Sea Control - Sea Control 158: COVID-19's Impact on the International Maritime Industry with Dr. Sal Mercogliano

Episode Date: February 17, 2020

Links:1. https://gcaptain.com/ships-are-skipping-china-and-its-causing-turmoil-for-trade/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter2. https://maritime-executive.com/article/two-cruise-ships-deployed-on-humanitarian-missions3. https://www.wsj.com/articles/u-s-to-evacuate-some-americans-from-diamond-princess-cruise-ship-11581733214?mod=e2tw4. https://www.cdc.gov/coronavirus/index.html5. https://maritime-executive.com/article/coronavirus-policies-disrupt-china-s-shipbuilding-industry6. https://gcaptain.com/coronavirus-to-hit-u-s-retail-imports-in-february/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter7. https://www.bangkokpost.com/thailand/general/1856164/cambodia-welcomes-liner8. https://splash247.com/coronavirus-crude-contango-sees-floating-storage-stage-a-comeback/?utm_source=dlvr.it&utm_medium=twitter9. https://www.bloomberg.com/news/articles/2020-02-10/shipping-is-getting-smashed-by-coronavirus-in-more-ways-than-one

You're listening to Sea Control, hosted by the Center for International Maritime Security. Aloha, shipmates, and welcome back aboard Sea Control. We have a special short notice episode today with Dr. Sal Mercogliano, Merchant Mariner, Maritime Historian, and Associate Professor of History at Campbell University. Sal, welcome back, and thank you for coming on again. Thanks for having me. So on February 11th, the Centers for Disease Control and Prevention announced an official name for the coronavirus that originated in Wuhan, Hubei Province, China, COVID-19. Per multiple reports online, there are more than 71,000 confirmed cases, including 1,770 deaths, and the most recent reporting has identified 26 cases in the U.S.

So our discussion today, however, isn't to discuss epidemiology. It's to discuss the virus's impact on the international maritime community. Sal, I'd like to start with trade because we're seeing a lot of photos online of Chinese ports that are normally teeming with container vessels sitting empty. You used the phrase in a tweet, an internal slowdown in trade has a global butterfly effect. Why is that? Well, first off, we are very interconnected in terms of trade. One of the things that's happened over at least the very last 25 years has been a wholesale increase in the amount of trade moving by the sea. Now, we've always moved goods by the sea. That really hasn't changed much. But what has changed in the recent past is just the quantity of it.

We have just gone leaps and bounds above that. And one of the things that has been developed is something called just-in, just-out logistics. Basically, a lot of firms and a lot of industries don't keep a lot of reserves on stock. It has become so cheap to be able to move things thanks to the introduction of container ships, particularly mega container ships that carry over 15,000 containers and large bulk commodity carriers. And what basically companies can now do is basically avoid having to stockpile goods, keep goods piled up in a warehouse or in a reserve area. Instead, they can just basically free-flow goods in as they need and with very little warning, which is great for a business model where the problem becomes is any disruption in that business model has impact not just in that one business but in untold businesses down the chain. And that's one of the things we're seeing right now by the outbreak of the flu in China is having an impact on the global maritime shipping sector in a way that many are predicting to have cataclysmic effects in some areas and some sectors potentially down in the future. So let me ask you, too, we discussed this in sort of our pre-show meeting.

Why should I care about this as a U.S. Navy officer? So right now in China, what you see is China has been the focal point, obviously, for this disease. It's been originating in central China. And one of the things that the Chinese have done is shut down the area. Thanks to their system of government they have, they have an ability to shut down major cities, major urban areas, and contain the disease, which is great. What we're not talking about here is a proliferation of the disease through trade. That's not the issue here. The issue here now is goods are not moving internally in China.

And China is the largest exporter and importer of goods and raw materials in the world. Once you shut down the trade internally in China, you're stopping the flow of material out of China. And so what we're seeing is container ships. These are the large, massive box ships that are supposed to be loading in ports like Hong Kong and Shanghai are not loading. Matter of fact, reports are coming in from people I know showing me pictures of the port being basically deserted. They're at half capacity. Now, February is always a slow month in terms of shipping, but this is much more than that. And what this is doing is causing a slowdown in the trade.

There was a report out not too long ago about a 26,000-box ship sailing from Shanghai with only a tenth of the container space taken up by cargo. Shanghai is the largest container port in the world. And once you start slowing down the export of goods, that means China is also going to slow down the import of goods. so the import of oil of petroleum of liquid natural natural gas of bulk materials from australia of iron ore is going to slow up you're going to see the cancellation of contracts and now all of a sudden what you're going to see is the chinese economy begin to grind to a halt it's going to start to slow down and if you look over the past 20th century for example how many wars have been precipitated over issues of trade the whole reason the japanese attacked the united

States and the European allies in World War II was because the U.S. embargoed oil to the Chinese. What happens now if all of a sudden, because of flu and danger, that China cannot export goods, they can't import goods because there's not a demand for it? What happens when China finds itself financially strapped? This is the catastrophic issue I'm talking about that we could potentially see. I'm not saying it's going to happen, but it has that potential to happen, such a big slowdown. So you mentioned specifically the 26,000 box ship sailing with only 2,000 containers on board. One, it doesn't seem economically sustainable. Two, has that ship even paid for itself when it set sail with 2,000 containers on board? No. And one of the issues you

have here is that ship has to sail because of the liner service that exists. So those ships and those companies make their money by saying that these ships will sail on X day, arrive in the next for x plus so many days so they have to sail and what you're going to have is a situation where you're going to start seeing contracts and potentially delivery of goods and export of goods have to be in potentially violation and one of the things that they're talking about doing is exercising what's called force majeure force majeure basically translates from the french to mean superior force we would refer to it as an act of god but you know mariners sailors are heathens and they don't believe in God. And so we use the term force majeure. And that is actually

a procedure that was put in place, believe it or not, under the League of Nations way back in the 1920s. And since then has been carried out. There is a separate convention out there of 63 nations. And what it basically means is in the maritime trade that you can cancel or postpone a contract contract if there is an act of God or a superior force at play. What we're seeing is the beginning of those execution of those force majeures. Hey, I don't need that load of bulk material coming in. I'm going to have to cancel. It's not my fault I'm canceling it. It's because of this disease that's happening, which is a force majeure. Therefore, I don't have to pay for it. The design of the force majeure was to not really cancel the contract, but to delay it or push

it back. You'll eventually need that commodity, so we'll just push it back at times. The problem is once you start delaying those it's going to have again this domino effect this butterfly effect we talked about of impacting other sectors of the trade once china slows down again china is the focal hub for a lot of trade you know 63 of the world's trade is on this europe you know asia the european route and if goods are not coming out of china imports aren't coming in and that's going to have a slowdown on the entire world economy uh and it has the potential to be a drag on on all the world's economy. In the pre-show, we mentioned the shipbuilding industry as well. And that was one of the affected industries here is that two weeks ago, Chinese shipbuilder Jiangsu

New Time Shipbuilding Company declared force majeure. What impact are you seeing in the shipbuilding industry? So on January 1st, 2020, IMO 2020, the International Maritime Organization 2020 rules went into effect. And what that required was ships to basically burn either low sulfur diesel fuel to reduce their carbon dioxide emissions or one of the things that a lot of companies are doing are installing scrubbers basically scrub the exhaust get the carbon dioxide out and allow you to burn cheaper fuel that's not as clean well china is the largest shipbuilder in the world 40 of all commercial ships come out of china and a lot of companies have booked into Chinese shipyards to have scrubbers installed. Well, as Chinese shipyards are closed because

they don't want to have people together in this environment because of the virus going on, you're seeing companies are not able to come into China to get the scrubbers installed. Another aspect is China stockpiled a good chunk of the world's very low sulfur diesel fuel in barrels, excuse me, in tanks in storage sites throughout China. And what you're going to see now is people are unable to access this fuel and it's having an impact on the trade. And it's largely because, again, China is such a focal point in the maritime trade, controlling the second largest merchant marine in the world. When you combine Chinese flag and Hong Kong flag, this is having a massive impact. This slowdown is having that butterfly effect across the spectrum.

So what it sounds like to me is we're looking at an enduring slowdown. The coronavirus could be expunged tomorrow, but we would still have this enduring slowdown caused by the fact that all these Chinese ships are still going to, or all these vessels are still going to require the scrubber installs and everything else, all the maintenance that's going to be required in shipyards. And that's going to have to be made up at a later date. And until then, those ships aren't going to be available for trade. Is that an accurate statement? Right. And in quota, there was a story in G-Cabin that talked about this. You know, if you think about it, you know, ships are lagging behind the demand so i mean ships right now are sailing that are loaded with goods that

will be on the shelves you know weeks later and one of the things that we're seeing is when you shut down the internal transportation system of china and elements for example for the car manufacturing industry are not being manufactured and produced well there are car builders in the united states that are waiting for the arrival of parts that are going to go into future cars now some of those parts are already crossing the pacific they have been loaded already they were in containers they're on the way across but for later months there's going to be a gap in the transshipment of those goods and so now all of a sudden car manufacturers sitting there not today not tomorrow but in the weeks ahead we can't finish the cars on our production line

because we're missing these components that are now all of a sudden held up because of the the slowdown that's going on in China. And, you know, this impact is not just in the delivery of material for construction, but China, the Chinese themselves occupy a unique aspect in the maritime sector. You know, many crews are Chinese in origin. So a lot of Chinese provide a lot of mariners out there. And now all of a sudden international airports are shut down in China. People are not being allowed to be moved out of China. And so crews on board the ships are not getting reliefs. You're unable to send people back home.

You're unable to relieve crews on board the vessels. And that's going to have an impact, too, on the ability of ships to sail. If we want to quantify this by counting ships at sea, MarineTraffic.com reported 4,896 ships reaching port in China in the week preceding February 11th. in the same period one year ago, 5,955 reach ports. So that's a difference of roughly 1,100 ships. What do those numbers actually mean? What products outside of containers are we moving?

Well, I mean, that's a 20% reduction. So, I mean, when you see that level of a reduction, that's really significant. The other issue that even marine traffic can't acknowledge is how many of those ships are just sitting there waiting to be cleared to go someplace else. If there's not a load for it to pick up or if it's not able to discharge that cargo, are they going to have to go somewhere else? And, you know, this is the kind of the impact we're having. You know, someone used a comparison not too long ago. I tweeted it out.

They were comparing this to SARS back in 2003. Well, the Chinese economy is much stronger today in 2020 than it was in 2003. Not only that, the amount of goods that's being shipped has increased a tremendous amount since 2003. So even just tracking the movement of ships really doesn't do it the justification to go back to the container ship we talked about earlier. You're seeing a ship move in and out of China, but it's at only one-tenth capacity. And so even the slowdown doesn't represent the fact that some of these ships are going to be sailing light without the requisite cargo on board. And again, the impact this has is very hard to determine economically and the impact it has across the spectrum. But what happens when a nation with your China with the second largest economy in the world all of a sudden have its gross domestic economy shrink precipitously and all of a sudden they can't afford to move goods in and out of its harbors?

That's the impact that the Navy and military professionals should be thinking about. What happens when you have a desperate China and a population now that can't be sustained? How analogous is this to what you would see in the case of a conflict where Chinese trade might be more restricted? That's a good analogy to look at because, again, you know, we're not talking about that Chinese trade has stopped, and it hasn't. Goods are still moving. But, you know, if you want one of the great indicators to see right now, you just have to look at the passenger liner trade in East Asia. You know, two weeks ago at this time, there were 21 ships that were in and out of ports throughout East Asia. You know, East Asia is the largest passenger trade booming sector in the economy right now.

It's growing at a tremendous rate. Matter of fact, the major cruise lines were all building ships specifically for the China trade. And, you know, 21 ships in and out of port, if you look at a system like Cruise Tracker or Cruise Critic, which tracks the location of cruise ships around the world, one of the things you'll see is East Asia is devoid of ships right now because there's no ships going in and out of China at all. As a matter of fact, a lot of the cruise liners are diverting ships for other purposes. Royal Caribbean just announced that they're sending one ship down to Australia

and one over to California to support the first responders in fighting forest fires, which I think is a great attribute to Royal Caribbean to do that. But it should also be clear the only reason they're doing that is because those ships had no business because the routes they were going to go on in East Asia have dried up, and no one's going to go on a ship right now in that area. Yeah, and I've got a couple of questions on the cruise industry coming up here and specifically what it's like on board those ships. But I want to go back to a little bit of trade here.

G. Kappen published an article on the impact of U.S. consumer imports. Given the quantity of products we see with Made in China on the label, what kind of impact can we expect here? Well, I think, you know, I had a great discussion. I teach a course in maritime industry policy, and one of the things we talked about is what is this impact going to have in the maritime sectors in domestic economies like the United States and Europe and around the world? And is there going to be a hesitation to buy goods made in China because of the virus? There's a potential for that. And again, what I'm talking about here is not a contagion-style disaster taking place.

We're talking about the impact of whether it's this version of the flu, whether it's a hurricane, a tsunami, any sort of disruption we see in the trade, it has these effects. We've seen examples of this in history. Back in 2016, a major container liner, Hanjin Marine, collapsed, and it was the seventh largest container ship company in the world. And what we saw was a brief little disruption in the movement of goods. People couldn't get their goods off the ships, but other carriers swooped in there and were able to suck up the transport and cover those rates. We saw Maersk get attacked by a cybersecurity threat that shut down Maersk lines for a few days. They weren't able to load and move goods. They were able to get around it, fix it, and be able to get back up and running, but it did create a slight disruption.

The question becomes, will this disruption going on in China right now cause a moment of hesitation among everyone who sits there and says, it's fine to have your goods moved on, foreign flag, constructed overseas, we're in a global economy now, this is good. Or is it going to make some nations sit there and go, well, it's good to be in a global economy, but we should still have a reservoir of construction, domestic production, domestic shipping to make sure that when these disruptions do happen, we can be able not to be at the mercy of outside sources. Our previous discussion we had was my analysis of how the situation is similar to World War I. And in many ways, I go back to that. Disdisruption we're seeing right now is really out of our hands. It's nothing the United States can do. We've offered help. The CDC and other agencies are helping out as much as China will accept it.

But more importantly, we're going to be governed by what happens in China without any real input from us. And so I think the made in China label may be an important one going down the future. Do we want to make sure our entire world economy is being driven by one nation? Does this represent an opportunity for the U.S. or any other country? And if so, who is poised to take advantage of that opportunity? Well, I think it should make everyone think for a moment about what should be their overall trade and shipping policies at this time. Again, if you're a small country, you don't have a large footprint overseas. and you're fine with having your goods moved on different ships, you can probably alter.

I'm sure there's other countries in Southeast Asia right now who are seeing an opportunity here to jump into a trade that maybe China is vacating, and that's great for them. But for a nation like the United States or the European countries or other major powers out there, They're going to sit there and question, wait a minute, can we really be dependent on one nation like China to provide us with key components for our industry? And I think it's an opportune time to do that. Again, we live in a global world. There's nothing you can do to prevent a situation like this from happening. But you can minimize it by perhaps thinking about what protections and legislation should be in place to ensure that we're not 100 percent dependent on an outside force for us.

again, when you have a global commitment like the United States, it's probably a good idea to have a reservoir of shipping of industry back in the United States so that if you ever do wind up in a peer-to-peer confrontation, you can handle it and not be dependent on a nation like China in this case, who again is suffering from a disease that is having a secondary effect on their nation. Shifting gears a little bit here because I've seen a number of tweets, stories, links referencing the baltic dry index what is the baltic dry index what does it measure and what effect have we seen on it from covet 19 so the baltic dry index is kind of like the dow jones for moving iron ore and bulk materials uh it generated out of uh medieval trade out of the baltic moving things like trees

and iron ore and all those materials and ever since then the index is really as much like the Dow Jones Industrial, it gives you a measurement of how trade is moving. One of the indicators is when the Baltic index is declining, as it has been, that tells you that in the future it's going to get cheaper to move bulk goods, or more importantly, the demand for bulk goods is going down. One of the big changes we've seen over those past 25 years is we're moving a lot more bulk goods, iron, vegetables, grains, minerals, you name it, around the world. A lot of blossoming economies have a need for material, for resources.

One of the things that the Baltic Dry Index tells you and allows investors to basically short or buy commodities for trade, but it's a good indicator for us. what the baltic dry index will tell us is okay the world's economy is slowing up or it's slowing down and it has been dropping to a pretty low level recently you got to go back to 2008 to really find it at such a low level right now and what that's telling us is again the demand for bulk material is is going down because china is not consuming the bulk material because the factories are shut down and internal transportation is shut down in china can you quantify what you mean by low level i hadn't seen the number i mean usually one of the things i will i will always

reference and a great resource to look at is the united nations the uh what's called unctad the united nations conference on trade and development put out every year since 1968 what's called the review of maritime transport comes out in november uh and it is a great gauge for measuring world trade. And it has everything in there from tonnages and materials in there. Now, of course, it's for last year. So it's not a great guide for telling us what's going to happen in the upcoming year. But one of the things that we see, you know, the last time again in 2008 is you saw a dip in the growth. I mean, overall, we've seen world trade just increase year from year from year. But after 2008, we saw a dip. It didn't stop, obviously. It just self-corrected itself

and now it's back on that upward trajectory the problem we see right now is we just don't know how long this lasts in china how long does china keep everything shut down you know do they declare hey come april the weather's warm now and now all of a sudden everything's good and we can start you know start uh consuming goods again or does it get to the point that this virus begins to have outbreaks around the world and now all of a sudden people don't want to trade with china And I think that's the scary scenario right there. If all of a sudden China finds itself, person non grata, betrayed, how does China react to that? And I can't imagine they react very well to it. Yeah. Shifting gears, I have a couple of industry-specific questions. The first being, what's been the impact on the petroleum LNG shipping industry? Are those ships getting through, or are they arriving, discharging cargo, and then being quarantined? What's happening there? The ships aren't really going into port. I mean, one thing about LNG and oil tankers is they tend to pump offshore at discharge facilities. So vessels going in aren't really being quarantined. There's not an issue if the ship's coming in unless there's an indicator of an infected crew member on board.

There's been a couple of those indicators out there, but those are usually Chinese crew members and crew members who have come in contact with the virus, and at which point the ship will be quarantined for two weeks and held out at quarantine acreages. But right now the demand of oil and liquid natural gas is decreasing. And, you know, an oil tanker loaded with oil is just going to sit there and wait and usually just sit there and wait for a broker to come up and say, okay, you can discharge your cargo here. It's not as easy with liquefied natural gas because you have to keep that cargo super cooled,

and it's really difficult to do it with a ship sitting at anchor. So that's a big problem. If those ships cannot offload, they face a situation where there's always a bleed off of cargo. They're always kind of venting cargo. But sitting out there, it's very hard to keep that cargo cooled to the point where they can keep it on board. They really need to discharge it or else they start losing cargo, and they may have to return back to storage facilities. The problem is finding storage facilities that will take them.

The biggest exporter of LNG right now is the United States, number one, and then also Qatar. Qatar is not great because of issues in the Middle East, and the United States is exporting so much LNG that it would be very hard for us to take it back because of storage facilities. And so what you're probably going to see is ships start being laid up. It's not unusual in the tanker industry for this to happen, when all of a sudden, because of the spikes in the oil trade, for ships to be laid up, if you ever look at a quick little snapshot of marine traffic, for example, off Singapore, you'll find oil tankers in rows out there just sitting, waiting and waiting, sometimes empty, sometimes loaded, waiting for all of a sudden for a demand to come up, and they'll dispatch them and send them off. But what you're seeing now is more and more ships being laid up. The trade is just slowing down.

And I think I've also seen some notes, I can't remember if it was Jeep Captain or elsewhere, about floating storage coming back into fashion. Is that something you're seeing? Yeah, that's these tankers sitting off there. So, again, oil tankers will double as reserve facilities. And they'll sit there and anchor. They'll go minimum crew and just enough to maintain themselves. And then all of a sudden, when brokers are able to sell that cargo, they'll come back up and go. I mean, it is not unusual off of Singapore, for example, to see ships lined up.

Same thing with Fujairah and some other sites around the world where you'll see that happen. Again, you can do that with an oil tanker. You can do that with a VLCC or an LR1 or an LR2, but it's difficult to do that with an LNG-type carrier because it's difficult to sit still with that cargo on board. You really need to plan up for the cooling process. And more importantly, it's just that cargo is not designed to stay on board for that long period of time. so how about the fishing industry i know the chinese have very robust fishing industry both in the south china sea and then ranging as far afield as the west coast of africa i'm sorry

east coast of africa so what impact are we seeing on the fishing industry well the fishing industry is is one that hasn't gotten the attention it probably deserves because again a lot of the The fishing industry is done by small vessels, obviously, going out, netting in, and then filling into larger processing vessels to bring it in. Fish is the commodity that feeds the Chinese. If those vessels are not continually moving, if they're not harvesting fish out there, that creates a problem. What you're seeing, again, has to do with this crewing problem, getting people out to those vessels to replace the crews on board. basically, we're seeing very difficult to move crews around out there. And again, those are some of the lowest tier on the shipping scale are those crews on those fishing boats. And again,

all you're going to need is a crew member not to have, you know, the coronavirus, but just to have a common cold. And the impact that's going to have on communities when these fishing vessels come in, it's going to shut down any sort of participation or help for them. And if China begins to starve it's because they're not getting the fish they need and that's a vital commodity that has to keep going again we tend not to think of china as a massive maritime power but if you look at ancient chinese history go back into the 1300s the voyages of zhang he you know china was a is a massive maritime power everything is connected to the major rivers the grand canal everything's got to flow into that country to keep it surviving and one of the things that

China has been doing is buying fishing rights from countries throughout the world, going in and using the fishing fleet. But again, hauling fish out of East Africa is great, but you've got to get into the processing ships. And then those processing ships have got to get to China to be able to offload. But as those ships pull into China, as they go pier side, are they going to encounter issues with this virus that's going to make them basically a hazard coming into East african ports not seeing it as of yet but that's something to be on the watchful eye for so we've talked a lot about product let's talk about people now in the cruise industry the westerdam is a holland america cruise liner that has now been barred from entering ports in japan taiwan the

philippines guam and thailand on february 13th ships owner announced a ship carrying 1455 guests and 802 crew would be allowed to dock in cambodia so all reporting indicated there were no windows. There were no cases of the virus on board. She had left Singapore on January 16th. Cruise ships, I know the perception is they go on these long trips, but really they're moving port to port, relatively rapid succession. They don't typically remain at sea for a long period of time. What are the logistical considerations for staying at sea and continuing to support that many people? Well, the Western Dam was a great example of this. So here's the Holland America line vessel and as you mentioned before there was not an indicator that there was any virus

on board the ship she was pretty clean according to all reports yet no country was willing to allow her in because of a visit she had to china and so she basically was was you know a ghost ship sailing the east east china sea looking for a port discharge eventually got it in cambodia it depends on the nature of the vessel these vessels are good for about a week to 10 days based on the supplies on hand. Again, you know, they're self-contained cities. The problem is they're very tightly packed self-contained cities. And one of the potential threats you have on board is once you have a contagion on board, it's going to spread. But more importantly, if you think about who's on cruise ship, you know, what type of people go on cruise ships, you know, the large

percentage of them are fairly elderly people go on them. They are the most susceptible to a flu-like disease they don't have the immunities they don't have the ability to fight it medical facilities on board ships are pretty sparse i mean they have enough to handle slip falls and accidents with the pretend with the idea of stabilize and then get them off the ship to superior medical care if you have a major breakout like they did for example on the diamond prince princess diamond then that's entirely separate situation but i think going back to what we mentioned before what we're seeing here is the passenger industry again and it's dominated by three companies and three companies only that's carnival that's that's world caribbean and norwegian they own a batch of sub brands

they are doing everything they can now to avoid this from happening so for example the queen mary which is a canard line but owned by carnival was on a round the world trip i think it was a 90 day round the world trip she was going to have two weeks in east asia she is boycotting the east Asia run, and she's going to spend an extended period of time around Australia, New Zealand, and just avoid all of East Asia. And I think that's what you're going to see. A lot of these cruise lines are going to kind of bolt out of here and leave. But most of these cruise lines made a big investment in East Asia.

They were counting on the 4.5 to 5 million people a year coming out of East Asia to cruise. And that's going to be a hard hit. These companies can take it up. They can suffer this loss, but it's going to cause a big disruption in their industry. I think one of the things, as Americans, we're going to see is some cheap cruises coming our way along the West Coast and potentially the Caribbean here, because there's going to be a lot of empty boats sailing around that are going to be looking for passengers. We've talked about Princess Diamond a couple of times now. You mentioned at least several dozen passengers on Princess Diamond tested positive for COVID-19.

The ship carrying 3,700 people is quarantined in Yokohama, Japan. What is the situation like on board for the passengers and crew? Does everybody just hold up in their rooms in that time? How are they being fed? Do you have any insight into what operations are like on board, whether from reporting or your own sources? Sure. Fortunately, there's been quite a bit of reporting coming from internal on the ship. The passengers, again, here's a ship that has been infected with the disease.

We know for a fact that there are cases on board. What the Japanese have been doing is a very good job of keeping this quarantine. She's in Yokohama at an isolated pier. As patients are diagnosed with the disease, they're taking off the ship, transported by ambulance to medical facilities to be treated. Everybody else is asked to remain in their cabins, But they're allowed to leave their cabins as long as they're wearing protective masks. And they can go about the vessel as they want, but they're basically told to be in their cabins.

Food basically ran out. The standard food on board ran out after two weeks, but they've been resupplied by the pier. A lot of Japanese cuisine, which doesn't always agree with everyone, is being brought on board since obviously they are in Japan. But the bigger issue has to be the fact that the United States has announced it's evacuating the Americans off the ship. And this is ahead of the quarantine expiration. Basically, 14 days has been determined to be enough time to clear vessels or clear patients from this virus. And the plan was for everybody to remain on board for four more days, and then they would go through a blood screening. If they were clear of the disease, they would have been released from the vessel free to go where they wanted to go.

Instead, the United States has interceded, and they've basically told all Americans on board if they don't take the opportunity to fly out on these American transports that are provided, then they can't guarantee they'll be let back into the United States. And one of the passengers on board has voiced opposition to that. He was on Fox News last night and talked about the fact that the Americans should just leave him alone. You know, he was talking about the fact that he's in a cabin with a balcony. Everything's fine. Everything's good. It's not so great if you're in an interior cabin because it gets a little bit claustrophobic, but everything's good. They're treating them well on board. And, you know, a few more days, they'll be clear.

What's going to happen now is those Americans will leave. They'll be transported to the United States to Air Force bases and then quarantined for 14 days. Now, let me be clear. There's no doubt in my mind that the U.S. will be extremely well protecting these people. I don't expect to see the virus spread out of this group. The concern is if the Japanese are going to allow the Americans to remove their nationals, what about other nationalities who may not have that same level of protection and medical support as a nation like the United States? And I think, you know, one of the issues you have at play here is this vessel, this ship in particular here that's in Japan, is not a U.S. flag vessel. It is a ship owned by Princess Cruise Lines, which is flagged, I believe, in Panama. And it's under Japanese laws.

It's in Japanese territory right now. And, you know, Americans have to realize they surrender certain rights when they board vessels flagged from other nations and sail into other nations' waters. under the UN Convention on the Law of the Sea. And it sets an interesting kind of precedent here for the United States to go ahead and request this movement of people off the vessel. I think the cruise lines have acted very well in handling this situation, along with the Japanese authorities. Japan does not want to see this disease all of a sudden spread into Japan. And again, I think this goes back to the issue of the impact this may have on china down the road because you know if you read the literature in east asia if you read you know papers in japan and korea vietnam they

identify this not by the politically correct term here you know the the covid 19 they're calling this the wuhan flu they're referring this as to a chinese flu and you know rivalries between east asian states is pretty severe especially japan and south korea which are really upset with the way China builds ships. The second and third largest maritime nations in the world are Japan and South Korea. And this is an opportunity for those two nations really to kind of step up and take a better place in the terms of maritime trade. So you mentioned the Japanese allowing in Princess Diamond and quarantining her. Then they denied Westerdam access. What recourse does the shipping company have at that point? Well, you know, the shipping companies, particularly the

cruise lines do have some leverage with with nations because again nations want that business they want cruise liners coming in and dumping 3 000 to 5 000 passengers into their towns and communities because of the obvious monetary influx that has but at the same time these nations are concerned about the the spread of this virus and the potential it would have to cause what's happening in china internally in their nation plus a lot of these nations don't have that that form of protection that they can shut down their nation like china does and in particularly the case of the westerdam the westerdam basically found itself shut out holland america and its parent company were not doing a very good job in trying to ascertain or

clarify the fact that the patients were clear they were also a little bit of a debate about what constituted them being clear of the disease and you know finding cambodia to do it was was a fortunate one because if not the ship would have had to find an alternative source to go reading from tweets and posts from people on westerdam everything was fine on board there was no issues really on the ship i think a lot of people seem to be fine with what was going on the question was what happens after this all dies down are these shipping companies now going to have a much tougher line going to countries sitting there saying hey we remember what you did we're not going to you know book our ships into your ports now we're going to go to someplace else and you

see that happen in the caribbean all the time you see it happen in other places and again that's part of maritime trade lots of times if you can't control the ports or if you don't have access to to leverage the ports you'll go someplace else and it'll be interesting to see what the impact of this is a month down the road when all of a sudden you know the disease has run its course hopefully and now all of a sudden maritime trade kind of gets back to a semblance of a normal level how do these trade routes and these passenger line routes figure out in the future thanks any final thoughts from you again i go back to the issue that we initially started you know why is this important to the naval military professional you know disruptions in global

trade have impact in national economies, but more importantly, in national policies. And, you know, national policies, especially in a nation like China, where we see China going into the South China Sea, building an icebreaker fleet to be able to go up into the Bering Sea and the Northwest Passage, they're doing this to protect their trade routes, Chinese expansion into the islands in the Pacific, Chinese expansion into the Indian Ocean, the One Road, One Belt initiative. China is very cognizant of the fact that it needs its trade to sustain its economy. And when we see the Chinese trade all of a sudden suffer a massive disruption,

and more importantly, there are other forces out there, nations and companies, that see the potential to seek a profit at the expense of China, we have to be careful of how a nation, a major power in the world reacts to that. We have the track record in history for what happens when a nation suffers a shortfall in their trade and all of a sudden they find themselves, you know, economically depressed, you know, having to feed a large population, not being able to support it. They will take desperate action at times. So I think it's very important for us to watch this virus run its course, this disruption of trade, while always keeping an eye toward how does the Chinese military, how does the Chinese government react to this in the future. This has been really illuminating for me and I hope for our listeners. I'd like to thank my guest, Dr. Sal Mercogliano.

You can find him online at MercoglianoS on Twitter or catch him on ESPN Plus doing color commentary for the Campbell Camel Lacrosse team. Sal, any place else we can find you online? I can be contacted at mercoglianoS at campbell.edu. I'm a contributor to GCaptain, and I'm also working on a piece on a national sea lift strategy for the nation. Thanks, Sal. One thing I think important to point out, I should have said at the top here, obviously our opinions are our own and not representative of any institution with which we might otherwise be associated. But for our listeners, thanks again for tuning in, and we'll see you next time.

We'll be right back. ¶¶