Posted by Chelsea Craven on Friday, February 04, 2011
As the world watches, the political unrest in Egypt intensifies; the trade community wonders how this will affect global trade. Even though Egypt is not a major exporting country, it is a very important passageway for products from the Middle East and Asia to Europe and the Americas. The Suez Canal and Sumed pipeline are the most significant means of transporting goods from the Indian Sea to the Mediterranean.
If the canal and pipeline were to shut down due to the political unrest, rip tides would be felt throughout the trade community as well as consumers worldwide. Cargo ships would have to take a longer route around Africa and spend additional time and fuel in order to reach their destination. Already high oil prices would increase even more because of the extra transportation costs associated with the inability to use the Sumed pipeline. When oil prices rise, as we know, the economy struggles. European countries would especially suffer.
Furthermore, the political unrest is not isolated in Egypt; other countries in the Mideast and North Africa are gaining ground and emulating the protests in Egypt. The already volatile area around Somalia could become even more impassible as chaos and uncertainty ensue. With such an interconnected world, events that seem so far-off will be felt very near.