The vulnerabilities of JIT to disruption and its subsequent economic impact are well known. Consider the impact of the 17-day strike in March 1996 by a local United Auto Workers(UAW)union at two Delphi Chassis Systems brake plants in Dayton, Ohio. The strike virtually shut down General Motors, halting production lines at 22 of its 29 assembly plants in the USA and Canada. More than 75,000 workers were without paychecks at parts and assembly plants from Chihuahua, Mexico to Lordstown, Ohio to Oshawa, Ontario.^xxiii The strike lasted long enough to shave a half a percentage point off the growth in Canada's gross domestic product(GDP)in the first quarter of 1996.^xxiv

　

　　It also provided a particularly instructive comment by David Andrea, director of forecasting at AutoPacific, an auto-marketing firm, who said, "There just isn't the slack in the [JIT] system to keep assembly plants running for two to three weeks anymore."xxv

　

　　Indeed, like the Dayton brake plant and the oil refineries, the hub port constitutes a weak link in the global transport chain. The Great Hanshin Earthquake that destroyed the Japanese port of Kobe on 17 January 1995 provides an excellent case study. At the time of the earthquake, Kobe was Japan's biggest international trade hub and a major production and logistics center:

　

　

　　The global impact of the earthquake was best described by the headline that appeared four days later on the front page of the New York Times, "Quake in Japan: Kobe Earthquake Disrupts the Flow of Global Trade."^xxxi The article noted that the "effects of the quake, which made the port unserviceable, were being felt in many parts of the world, with companies in Japan and the United States having to hold back goods. The closing of the port and uncertainty of finding alternate routes had a domino effect."^xxxii

　

　　Yet, the worst fears of Kobe paralyzing global trade did not materialize. The Japanese ports of Osaka, Nagoya, Tokyo, and Yokohama and the regional ports of Pusan, South Korea and Kaohsiung, Taiwan were able to handle the diversion of the ships enroute to Kobe. The global impact was mitigated by the fact that a large part of Kobe's business involved the transshipment of containers. Since the container handling infrastructure was relatively standardized in most Japanese ports and throughout the Pacific Rim, the diversion of containerships was accomplished with relative ease and with minimal delays. The location of transshipment was not dependent on the physical infrastructure, but rather on pricing and service.

　

　　All that changed, however, with the introduction of 6000-TEU containerships. The "6000-TEU" number is significant since neither this specific ship designator nor the container cranes to handle these behemoths were in existence before the Kobe earthquake. The first 6000-TEU ship did not enter service until a year later in January 1996, and the first cranes specifically designed to handle them were on the drawing board when the earthquake struck. The introduction of the 6000-TEU ships has since forced the ocean carriers into a race to "outsize" their competitors by ordering ever larger sizes of containerships. As of 2001, the biggest containership can handle 7400 TEUs.

　

　　The carriers have discovered that bigger is beautiful when it comes to cost savings. In comparison to two 4000-TEU ships, a single 8000-TEU ship requires less capital expenditure for newbuildings and offers up to 20 percent savings in annual operating costs. The prospect of such savings has prompted Ocean Shipping Consultants(OSC)to declare in a recent report that "8000-TEU ships will be dominant in all trades by 2010."^xxxiii

　

　　Since OSC's prediction in 1997, the goal post has shifted to 18,000-TEU ships, dubbed the Malacca-max containership. As the name suggests, these containerships will reach the limits of the draft in the Malacca Straits, which is the key artery for the Asia-Europe container trades. They are currently on the drawing board, but the team responsible for the Malacca concept, Professor Niko Wijnolst, chairman of the foundation Dutch Maritime Network and then member of the Marine Engineering faculty at the respected Delft University of Technology, and Marco Scholtens, a Delft student of Naval Architecture, argue persuasively in their publication, Malacca-Max(2): Container Shipping Network Economy, that such super ships will be a commercial reality far sooner than anyone anticipates.^xxxiv

　

　　The significance of this statement is that as the popularity of these behemoths increases, the fewer ports there will be to handle them. For example, there are only four ports on the Atlantic side of North America -- Halifax, Nova Scotia; Freeport, Bahamas; Hampton Roads, Virginia; and Charleston, South Carolina -- that can handle the latest generation of containerships on order. Yet, only two of the ports(Halifax and Freeport)can handle the >6000-TEU ships fully loaded. Thus, the flexibility of ships and trade to divert will not be as elastic as was at the time of the Kobe earthquake. Not only are there significantly less ports capable of meeting the criteria of handling >6000-TEU ships, they are spread around the globe. This means that the loss of a hub port half way around the world creates a cascading effect, since the >6000-TEU ships represent the linchpin of a fixed and regular delivery schedule on a global basis.

　

　　Consider Figure 10, which depicts a cyber-map of the world's internet coverage. This network of spindly wires converging in key nodes in the cyber universe is similar to the hub-and-spoke network of the airline industries and the one emerging in the ocean container shipping networks. In December 2000, an accidental cut to the world's longest subsea cable system in the Strait of Malacca, allegedly caused by an unspecified "marine contact," brought chaos to web links in Australia, Singapore, and Indonesia, and users in the United States, Europe and elsewhere trying to connect with them. Losses through business interruption ran into the millions daily before repairs could be completed. During the emergency, telecommunications were able to reroute web traffic to another subsea cable, but the cascading effect of the rerouting slowed down the speed of internet connections worldwide.^xxxv

　

　　Now consider the world's busiest port and top container-handling port, the port of Hong Kong where a vessel arrives at or departs every 1.2 minutes; one TEU is handled every two seconds and one passenger arrives or leaves by ferry every two seconds.^xxxvi In order for the port of Hong Kong to manage the volumes and complexity of handling different cargoes all at once, only a sophisticated information network management system could shoulder such a load. Imagine the ensuing chaos to world container movements if Hong Kong's information systems were crippled either by accidental means or more sinister means. The severity of the business losses would, of course, depend to a large degree on how quickly the other regional ports could absorb Hong Kong's trans-shipment business and how quickly the manufacturers can adjust their production schedules.

　

　　With the global port shakeout underway, the eventual winners in the "hub port" sweepstakes may engender significant maritime security implications. This emerging phenomenon has added a new concept to our maritime security lexicon: focal point. Similar to the chokepoint concept, the focal point represents a vulnerable link in the chain of the free and orderly flow of maritime commerce. However, it differs in several important respects:

　

At the same time hub ports are growing in importance as facilitators of world trade flows and as key nodes in the global economy, traditional geographic "chokepoints" may be losing some of their significance - or simply may have been less crucial than we assumed. In a chokepoint closure scenario, no one disputes the fact that the countries nearest the chokepoint would certainly be affected, but they are also the most motivated to keep the chokepoint open. Where conventional wisdom goes astray is in implying that the economies outside the area remain vulnerable to a closure. For example, just about every literary reference to the South China Sea notes the huge volumes of Arabian Gulf crude oil moving through there to Japan, South Korea, and China. Consequently, nearly everyone considers the South China Sea as“strategic”; so much, so that it has become a shibboleth. But is it, in fact, true?

　

In the Chokepoints: Maritime Economic Concerns in Southeast Asia^xxxvi study published by the National Defense University(NDU), the analysis noted that if all the straits, including Malacca, Sunda, Lombok, Makassar, and the South China Sea, were closed and the ships circumnavigated around Australia, the extra steaming costs would amount to roughly $8 billion per year based on 1993 seaborne trade flows. Keep in mind that the extra costs are predicated on the SE Asia chokepoints being closed for an entire year. If some of the chokepoints were re-opened(i.e., only Lombok and Makassar)or the entire closure lasted three months or even 20 days, then the total extra steaming costs would be significantly lower. Even so, the $8 billion number pales in comparison to the $16 billion worth of damages suffered from Hurricane Andrew in the United States in 1992, or the $13 billion amount of sales lost worldwide to software piracy in 1995.^xxxviii

　

　　On a national level, the study points out that, if Arab crude and gas had to divert around Australia, only $1.5 billion/year would be added to Japan's energy bill. If only the South China Sea route closed, crude oil the Arabian Gulf would cost Japan an extra $200 million/year. In either situation, the added costs represent a small fraction of Japan's total energy bill. The annual value of Japan's crude oil imports alone ranges anywhere from $50 to $100 billion, subject to oil pricing and exchange rate fluctuations. The extra costs also pale in comparison to the economic costs inflicted by the Great Hanshin Earthquake in Kobe, Japan on 17 January 1995. Despite the reported repair costs in the range of $90 to $150 billion, overall Japanese industrial production and GDP actually benefitted from increased public works spending for reconstruction efforts.^xxxix

　

　　The NDU study also found relatively little direct U.S. trade interests in the chokepoints. U.S. imports and exports passing through the SE Asia chokepoints accounted for only 3.3% and 4.5% of total U.S. merchandise trade by value, respectively, in 1993. That level has remained relatively constant through 2000. Even more significant is the relatively small economic impact of detour costs on the biggest economies in the region(i.e., Japan, China, South Korea). In context, the adverse impact of such costs are much less than the tariffs, taxes, or other economic externalities in their respective economies. However, indirect economic interests, such as stability in the ASEAN countries, would bear the brunt of the economic impact from closure, could present a compelling rationale for intervention. Certainly less compelling would be on the basis of economics, such as keeping the oil flowing from the Arabian Gulf to Japan, China, or South Korea.^xl

The same could be said of other traditional chokepoints like the Panama Canal, Suez Canal, and Strait of Gibraltar. For example, the volume of trade that circumnavigates the Cape of Good Hope at the southern tip of Africa already outnumbers the volume through the Suez Canal on a 4:1 basis for "strategic" commodities such as grain, iron ore, coal, and crude oil. In fact, virtually all of the Arabian Gulf crude destined for North America, Latin America, and North Europe goes around the Cape aboard very large crude carriers(VLCCs)that can not sail through the Suez Canal due to draft limitations.^xli

　

　　Like the Suez Canal, the Panama Canal has been overtaken by world shipbuilding advances and ship-operating economics that seek to maximize economies of scale. At present, about 17% of bulk carriers and 47% of container vessels that ply key trade routes from Asia, Europe, and the U.S. East Coast can not go through the Panama Canal locks.^xlii In addition, more than 60% of container ships ordered since January 1999 are too big for the Panama Canal.^xliii

　

　　If the straits and canals are becoming the chokepoints of the past, then the Internet and hub ports are becoming the chokepoints of the future. Already world powers are waging high-tech battles to control and defend information systems and cyberspace. And the United States, more than any other country, uses its economic might to strengthen its position around the globe. While a blockage of the Internet or a hub port like Singapore would devastate economies and stock markets, a shutdown of the Panama Canal or Suez Canal would barely register on most of today's economic indicators.

　

　　Not so fast say some proponents who advocate the importance of keeping open chokepoints for economic reasons. They routinely cite the Strait of Hormuz(SOH)as their trump card. The SOH's importance as a maritime chokepoint for the world's oil exports is not disputed. The SOH, however, is a unique chokepoint because of its proximity to the oilfields, which hold two-thirds of the world's proven oil reserves, and the fact that only 10-20 percent of the world's spare production capacity currently lies outside of the Arabian Gulf. Without these two conditions, the SOH would cease to be a chokepoint with global economic implications.

　

　　Moreover, the SOH's "oil" factor is so powerful and pervasive that it has led many to wrongly assume that other chokepoints, which handle large volumes of oil, must be equally critical. First, the assumptions ignore the unique geography of the SOH, as it handles over 18 million barrels per day(mbd)aboard tankers transiting outbound, for which about 65% or 11-12 mbd could not be diverted to alternate loading terminals in the region. Similar conditions do not exist for any of the other chokepoints. Second, there are equally critical minerals and commodities that go by sea, which do not possess the same degree of "politics" surrounding oil. Third, the fact that large volumes traversed a specific chokepoint does not indicate the absolute limits of shipowners to respond to disturbances in the chokepoint. The reason has more to do with market conditions than technological, operational, or even security constraints. The choice of sailing through a chokepoint is strictly a function of market conditions. Suppose one or a combination of the following occurs:

　

　

　　In the first two instances, normal economic events may cause certain shipowners to decide that it is more profitable to shift tankers from other routes that exceed the draft limits of Malacca to traverse the longer route via Lombok Strait, since higher spot charter earnings(due to increased demand for tonnage)on the Middle East to Far East routes offset the minimal increase in bunker costs(due to additional 3-4 days steaming time)compared to market conditions six months earlier. The second is a result of a political decision that set the tariff too high, forcing more shipowners to use the Lombok route. In either case, shipowners made a routing decision based on prevailing market conditions affecting their bottom line. The same holds true even if Lombok were closed as well.

　

　　In assessing the economic value of a chokepoint, the responsiveness of the shipping community to a disruption determines whether the trade is merely delayed due to longer transit times or denied access to the markets. With the exception of the Hormuz, chokepoints generally fall into the former category. The methodical analysis of both trade and shipping through the SE Asia chokepoints and others suggest that as long as there is sufficient shipping capacity to accommodate the increased demand for tonnage in a diversion scenario, the impact of extra steaming costs is negligible on the economies outside the closure area. No instances could be found where economies would be denied access to the trade due to prohibitive transportation costs. This is further buttressed by the real-world closures of the Suez Canal in 1956-7 and 1967-75. In both instances, pressures for outside intervention based on economic rationales did not occur. Why? The reason is simple: The shipping markets responded by providing the appropriate tonnage necessary to carry that trade at minimal extra cost, both financial and political, to the global economy.

The protection and policing of maritime commerce has historically been one of the prime raison detre for navies. The increasing multinational character of the shipping industry poses a quandary for navies, since they represent a national policy instrument in a world where states are becoming globalized. That is, the policy orientation of the state has gradually shifted outward and beyond its territorial waters, and in the process, the nation-state's actions are increasingly being defined by non-territorial actors and global market forces.^xliv

　

　　The difficulty, of course, for states and, by corollary, navies lies in recognizing that they can no longer operate in a vacuum where the only consideration is their national interests. This represents a sea change in culture, and there is enormous institutional resistance to revolutionary change. For navies to successfully manage radical change, the first step is to recognize the "problem" and then take steps to either reflect or incorporate those changes. That means for policymakers and naval planners to broaden the focus from traditional threats, which are political or military in nature, to a more dynamic and unpredictable mix of scenarios, which include non-naval threats that often require the navies to participate in operations involving multiple organizations and multiple countries.

　

　　Given the internationalization of maritime commerce, every nation would require a navy capable of projecting power anywhere on the globe in order to ensure adequate defense of its national economic interests. For example, when roughly half of the world's oil exports come from the Middle East and combined with the transparencies in the global oil market, virtually all nations remain at risk to a disruption of the tanker trade out of the Arabian Gulf.

　

　　A quick survey around the globe reveals that few navies possess such a capability. In fact, today only one, the U.S. Navy, conforms to traditional sea power theory. Yet, even the U.S. Navy is facing budgetary disarmament. The choice for navies is stark: either seek multi-national cooperation or invest in power projection platforms. It is clear that only the former is a practical choice, since few nations have the economic resources to build and maintain a navy with truly global reach.

　

　　Hence, navies with their inherent national orientation must work together in scenarios that have adverse impact far beyond their territorial waters. Examples include trade interdiction, mining of harbors and straits, piracy, illegal migration, drug smuggling, arms proliferation, illegal fishing, and nuclear dumping. The continuing integration of the global economy means that the source of the negative impact on the seas can occur from any point of the compass by virtue of the cascading effect generated by mutual interdependence of not just trade, but also banking, manufacturing, capital markets, etc. Thus, the states must "multi-lateralize" their navies in order for them to remain effective extensions of foreign policy in the 21st century.