Naval power has been associated closely with the protection of commercial shipping since before warships protected the growth of Athens's trading empire. For 400 years, the British Empire expanded according to the maxim "trade follows the flag." A century ago, the American naval strategist Alfred Thayer Mahan codified the relationship between merchant shipping and naval power, influencing and encouraging the development of the war fleets of several nations, including that of the United States.
The naval protection of commercial shipping, in turn, has traditionally been associated with the assurance of free passage through important, narrow sea lanes known as choke points. The ability to pass freely through these points, or to deny passage to adversaries, has long been recognized as an important element of national power. More than 90% of internationally traded goods still travel by sea, and ensuring freedom of navigation remains a primary mission of the U.S. Navy.
In the past 25 years, however, there have been major changes in commercial shipping, manufacturing processes, and oil trading. These developments include the rise of extremely large container vessels and of ports capable of serving them; the containerization of cargos formerly thought inappropriate for such storage; the decline of the U.S. merchant marine; the "commoditization" of crude oil; and the spread of just-in-time manufacturing processes. These changes have rerouted sea-borne commercial traffic, reduced the importance of traditional choke points while increasing the significance of a small number of megaports, and introduced new vulnerabilities to world shipping. The importance of these trends, which will become more significant with time, has yet to be fully appreciated by strategic planners.
For the U.S. Navy, these developments will mean changes in how it protects sea lines of communications and a greater divergence between the protection of shipping for military and commercial purposes. There are important new vulnerabilities to logistics flows to consider. The Navy will need to work with U.S. government agencies beyond the diplomatic and military worlds familiar to it. In addition, there may be a renewed interest in sealane protection, a mission that has lost ground to power projection ashore. For other countries, the emerging maritime world may affect the decision of whether to construct blue-water fleets to protect overseas interests. Finally, countries that may consider impeding shipping will face a more complicated calculus of benefit and risk.
Megaports
The growth and transformation of the container shipping business has the most far-reaching consequences for the U.S. Navy. An increasing percentage of traded goods are shipped in containers, owing both to the advantages of containerization (the cargos are better protected and easier to load and unload) and to the rising excess capacity in the container shipping business, which drives down shipping costs. In 1980, 23% of global general cargo trade was shipped in containers. By 1995, the figure had risen to around 50%. Increasingly, goods earlier thought inappropriate for container transport, such as scrap metal, are being containerized, as are military cargos.
A development of the greatest importance is the increasing size of container vessels and a corresponding decrease in the number of ports that can accommodate them. The new "Super-Panamax" vessels, so-called because they are too large to transit the Panama Canal, are capable of carrying up to 6,000 20-foot equivalent units (TEUs), and even larger ships are being planned. These vessels, which offer both higher speeds and economies of scale, can call only at a small number of very large ports called megaports. Some traditional large ports, such as Hong Kong and Oakland, are simply incapable of handling the new vessels, at least at all tides. Megaports are highly computerized and capable of tracking bar-coded containers from origin to destination. Some have fully automated cargo-handling systems. A "hub-and-spoke" shipping system has emerged in which Super-Panamax vessels move between a limited number of megaports, where cargos are resorted and loaded onto smaller "feeder" vessels for delivery to their destinations.
The drive for greater efficiency has bred alliances among transport companies, making the container industry more international. These alliances offer door-to-door shipment of containers on ships, trucks, railways and aircraft. Consequently, one customer's shipment may travel on several different means of transport owned by firms from several countries. Moreover, because Super-Panamax vessels carry all containers traveling from one megaport to another, one ship typically will carry containers from many different countries. For Americans, this globalization of the shipping business has been reinforced by the decline of the U.S. merchant marine. In 1945, more than half of U.S. foreign oceangoing trade sailed on U.S.-flagged merchant ships. By 1990, the figure was less than 4%. In today's maritime melting pot, it is increasingly difficult to determine which cargos are "American" and thus deserve U.S. naval protection.
The shipping business does not simply serve the manufacturing sector; it also shapes it. The emergence of a highly efficient and predictable system for transporting containerized cargo worldwide has encouraged the development of just-in-time manufacturing. In this concept, factories minimize costs by holding only small inventories of parts and raw materials. They rely on the world shipping system to deliver the necessary components, which may converge from a number of different countries, shortly before they are actually needed.
Declining Choke Points
As megaports grow in importance to commercial shipping, traditional geographic choke points may be losing some significance. The National Defense University (NDU) and the Center for Naval Analyses (CNA) analyzed the importance of Southeast Asian choke points, using detailed data on commercial shipping flows and costs. This region includes the Malacca Strait, the second-busiest in the world after the English Channel. Traffic through Malacca is several times greater than that through the Suez or Panama canals. Nevertheless, the NDU/CNA study found that if access to the Malacca Strait were barred for an extended period—requiring shipping either to skirt Australia or to circumnavigate it altogether—shipping costs would increase by only 0.2% of the cargo's value. The additional cost would be somewhat higher for crude oil at 0.4% of the cargo's value.
Moreover, although the United States trades more goods across the Pacific Ocean than across the Atlantic, a surprisingly small percentage of U.S. traded goods passes through the Southeast Asian straits—approximately 3.3% of U.S. exports and 4.5% of imports in 1993. A broader study of choke points now being carried out by the Office of Naval Intelligence (ONI) yields similar results for the Suez Canal and the Strait of Hormuz. However, more than half the world's internationally traded oil passes through the Strait of Hormuz, and an important development in how crude oil is bought and sold ensures that this waterway will remain important to the United States.
Commoditization of Oil
Before the oil shocks of the 1970s, most oil was traded internationally through long-term contracts with oil companies that were vertically integrated—that is, they owned the entire line of production, from well-head to gas pump. In the 1970s, however, as oil-producing states ruptured their relationships with individual oil companies and began marketing crude themselves, oil companies transformed themselves into trading firms that bought and sold oil worldwide. A world of fragmented oil markets linking specific oil-producing and oil-consuming countries increasingly gave way to a global market in which oil of a given quality trades at a single, world price. In short, oil became a commodity.
The consequence of a single world market for oil is simple and important. A disruption of oil supplies anywhere in the world will influence the price of oil everywhere. The United States obtains only a small and declining portion of its oil from the Persian Gulf—by 2010, such imports may amount to less than 5% of U.S. oil consumption. Nevertheless, the integration of the world's oil market means that a disruption of oil supplies from the Gulf would affect the price of America's imported oil just as if it had come from the Gulf. If the internationalization of container shipping has made it difficult to decide which shipping is "American" and thus needs to be protected, the commoditization of oil has rendered the concept nearly meaningless.
New Vulnerabilities
The internationalized shipping system has serious new vulnerabilities. To begin with, the economic and financial consequences of blocking access to a megaport can be far greater than those of blocking a choke point. According to the NDU/CNA study of Southeast Asian choke points, the additional shipping cost caused by blocking access to a major port would be around 20% of the value of the cargo, as opposed to 0.2% in the case of blocking a major choke-point.
The causes of this disparity in cost are easy to see. Ships can circumnavigate a choke point, but there may be no alternative megaport through which to divert a cargo (as the map opposite shows, these ports are both few in number and unevenly distributed around the world). Moreover, the costs and time delays caused by diverting a ship around a choke point are calculable. By contrast, container vessels depending on megaports follow strict schedules whose disruption could have large and unpredictable economic effects. The very efficiency of the hub-and-spoke shipping system, which makes just-in-time manufacturing practical, also renders it more vulnerable to disruption.
Megaports also are vulnerable in ways that choke points are not. Of course, ports can be closed by the same means used to threaten choke points: surface ship blockade, submarines, aviation, and mining. In addition, highly computerized megaports can be threatened by cyber attack. They are vulnerable to labor strikes, which could be fomented by an enemy. A megaport also could be rendered unusable by radiation, or chemical or biological weapons. Even the claim that a container holding a weapon of mass destruction had been inserted into a port could disrupt operations as authorities frantically sought to find it.
What Should the Navy Do?
For the U.S Navy, these developments have consequences from the tactical level to the grand strategic. Might the most modern developments in shipping practices paradoxically cause a revival of interest in one of the Navy's most old-fashioned, traditional missions? Given the critical importance of megaports to sea transport, might we witness a rebirth of interest in sea-lane protection, a mission that has in recent years lost ground to the task of projecting naval power ashore? Have we had our eye on the wrong ball? Should the Navy shift its thinking on sea-lane protection from choke points to megaports? If so, how should those ports be protected?
The vulnerabilities of megaports suggest that naval planning may have to incorporate other U.S. government agencies to an unusual degree. For example, as commercial shipping grows more internationalized and less associated with individual trading nations, the critical nodes in the system are becoming more national. In lieu of choke points whose access often lies in international waters or is governed by international agreement, we now have megaports built on sovereign territory. To protect shipping in the future, diplomats will be needed to deal with the governments that own megaports. Intelligence agencies and law enforcement agencies will have to contribute to fighting the threat of terrorism and cyber attack. The protection of sea lanes will be far from a purely naval problem.
It is possible that the Navy henceforth will have to safeguard both megaports and geographical choke points. This will be true to the extent that commercial traffic travels via megaports, while naval power projection continues to rely on passage through choke points.
In fact, naval logistics already depend on both sorts of routes. More than 90% of U.S. naval and military cargo needed to fight the Gulf War moved into the theater by sea. Much of it sailed from the United States or Europe on dedicated military sea lift or on leased ships (most of them foreign flagged) moving along direct routes. Some military cargo, however, moved by commercial container ship along normal commercial routes. During the Gulf crisis, the Military Sealift Command contracted with U.S. shipping companies to transport approximately 37,000 40-foot containers of Department of Defense cargo on board regularly scheduled United States to Middle East liner services. Consequently, logistics for the Gulf War depended on both direct and commercial hub-and-spoke routings.
Military dependence on commercial shipping routes seems likely to increase because commercial shipping can be more efficient than the U.S. military logistics system. During Desert Shield/Desert Storm, the Department of Defense took 40-60 days to resupply the same parts that Caterpillar could deliver anywhere in the world in just four days. And if the United States gets involved in two nearly simultaneous major regional conflicts, lift capability would be stretched so much that an even greater dependence on regularly scheduled shipping than during the Gulf War would be inevitable. Greater dependence on commercial shipping routes will increase the vulnerability of military logistics to the same threats for commercial shipping—a problem that will only grow worse as logistics are placed on a just-in-time basis.
As logistics become more dependent on commercial routings, the question of strategic inflexibility arises. Areas of the world near one or more megaports may become significantly easier to supply than others because megaports are grouped in only a few areas of the world. Still another question for naval planners is whether the transformation of commercial shipping might affect the calculations of potential enemies. A megaport may be a particularly attractive target to an adversary. Even threatening to deny access to it could prove to be a potent political lever. But the calculation is a fine one. A threat to disable a port, precisely because such an action would be so disruptive, would be likely to provoke a strong reaction on the part of those nations potentially affected. And the U.S. Navy, in particular, can look forward to pressure from home to "do something" at the first sign of trouble at a key megaport. For example, the fact that Taiwan is home to the third-largest container port in the world adds another strategic dimension to the friction between Beijing and Taipei.
The new shape of commercial shipping can affect a potential adversary's calculations on a strategic level, as well. For example, China's demand for crude oil is expected to increase by up to five million barrels per day by 2015. This will create interests for China in oil and gas pipelines and in shipping lanes from the Gulf. A possible response by Beijing is to develop a blue-water navy capable of protecting the sea lines of communications it requires to import crude oil.
But if Beijing appreciates the denationalization of merchant shipping and the commoditization of oil, then cold reason may tell Chinese leaders that the U.S. Navy is protecting not only U.S. interests but, as a by-product, Chinese shipping. Conceivably, this line of reasoning, combined with a desire to concentrate limited resources on economic development, could lead China to reassess its need for a large navy. Might Beijing even contemplate cooperative arrangements with the U.S. Navy for protecting sea lanes?
Grand Strategy
The example of China leads to the broader topic of how changes in commercial shipping have helped transform the significance of U.S. power worldwide—and heightened the U.S. Navy's role in the grand strategy of the United States. We have seen how it is increasingly difficult to link the protection provided for shipping to specifically American cargos. For the Navy, this harbors both a danger and an opportunity. The danger is that influential voices may question whether so much money should be spent on a navy that, in fact, protects mostly non-U.S. commerce. Is the amount spent for U.S. naval protection of Persian Gulf oil wholly out of proportion to the value of Gulf oil imported by the United States? Is the rest of the world riding free while the United States buys the ticket?
But the matter also can be viewed from a different perspective. The German political commentator Josef Joffe has noted the remarkable fact that since the Cold War ended, the United States has succeeded in maintaining hegemonic influence while not alienating other countries to the extent that they make a serious attempt to balance U.S. power. Joffe attributes this in large part to the fact that the United States, while pursuing its own interests, incidentally provides services to the world at large. Joffe writes that "the genius of American diplomacy in the second half of this century was building institutions that would advance American interests by serving others."
Joffe primarily means NATO, the Bretton Woods financial institutions, and the like. But surely the U.S. Navy and its protection of world shipping fit Joffe's underlying meaning. In fact, the Navy's ability to provide services to other countries while pursuing purely U.S. interests may, as in the hypothetical case of China, move others to desire the continuation of U.S. power. If so, the Navy will indeed have succeeded in "doing well by doing good."
It would not be the first time such a thing had happened. Throughout the 19th century and into the 20th, the Royal Navy that enforced the Monroe Doctrine and protected the East Coast of the United States. The Royal Navy did so as a by-product of pursuing British commercial interests. When Germany threatened Great Britain, both in 1914 and in 1939, President Theodore Roosevelt and President Franklin Roosevelt argued for the United States to aid the British because if Britain fell, the Royal Navy's protection of the United States would fall with it. The Royal Navy inadvertently provided a common good that caused others to desire the preservation of British power.
The transformation of world commercial shipping has wrought a sea change in the way navies must view one of their most important tasks, the maintenance of freedom of navigation. The precise implications of the change must be debated, but the clear first step is to appreciate the new challenges and to ask how to face them. Have we taken it?
Mr. Fox is an American Foreign Service Officer assigned to the political section of the U.S. Embassy in Moscow, Russia.