Shipping Costs Start to Crimp Globalization

Manufacturers increasingly sought a competitive edge by subcontracting out work for all manner of parts, from batteries to textiles, to countries with the lowest wages. But that strategy was viable only with low energy costs. Companies trying to keep costs low will move more operations closer to markets to reduce fuel costs, especially for bulky or perishable items like food. “Globe-spanning supply chains – Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago – make less sense today than they did a few years ago,” reports Larry Rohter for the New York Times, citing the example of Swedish furniture manufacturer Ikea opening its first US factory in May 2008. The cost of moving goods, not tariffs, has offset benefits of trade liberalization during the last three decades, notes a report from a major Canadian bank. Analysts note that policies that protect the environment and save fuel could end up protecting local jobs and saving companies money, too. – YaleGlobal