Thursday, July 10, 2008

Outsource for the goose

A news report syndicated by Britain’s Telegraph Group
makes the persuasive case that globalization has “passed
its high-water mark,” mainly because the soaring cost of
transportation will make long-distance trade prohibitively
expensive. The report quotes an outfit called CIBC World
Markets as saying that the “Asian outsourcing game is
over,” and goes so far as to predict that the “pendulum
will now swing back from China to America.” For instance,
“North Carolina’s furniture industry is coming back from
the dead as factories close in China.”

It may be a little premature to write China off like that,
but I have no doubt that, as the consequences of peak oil
hit home (literally), trade and commerce will relocalize.
We may well see the reappearance of suburban groceries,
butcheries and bakeries as the giant shopping malls fall
derelict for want of motorized custom; and cottage
industries springing up too. There will always be global
trade of one sort or another, of course, but the future
clearly favours any enterprise not wholly dependent on
trucking stuff great distances. New Zealand’s declining
clothing industry, for instance, could take fresh heart
from this.

On the other hand, New Zealand’s own export industries
will be hard hit, so it cuts both ways. Firms like Fonterra
are already anticipating the trend by setting up factories
of their own in other countries.


Steve Withers said...

Everyone seems to be using that single report about the North Carolina furniture factory to justify keeping things as they are.

CIBC are the Canadian Imperial bank of Commerce - one of Canada's big 5 banks.

Canada currently has a conservative-lead minority free trade is the unquestioned order of the day....

That furniture factory is becoming the icon for arguments globalisation is over even as it continues to expand and intensify. In looks to me like it is propaganda.

Steve Withers said...

Additional to my truncated comment: In the past 2 weeks, Siemens has announced 17,000 jobs cuts and Unilever has announced 20,000 jobs cuts. I'm betting I know where many of those jobs have gone....and it isn't to North Carolina. While working for a global nework provider, I watched the developed world's major corporations racing to transfer their production to China....with a 3-5 years transition period for bedding in and quality control....and that period is ending right about now. There will be many more rationalisations. They have been programmed in for several years now. It would take a HUGE event to stop them happening. The factories have already been built that the jobs have gone to.