Unit 1.

5 Global Free Trade 1950-2015 12/01/2016

Updated May 2014

MARITIME LECTURE 1
Unit 1.5 Global Free Trade 1950-2015
By 1950 the liner and tramp system had worked
successfully for a century and it was hard to believe that
it could suddenly disappear, but that is exactly what
happened. Although it was immensely flexible, it was far
too labour intensive to survive in the post 1945 global
economy where rising labour costs made mechanisation
inevitable. This meant replacing expensive labour with
cheaper capital equipment and increasing the size of
transport operations to take advantage of economies of
scale
Maritime Economics 3rd Ed page 35-44

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 1

Unit 1.5 Global free trade 1950-2015

Issues to cover in unit 1.5 Charts used in unit 1.5
New era of trade after Bretton Woods 1. Global free trade policies established
Five big developments 2. Key actions at Bretton Woods in 1944
1. Colonial system dismantled 3. World GDP – 50 years of growth
2. Better communications 4. Development 1: colonies dismantled
3. Air travel between continents
5. Development 2: better communications
4. Access to global materials and markets
6. Development 3: air travel arrives
5. Eurodollar market finances shipping
OECD economies grow very fast 7. Development 4: access to global markets
Sea Trade grows even faster 8. Development 5: Euro$ market provides
ship finance
Study Material for Unit 1.5
9. Result – rapid sea trade growth 1950-2015
1. Maritime Economics 3rd Ed p 35-39
2. Quick test 10. World seaborne trade by region 2011
3. Videos and web links

© Marecon Ltd12-Jan-16 wwww.mLecs.com 2

Marecon Ltd © 1
Unit 1.5 Global Free Trade 1950-2015 12/01/2016

S1 Global Free Trade Policies Established

A dynamic
world
 In 1944 the Bretton Woods economy
conference in USA set the
scene for the transition from
the Imperial System
 “Globalisation” would open
the world economy to free
trade
Time, January 21st 1957

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 3

S2 Key actions at the Bretton Woods meeting in 1944

“The objective,
 The aim was to replace the gentlemen, is to
imperial world with a new system create a dynamic
of free trade world economy”

 The meeting set the scene for a

new, global trade framework
 US Treasury Secretary Henry
Morgenthau outlined the aim - "a
dynamic world economy ".
 The World Bank, the IMF and GATT
were founded. Delegates at Bretton Woods Conference in 1944

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 4

Marecon Ltd © 2
Unit 1.5 Global Free Trade 1950-2015 12/01/2016

S3 World GDP – Fifty Years of Growth

Index 1950=100
1,000 World GDP
900
800
700
600 By 2015
500 World GDP
400 World GDP was eleven
300 Grew at average of times as big
3.9% per annum as in 1950
200
100
0
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Five developments drove this change in the world economy
© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 5

Development 1: Colonial system dismantled

Colonies
Colonies
Colonies
Colonies in
ininin2007
18001855
1914

mainly in the 1950s

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com

Marecon Ltd © 3
Unit 1.5 Global Free Trade 1950-2015 12/01/2016

S5 Development 2: Better Communications

 Better communications “oiled the wheels” of
globalization
 In 1957 overseas phone calls had to be booked and
telex was just getting started, but big changes
followed
1. Broadcast telex Siemens T100 Telex machine 1957?
2. Cheap direct dialing
3. Fax Tell him to
counter with
4. E-mail W/S 200
5. Web
6. Skype
7. Smartphones
© Marecon
The Ltd
process is ongoing today
12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 7

S6 Development 3: Air Travel Arrives

• Jet airliners made global

business easier, reducing travel
times from weeks to a single day
• Inter-regional travel became
progressively much cheaper
• It wiped out shipping’s
passenger liners in less than a
decade The first commercial airliner was the
de Havilland Comet I built in United
Kingdom in 1949.

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 8

Marecon Ltd © 4
Unit 1.5 Global Free Trade 1950-2015 12/01/2016

S7 Development 4: Access to Global Markets

Major Oil Discoveries Middle East Oil Production
Bill Barrels pa $ per barrel
• 1924 – Venezuela 10.0 120
UAE
• 1932 – Bahrain 9.0
100
• 1935 – Kuwait 8.0 Turkey
7.0
• 1938 – Saudi Arabia 6.0
Syria 80

• 1948 – Saudi Ghawar field 5.0 Saudi 60

• 1944 – Indonesia 4.0 Qatar
40
3.0
• 1949 – Mexico (offshore) 2.0 20
• 1961 – Niger delta 1.0
• 1966 – Angola (offshore) 0.0 0
1918

1928

1938

1948

1958

1968

1979

1989

1999
© Marecon Ltd
Iran nationalises oil assets 1951
wwww.mLecs.com 9
12-Jan-16 Lecture 1: Sea Transport in the Global Economy

S8 Development 5: Eurodollar market provided finance

 Rapidly growing deposits of LIBOR Interest Rate 1970-2015
18%
US dollars held outside USA
16%
needed to be invested 14%
 The Euro$ market was the 12%
perfect finance for 10%
independent shipowners 8%
6%
 First euro dollar deposit 1957
4%
 Euro dollar loans arranged in 2%
London could be banked in 0%
e.g. Cayman Islands to obtain
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015

favorable tax treatment.

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 10

Marecon Ltd © 5
Unit 1.5 Global Free Trade 1950-2015 12/01/2016

S9 The Result - Sea Trade Growth 1950-2015

Sea trade grew even faster than GDP
Index 1950=100
2,000 Sea Trade World GDP
1,800 2015
Note sea Sea trade
1,600 was 18
trade getting times as big
1,400
out of control as in 1950
1,200
1,000 Sea trade grew at
800
4.3% per annum
2015
600 World GDP
400
World GDP was 11 times
Grew at average of as big as in
200
3.6% per annum 1950
0
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 11

S10 The world of sea trade by region 2011

Sea Trade in 2011

W Europe
M. East Oceania
Africa
N America OECD 3% 1%
5% W Europe
Japan 42% S America 21%
5%
SE Asia
China
China
S America Non
22% N America
Africa OECD 11%
M. East 58%
Japan
Oceania
9%
0

500

1,000

1,500

2,000

2,500

SE Asia
23%

© Marecon Ltd
Million tons imports wwww.mLecs.com 12
12-Jan-16 Lecture 1: Sea Transport in the Global Economy

Marecon Ltd © 6
Unit 1.5 Global Free Trade 1950-2015 12/01/2016

Updated May 2014

The End
Unit 1.5: Global free trade 1950-2015

What to do now:
1. Run through the quiz for unit 1.5
2. Read ME3 pages 35-40
3. Download the text and slides for Unit 1.6
4. Make a date to work on Unit 1.6

© Marecon Ltd 12-Jan-16 Lecture 1: Sea Transport in the Global Economy wwww.mLecs.com 13

Marecon Ltd © 7