August 3, 2008
Shipping Costs Start to Crimp Globalization-New York Times
By LARRY ROHTER
When Tesla Motors, a pioneer in
electric-powered cars, set out to make a luxury roadster for the American
market, it had the global supply chain in mind. Tesla planned to manufacture
1,000-pound battery packs in Thailand, ship them to Britain for installation,
then bring the mostly assembled cars back to the United States.
But when it began production this
spring, the company decided to make the batteries and assemble the cars near
its home base in California, cutting more than 5,000 miles from the shipping
bill for each vehicle.
“It was kind of a no-brain decision
for us,” said Darryl Siry, the company’s senior vice president of global sales,
marketing and service. “A major reason was to avoid the transportation costs,
which are terrible.”
The world economy has become so
integrated that shoppers find relatively few T-shirts and sneakers in Wal-Mart
and Target
carrying a “Made in the U.S.A.” label. But globalization may be losing some of
the inexorable economic power it had for much of the past quarter-century, even
as it faces fresh challenges as a political ideology.
Cheap oil, the lubricant of quick,
inexpensive transportation links across the world, may not return anytime
soon,
upsetting the logic of diffuse global supply chains that treat geography as a
footno
te in the pursuit of lower wages. Rising concern about global
warming, the reaction against lost jobs in rich countries, worries
about food safety and security, and the collapse of world trade talks in Geneva
last week also signal that political and environmental concerns may make the
calculus of globalization far more complex.
“If we think about the Wal-Mart
model, it is incredibly fuel-intensive at every stage, and at every one of
those stages we are now seeing an inflation of the costs for boats, trucks,
cars,” said Naomi Klein,
the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”
“That is necessarily leading to a
rethinking of this emissions-intensive model, whether the increased interest in
growing foods locally, producing locally or shopping locally, and I think
that’s great.”
Many economists argue that
globalization will not shift into reverse even if oil prices continue their rising
trend. But many see evidence that companies looking to keep prices low will
have to move some production closer to consumers. 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.
To avoid having to ship all its
products from abroad, the Swedish furniture manufacturer Ikea opened its first
factory in the United States in May. Some electronics companies that left
Mexico in recent years for the lower wages in China are now returning to
Mexico, because they can lower costs by trucking their output overland to
American consumers.
Neighborhood Effect
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.
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 spike in shipping costs comes at
a moment when concern about the environmental impact of globalization is also
growing. Many companies have in recent years shifted production from countries
with greater energy efficiency and more rigorous standards on carbon emissions,
especially in Europe, to those that are more lax, like China and India.
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