Corporate lobbyists and ideologues have spent the past three decades in a frenzy trying to force countries to lower tariffs and deregulate their economies. Apparently, the brilliant economists involved in this exercise didn't realize that dangerously globalized supply chains require intensive usage of non-renewable energy sources. According to a front-page NYT story by Larry Rohter, which documents how Ikea and other companies are opening or reopening their U.S. manufacturing outfits:
Decisions like those suggest that what some economists call a neighborhood effect — putting factories closer to components suppliers and to consumers, to reduce transportation costs — could grow in importance if oil remains expensive. A barrel sold for $125 on Friday, compared with lows of $10 a decade ago.
“If prices stay at these levels, that could lead to some significant rearrangement of production, among sectors and countries,” said C. Fred Bergsten, author of “The United States and the World Economy” and director of the Peter G. Peterson Institute for International Economics, in Washington. “You could have a very significant shock to traditional consumption patterns and also some important growth effects.”
The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.
The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”
This is info that would have been useful before center-left political parties starting imploding over
their leaders' support for deregulatory policies against the interest of their constituents, not to mention the government waste on USTR salaries. Can we recall our Geneva delegation yet?