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How Stretched Supply Chains Hurt Poorer Nations

Is the global economy becoming an insurmountable obstacle course?

Extended and fragmented supply chains are impacting energy, food supplies, and economies worldwide. According to the United Nations Conference on Trade and Development (UNCTAD)’s Review of Maritime Transport 2024, it’s the world’s poorest nations—those already vulnerable to climate change, economic instability, and political volatility—that are facing the harshest consequences.

The Ripple Effect of Extended Supply Chains

The UNCTAD report highlights how the smallest, most economically vulnerable nations are disproportionately impacted by rising shipping costs and the cascading effects on food and energy supplies. The analysis points to a “profound impact” on these countries, often small island states and least developed nations, that rely heavily on maritime transport to keep their economies afloat.

The Vulnerabilities of Key Maritime Chokepoints

Maritime chokepoints like the Suez and Panama Canals serve as the arteries of global trade, and disruptions here have ripple effects on vulnerable economies. For instance, the unexpected closure of the Suez Canal during recent global tensions led to carriers diverting vessels around the African Cape, a move that significantly increased transit times and fuel consumption. As carriers scrambled to maintain schedules, costs soared, putting pressure on already thin economic margins in smaller nations.

In Panama, drought conditions imposed draught restrictions, complicating transit and adding further costs to carriers who were forced to reroute. Vessels bound for the US East Coast initially attempted alternate routes via the Suez, only to re-adjust again due to instability in the Red Sea, resulting in a costly game of maritime musical chairs. East African countries like Djibouti and Sudan, dependent on Suez for over a third of their trade, were hit hard by these disruptions, facing increased transit distances and exacerbated delays.

Increased Costs, Increased Emissions

Beyond economic concerns, these disruptions have environmental implications. UNCTAD reported that longer trade routes, re-routed through multiple chokepoints, contributed to a surge in emissions and operational costs. For instance, a large vessel on the Far East-Europe route can incur an additional $400,000 in CO2 emission-related costs under the EU’s Emissions Trading System, a burden that ultimately trickles down to end consumers in economically vulnerable regions.

Meanwhile, smaller island and developing states, heavily reliant on these shipping channels, have seen maritime connectivity fall by 9% over the past decade, further isolating them from global trade opportunities. Intra-regional trade, which fell by 3% last year, highlights a worrying trend of stagnation in global trade volumes despite increases in intercontinental trade.

Case Study: Intra-Asia Trade

Intra-Asia trade volumes, which make up more than a quarter of the global container trade (over 173 million TEUs in 2023), underscore the strategic importance of regional trading networks. However, with rising transportation costs, these intra-regional networks are struggling, with smaller economies losing ground as supply chains stretch further across multiple chokepoints. This vulnerability not only threatens the local economies within these regions but impacts global trade balances as well.

UNCTAD’s Recommendations for a Resilient Global Trade Network

In response to these challenges, UNCTAD calls for targeted actions to stabilise trade routes and mitigate the risks tied to climate and geopolitical factors:

  1. Strengthen International Cooperation: Encourage collaboration among nations to bolster resilience, minimise disruptions, and create a more secure trading environment.
  2. Improve Monitoring and Early Warning Systems: Invest in early detection systems to preempt chokepoint disruptions, allowing for faster rerouting options and adaptive port measures.
  3. Bolster Regional Trade Networks: Reduce dependency on vulnerable routes by supporting intraregional trade networks that enhance economic stability for the most affected regions.
  4. Prevent Protectionism and Preserve Open Trade Routes: Advocate for global coordination to prevent trade restrictions that could worsen supply chain bottlenecks.
  5. Combat Fraudulent Ship Registrations: Strengthen international regulations to crack down on fraudulent practices that undermine global trade security.

Rising Costs and Fleet Renewal

The report warns that while regulatory shifts towards decarbonisation are essential, they bring additional costs, as alternative fuels like ammonia, hydrogen, and methanol are still pricier than traditional fossil fuels. Although container rates have decreased since the pandemic highs, they remain elevated. The Drewry World Container Index, for example, shows an average rate of $4,058 per FEU this year, which is still above pre-pandemic rates.

UNCTAD also noted that despite a 3.4% increase in the global fleet size last year, only 14% of new vessels are prepared for alternative fuels, indicating that the pace of fleet renewal is lagging. The report cautions that failing to accelerate this transition could lead to heightened regulatory costs, competitive disadvantages, and even sanctions as sustainable practices become non-negotiable in the global market.

Conclusion: A Call for Action

With freight costs and emissions increasing, the impact on the world’s most vulnerable economies is stark. UNCTAD’s report underscores an urgent need for global cooperation and faster action towards sustainable, resilient infrastructure to protect small, economically fragile nations from bearing the brunt of these interconnected crises.


“The impact is especially severe for vulnerable economies reliant on maritime transport, as rising costs erode trade competitiveness, threaten economic stability, and drive inflation.” — UNCTAD


Want to learn more about how you can support sustainable global trade? Connect with experts and join initiatives working to stabilise trade routes and support economically vulnerable regions. Every action counts in creating a more resilient global economy.

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