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National Tensions and Logistics
While it has often been said that one man cannot change the world, there is evidence that two men, both powerful and in opposition to one another may, in fact, be able to alter the world.
The men that are spoken of here are United States President Donald Trump and North Korean Supreme Leader Kim Jong-un. Many have witnessed the altercations, insults, and tensions between these two, and many economists, reporters, and analysts fear that there will be a large conflict between the two nations resulting from the tensions between these two individuals (Steele, 2017).
While these concerns should be noted, the more immediate concerns relate to the impact of fear what might be to come, and how this fear impacts economics and logistics.
National Tensions and Logistics
Throughout history, there have been a number of times when national tensions have caused an interruption in logistics, and there have been instances that go back as far as the Old Silk Road and the East India Trading Company (Sparke, 2012). Indeed, the process of globalization, while it has accelerated and been brought into the public eye in the last few decades, is nothing new (Sparke, 2012), and as such, tensions relating to international trade (logistics) have existed for almost as long as these trade routes have been used.
A Case Study
In recent years, there were concerns between Russia and Turkey due to Turkey shooting down a Russian plane that had crossed into its airspace. While these tensions were resolved relatively quickly, and trade between nations did not cease during this time due to the fact that the nations are economically dependent upon one another (Durdag, Safak, Özsoy, & Sargin, 2016), this did not prevent damage to trade and supply routes (logistics) for other nations that were present within the region (Durdag et al, 2016). In the end, this event seems to have actually strengthened the interdependence of Turkey and Russia, and while this has allowed for the increased stabilization of these two nations, the surrounding areas are still facing recovery in greater or lesser capacities from these previous tensions (Durdag et al, 2016).
The Lesson Learned
The lesson learned from this event is that international relations have a strong effect on the logistics, trade, and economics of a specific region. Specifically, in this instance, the region affected was the region that was directly connected to the conflict. The qualitative analysis performed indicates that regions that are interrelated to tensions and conflicts feel the economic and logistical effects of the conflict (Durdag et al, 2016). The implication of this is that, when the nations that are facing conflict are far apart and both are considered large hubs for transport (Park & Lee, 2015), the impact to logistics could be felt worldwide. At this time, this thought is further backed up by the fact that China and Japan, both major international production and transportation nations, are not pleased with North Korea. These strained relations, even without a full war, have resulted in a 0.04% drop in logistics growth for the US, China, Japan, and North Korea as an average, and figures are expected to remain stagnant or worsen as events progress through 2018 and onward (Martin, 2017).
The Current Impact
Regardless of whether the tensions between the US and North Korea erupt into a full war or a lesser conflict, the impact on logistics is present due to the fear of the situation that is being presented (Martin, 2017). Overall, the rising tensions are leading to Japan being more cautious about vessels and aircraft entering its nation, China is preparing to take up arms against North Korea, and North Korea will not be receiving the same volume of continued movement through its own ports (Shin & Pak, 2016), which will prove problematic as experts agree that Korea has become a very important part of the logistics chain in Asia (Araszkiewicz & Antonowicz, 2015), and while most of the imports and exports go through South Korea, the rising tensions are making it more difficult for South Korea to participate in its logistical operations as well (Martin, 2017).
The Expected Results
The longer the tensions are present, and the more pressure these tensions place upon the supply lines and logistics systems that run out of Korea and the surrounding Asian countries, the more negative effects the world is likely to face due to interrupted shipments.
As logistical operations become more difficult to conduct, it is estimated that food exports, major businesses for Japan, Korea, and China, will become limited, driving up these prices and harming the economies of the nations that export these products while decreasing availability of these products within the nation that these are provided to (Norton, 2017). While food is of a major concern, and a damaged logistics system will definitely affect the consumers as time moves forward, there are also concerns that relate to general shipping lines for other products as well (Martin, 2017).
The fact stands that ongoing tensions are likely to see nations directly impacted by the current conflict losing revenue due to broken shipping lines, and it is likely that companies, governments, and other organizations or individuals will begin to see the impact of this through delayed shipments, increased prices, and in some cases the possibility of being unable to move an item into or out of another nation (Durdag et al, 2016; Martin, 2017), which of course may negatively affect logistics, the companies that provide the logistics, and the companies that are depending upon the movement of materials between nations.
Conclusion
All companies that conduct business in any manner that is involved with any type of international shipment that involves importing goods from or exporting goods to Asia must be concerned with the increasing tensions between North Korea and the United States. Further, anyone that plans on utilizing international logistics should become aware that the tensions between Kim Jong-un and Donald Trump are likely to cause more disruptions and increased costs for shipping.
Evidence shows that the political environment that surrounds specific regions has the capacity to impact every aspect of importation and exportation operations, whether this is information that dates back thousands of years or is considered today with our current political environment. Not only can the regions directly concerned be affected, but as time goes on, worldwide logistics have the potential to be disrupted, altering the transportation of goods and affecting the day-to-day lives of millions.
Understanding the potential impact on logistics operations is critical to the safe and effective operation of a business, and being aware of the potential impact of the current political climate is a manner of ensuring that companies are aware of the risks and may take steps to circumvent the risks associated with any international tension or conflict.
Contributor: Stephen Hull
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe, and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.
References
Araszkiewicz, A., & Antonowicz, M. (2015). The role of the Port of Busan in South Korea International Logistics. Annales Universitatis Mariae Curie-Skłodowska, Sectio H Oeconomia, 49(3), 7-17.
Durdag, C., Safak, Ü. D., Özsoy, Ç., & Sargin, S. (2016). The Effect of Political Crisis Between Countries on International Trade and International Logistics: A Qualitative Study on Turkey-Russia Relations. Journal of Economic and Social Thought, 3(4), 497.
Martin, W. (2017). This Chart Shows What a War with North Korea Could Do to the Global Economy. Business Insider. Retrieved from http://www.businessinsider.com/economic-impacts-of-war-between-usa-north-korea-2017-9
Norton, R.A. (2017). If Tension Between the U.S. and North Korea Escalates, How Will Food Logistics be Impacted? Auburn University. Retrieved from http://aufsi.auburn.edu/if-tension-between-the-u-s-and-north-korea-escalates-how-will-food-logistics-be-impacted/
Park, H. G., & Lee, Y. J. (2015). The Efficiency and Productivity Analysis of Large Logistics Providers Services in Korea. The Asian Journal of Shipping and Logistics, 31(4), 469-476.
Shin, S. Y., & Pak, M. S. (2016). The Critical Factors for Korean Freight Forwarders’ Purchasing Negotiation in International Logistics. The Asian Journal of Shipping and Logistics, 32(4), 195-201.
Sparke, M. (2012). Introducing Globalization: Ties, Tensions, and Uneven Integration. John Wiley & Sons.
Steele, M. (2017). The Independent. Retrieved from http://www.independent.co.uk/voices/donald-trump-north-korea-kim-jong-un-nuclear-weapons-holocaust-world-war-three-a7886901.html