Wednesday, May 28, 2008

Globalization begins grinding to a halt...

...too bad we haven't relocalized and made ourselves self-sufficient.

High oil prices will hurt trade, report says
Globe and Mail Update
May 27, 2008 at 1:23 PM EDT

OTTAWA — The rising price of oil is making international trade of heavy cargo prohibitively expensive, and acting as an incentive for importers to find products such as steel closer to home, new research by CIBC World Markets shows.

For heavy products, rising shipping costs are eroding the low-wage advantage of China over North America, say chief economist Jeff Rubin and senior economist Benjamin Tal.

If oil prices continue to rise, the soaring cost of global transport will act like a major tariff barrier and lead to a substantial slow down in international trade, they argue.

“Globalization is reversible,” they state...

...These days, the cost of oil is the equivalent of imposing a tariff rate of about nine per cent on goods coming into the United States. At $150 a barrel, transport costs act like a tariff of 11 per cent. And at $200, all the trade liberalization efforts of the past 30 years are reversed, Mr. Rubin said.

Oil prices now account for about half of total freight costs, and for the past three years, for every $1 increase in world oil, there has been a corresponding one per cent increase in transport costs.

“Unless that container is chock full of diamonds, its shipping costs have suddenly inflated the cost of whatever is inside,” Mr. Rubin said. “And those inflated costs get passed onto the Consumer Price Index when you buy that good at your local retailer. As oil prices keep rising, pretty soon those transport costs start cancelling out the East Asian wage advantage...”

...Regional trade looks much cheaper in comparison, they say.

As oil prices continue to climb, shipments of furniture, footwear and machinery and equipment are likely to meet the same fate, the economists say...

All that cheap junk we've been importing (from countries that don't have the moral and ethical wage and safety laws that we have) isn't going to be so cheap anymore - not because those countries have suddently decided to adopt first world Judeo-Christian values, but because even slavery or a pennies-on-the-dollar sub-living wage isn't profitable when oil is $150 or more a barrel. So Hashem will do for us what we refused to do ourselves - stop the robber barons from profiting off the backs of the poor and needy and stealing their resources.

The problem, of course, is that since we've shipped not just manufacturing of trinkets and what-nots to those third world backwaters of corruption and horror, but shipped basically all of our manufacturing to those seedy locales, we pretty much don't make anything the average household needs in this country anymore. We weren't smart enough to keep our manufacturing here - and then we didn't relocalize when we had the chance. So now we are fast approaching the moment where we can't afford imports but don't have a local source of goods, either. In fact, kids today don't even know how to make the stuff we need - or have the tools they need to do so.

To be self-sufficient, they need to get stuff from overseas they can't afford to get.

Brilliant, class. Just brilliant. Real planning ahead there, class. Fabulous party. Bet you drove your SUV to get there, too.

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