Soaring cost of fuel is whittling away at Asia's cheap-labour advantage

[depakid]

High fuel costs are expected to have a dramatic impact on trade patterns, as businesses look for supplies closer to home.

Two bank economists argue in a report released Tuesday that because of higher fuel costs, shipping a standard 40-foot container from Shanghai to the east coast of North America now costs $8,000 (U.S.), up from $3,000 in 2000 when oil was just $20 a barrel.

That higher cost is passed on to North American consumers, making goods from China and other Asian places more costly compared to the offerings of domestic North American producers.

Some Canadian manufacturers are already noticing the effect.

“It's helped us because it's harder for the Asians and others to ship over here,” said Barry Zekelman, chief executive officer of Atlas Tube Inc. of Harrow, Ont.

He said that after taking 30 to 40 per cent of the North American market for some steel tubing products, the Chinese have now “virtually disappeared” – partly, though not exclusively, because of the costs of transporting a heavy product such as steel across the Pacific.

Jeffrey Rubin and Benjamin Tal of CIBC World Markets Inc. say higher oil prices are reversing the world-is-flat effect, in which lower trade barriers and new technologies like the Internet made it cheaper to move goods and services from developing Asia to the markets of the rich world.

“In a world of triple-digit oil prices, distance costs money,” they write. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

More: http://www.reportonbusiness.com/servlet/story/RTGAM.20080527.wtrade28/BNStory/Business/home

[Nay]

1. Maybe, just maybe, we'll see a resurgence of local manufacturing

here in the US. I dearly hope so.

[madokie]

2. I think its coming

once we have a pro American in the whitehouse things will quickly start changing for the better. Our local industrial park has serveral manufacturing plants that are in mothballs just waiting to start back in production, for the real good news some already have. A good day is soon coming for us here in the states.