The head of a global logistics company called on the logistics industry, particularly air cargo stakeholders, to actively support initiatives toward more robust trade as he warned that protectionism was stalling airfreight and world trade growth.
“One big reason trade is no longer growing rapidly is the rise of protectionism,” said Frederick Smith, FedEx chairman and CEO, in his recent analysis of the global air cargo industry. “Over the last few years almost every trading nation has instituted policies that permit greater regulatory intervention in the trade processes—often justified by overzealous security considerations.
“Unfortunately, in many other cases, the protectionism is overt and politically driven. History shows that protectionism—whatever the justification—stifles competitiveness, innovation, and consumer choice. The result of all these factors is that exports have been declining with most major trading partners since CY 2010.”
In addition to intensifying protectionism, Smith enumerated other developments that he said are bringing changes to the air cargo market.
One of these is the miniaturization of electronics, a sector that represents about half the tonnage transported by air.
“Not only is there less weight being transported, but price reductions driven by technology have reduced the value-per-pound. New product introductions that require large main-deck freighters have slowed considerably as the market for electronic devices has been satiated,” Smith said.
Rising fuel prices are another, having increased by fourfold over the past decade and substantially raising air transportation versus ocean shipping costs.
He also noted the growing capacity of passenger aircraft to carry an increasing amount of cargo in their underbelly, and the arrival of new fuel-efficient, twin-engine freighters that provide airlift with much lower unit costs than previous models.
“Except for a brief spike in freight traffic in 2010 when post-recession inventories were finally replenished and electronic product introductions were accelerating, all these factors have put significant pressure on commodity airport–to-airport air cargo yields which have been declining in real terms for two decades,” he continued.
To bolster the air cargo sector, the executive urged a further reduction in current freighter capacity.
He lauded the active Internet marketplace for boosting cross-border e-commerce, door-to-door shipments of smaller packages, and light freight shipments.
“However, most national customs systems are far behind the needs of this market which will impede its growth if systems are not modernized to better handle this type of traffic.”
Finally, he called for support for new trade treaties that promote open markets in order to counter protectionism. “History shows innovation, investment, and larger markets have been the main drivers in improving living standards and reducing poverty around the world.”