Pearce: No growth for the last 12 months is ‘something to worry about’

SINGAPORE – Economic reports are often a mixed bag. For every positive sign, there are several lurking omens that could spell disaster. On March 12 at IATA’s World Cargo Symposium (WCS), Brian Pearce, chief economist at IATA, addressed the current economic conditions of the air cargo industry, and it was hard to read his assessment as anything other than blunt.

“The hard reality of the last 12 months is that we’ve actually seen no growth in the industry at all,” Pearce said, adding that the situation is “something we certainly need to worry about.”

Pearce is referring to the trend of diminishing growth in volume growth in freight tonne kilometers (FTKs) across major trade lanes that emerged in mid-2018 and has continued into the beginning of 2019.

While it would appear that 2018 was an improvement on 2017, if one observes that FTK volumes were 3.5 percent higher in 2018 than the year before, Pearce noted that this is a misleading figure, because “all that growth had happened by January 2018” – not during the remaining 11 months.

In reality, the growth margin is the result of a coat-tail of the surge in growth from 2017 that happened to bleed into January of 2018, not a legitimate increase in demand for air cargo capacity between the two years.

It’s no secret that industry leaders, including Pearce, overwhelmingly attribute suppressed growth to the wave of protectionist policies that have cropped up on major trade lanes over the past ten years, which was a focal point of Pearce’s presentation.

IATA tallied more than 9,000 individual protectionist policies from various countries’ respective governments over the past decade. This trend reached its peak in mid-2018 with the barrage of Trump-era policies affecting trans-Pacific and inter-North American trade, as well as increasingly tumultuous Brexit negotiations.

Pearce said that he’s observed governments take an increasingly protectionist view of the world since the financial crisis in 2008, but that he has hope that the trend will begin to change.

“It does look like we might be on the cusp of a deal between the U.S. and China,” he said, “but I do think we need to have open eyes on the trade policy situation. We are in the world of what one might call aggressive unilateralism.”

While the U.S. and China may be moving to neutralize aggravated trade relations, the U.K. is on the verge of what Pearce says will be a highly frictional exit from the European Union.