to re-establish the recognition that aggression and terrorism do not pay. More than anything, we should be thanking them for doing the work of the United States as the pre-eminent global superpower. In fact, had we been doing our job properly, none of this would be necessary. It is precisely because our alliance commitments and our tripwires are being questioned—in large part because of America’s unhinged politics and inadequate military capabilities—that we see the jungle growing back. 

This year will be decisive in showing whether order can be restored. Thus far, the Biden administration has tried doing it on the cheap, by sending older equipment to Ukraine and by backing Israel. The Red Sea crisis alone requires us to step up our game, as does the deteriorating situation in Ukraine—and the prospect of a conflict over Taiwan.

Those who value humankind’s progress during the age of globalization should make no mistake. Globalization and free trade—alongside American and global prosperity—are very much on the line in these conflicts, threatened much more by out-of-control geopolitics than by bad trade and industrial policy. For better or worse, we are likely to find out soon whether the world can be made safe for a free flow of goods, capital, and ideas again. 

Dalibor Roháč is a senior fellow at the American Enterprise Institute in Washington DC and a contributing editor at American Purpose. 

Image: Personnel Specialist 3rd Class Kodjo Agbeblewou stands watch aboard the Arleigh Burke-class guided-missile destroyer USS McFaul (DDG 74) during a transit of the Suez Canal, May 15, 2023. (U.S. Navy photo)