Trade leaders urge governments around the world to join Red Sea military efforts

A ship passes through the Suez Canal to the Red Sea on January 10, 2024 in Ismailia, Egypt.

Sayed Hassan | Getty Images

Trade associations representing sectors across the global economy have joined an open letter calling on more governments around the world to join maritime safety efforts in the Red Sea.

The letterobtained exclusively by CNBC, was signed by many of the leading trade groups in the US, including the American Apparel and Footwear Association and the National Retail Federation.

Currently, the US-led Operation Prosperity Guardian is the main military defense effort protecting merchant ships that have been attacked by Houthi rebels in the Red Sea. The multinational security initiative has at least 23 participating countries to date, but the open letter calls for more nations to play a role in maritime security.

“As representatives of organizations whose members depend on safe maritime shipping lanes, we urgently call on countries to join, support or align with the mission to support safe and secure maritime trade in the Red Sea,” the letter said.

The trade groups’ letter comes at a time when scrutiny of military efforts in the Red Sea is growing within countries that have taken the lead, including the U.S.

Senators on the Foreign Relations Committee, as well as House representatives, recently questioned the Biden administration’s unilateral authorization of Navy action in the Red Sea that may be on behalf of foreign-flagged ships. France is one of the nations recently facing political pressure and making a shift to prioritize the protection of domestic flagged ships. Political concerns in the US rose last week after the deaths of five US servicemen serving in the region.

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Despite political pressure, the flow of world trade still depends heavily on the use of foreign ships. U.S. import and export data, in particular, show that most of the country’s trade is carried on foreign-flagged vessels, with less than 3 percent of trade carried by U.S. vessels, according to MDS Transmodal.

The commercial reality also aligns with the United States’ longstanding policy of upholding freedom of navigation for all nations as a matter of principle. According to international law, freedom of navigation is defined as “the freedom of movement of ships, the freedom to enter ports and use facilities and wharves, to load and unload goods and to transport goods and passengers”.

“It is imperative that countries that have not yet joined or aligned with this vital mission do so immediately,” the letter said. “Broad participation and cooperation among nations is essential to signal the importance of free and fair treatment in international waters.”

American Apparel and Footwear Association president and CEO Steve Lamar said in a statement accompanying the letter that governments must unite around “a zero-tolerance approach to prevent attacks on merchant ships and seafarers in the Red Sea and anywhere in the world.” .

Associations from Canada, Bangladesh, Brazil, Portugal, Africa, India, Taiwan and Poland are represented on the list.

The US is conducting Operation Prosperity Guardian as a defense operation in the Red Sea with more than 20 countries providing support. Defense officials told CNBC that four to eight coalition vessels monitor the waters at any given time.

Up to 30% of global trade passes through the Suez Canal and the current diversion around the Cape of Good Hope, totaling $80 billion in cargo to date, adds two to three weeks to travel time, as well as “hundreds of thousands” in additional fuel and labor costs, the letter states. Beyond the economic costs, port congestion, equipment shortages and increases in shipping rates are expected.

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“This alternative route becomes even more difficult during the Southern Hemisphere winter months,” noted Matthijs Crietee, secretary general of the International Federation of Apparel, in a statement accompanying the release of the letter.

Shipping lanes on the other side of the world from the Red Sea are “beginning to be adversely affected”, with cost and capacity issues that are “incalculable”, according to trade groups.

Fares have risen sharply amid Houthi attacks and most major ocean carriers have diverted to the Cape of Good Hope, but there are recent signs that the sudden inflation in shipping may already have peaked. Shipping CEOs note that the industry is dealing with excess vessel capacity caused by the Covid outbreak and the sector’s finances remain challenging amid disruptions in the Red Sea.

The letter also referred to the drought in the Panama Canal, which has burdened the delivery of Asian goods to the US East Coast.

Diversions in the Red Sea, the letter states, are “a global problem that requires the participation and support of all nations that rely on global trade.”

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