Foreign Trade

Goods being loaded to intermodal rail in China. (credit

Foreign trade refers to the exchange of capital, goods, and services across international borders.

The Maher-Melford terminal will be a significant contributor in a service-based industry which is defined by and helps to define the contemporary nature of foreign trade; that is, the international container shipping industry; an industry "which transports more than $4 trillion of goods each year." (Bloomberg, March 3, 2011)

A Touch of Globalization

The introduction of standardized containerisation--an integral part of international shipping, and the central objects of Maher-Melford's services--played a major role in shaping international trade. It dramatically increased the efficiency in transporting goods, cutting costs so dramatically that it became economically viable for manufacturers to build factories in comparatively under-developed parts of the world, where wage expenses were much lower than those found in the manufacturers' own local economies, and ship the manufactured goods to the end-consumers, who were generally in much richer first-world countries. Today, 80 percent of international trade, by volume, is transported by ship; which amounts to 8.2-billion tons of cargo annually.

Demand forecast pre-2008 recession. (credit

The 2008-2009 Recession

The interrelationship between the container shipping industry, in which Maher-Melford will play an important role, and international/foreign trade becomes vividly accessible when looking at the effects of the recent recession (2008-2009). In mid-2008 there were approximately 150-million TEU's in use, but this number fell by roughly 11 percent during the 2008 to 2009 recession. Similarly, 11 percent of the world sum of container ships stood idle, amounting to some 500 ships. Some of the world's largest shipping companies, such as Hapag-Lloyd, the largest shipper in Germany, required bail-outs from shareholders or governments, or both, while others plummeted into bankruptcy.

In 2009, the container shipping industry accumulated losses of $20-billion. In October of 2009, Maersk, the world's largest container shipping company, reported it's first half-year loss since its formation in 1904. Container ships were regularly traveling at half-speed in order to save fuel; for one trip from Europe to China the savings could be as much as $500,000. For Maersk, this reduction in speed is believed to have saved more than £65m in fuel costs in less than two years.

Post-Recession Container Shipping

There is debate about whether or not this slow-shipping method will remain in common practice as the world economy recovers. There are fuel savings to consider, but there is also a major competitive advantage in being able to deliver faster than rival shipping companies, which may see a return to the race to deliver goods as fast as possible. The 'Ecologocial Sociology' blog discussed how the demands of international consumers will also play an important role in deciding the result of this issue. If the current trend towards local-goods becomes more than just a passing fad, a slow-shipping industry could very well continue to be the norm, but it is unlikely to do so if globalization continues along as it has in the last few decades; dissolving local economies in its path towards a unified world-economy.

For Maher-Melford, a movement on an international scale towards local economies is bad for business. Such a change will result in a slow down in the growth rate of, or even a decrease in, the movement of goods across international borders, especially for containers of the type their terminal will service.

In 2011, the container shipping industry is expected to increase by more than 8 percent. The cost of shipping a container of goods increased by more than 100 percent in 2010 over 2009 prices, and shipping companies have said that they will continue to increase their rates as the world economy rebounds. If these predictions come true, the situation looks optimistic for Maher-Melford's future operations.

Canadian Import Figures

credit: Statistics Canada