World Now Less Flat: Fuel Spikes Make It Rounder

http://www.treehugger.com/files/2008/05/shipping-costs-making-the-world-spheroidal.php link: the world is no longer flat : treehugger.

Tom Friedman wrote “The World is Flat”, suggesting that globalization had leveled the playing field between industrial and emerging countries. Jeff Rubin of CIBC World Markets suggests that this is perhaps changing because of the cost of fuel.

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The cost of shipping a 40 foot container from Shanghai to the east coast of North America has gone from $3,000 in 2000 to $8,000 because of the cost of fuel, and for many products, the Asian cost advantage has virtually disappeared.

“In a world of triple-digit oil prices, distance costs money,” write Jeff Rubin of CIBC World Markets. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.” Commodities will be hit hardest

Heavy commodity items like steel that are not particularly labour intensive are the first to be hit; Chinese steel exports have fallen by 20% in the last year. The Chinese were bringing iron or from faraway places like Brazil and shipping it back to the USA; now American mills actually have a price advantage.

Marcus Gee quotes Rubin and Benjamin Tal in the Globe and Mail:

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Shipping costs to and from Asia have risen so much that they have eclipsed tariffs as a barrier to global trade, Mr. Rubin and Mr. Tal say, calling the cost of moving goods “the largest barrier to global trade today.”

“In fact,” they say, “in tariff-equivalent terms, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades.”…

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