Recently an individual emailed me believing increased fuel costs would magically bring back his service job (engineering). Not so, I pointed out, for unlike manufacturing which requires raw materials, components, shipped around the globe per their ill advised and little analyzed global supply chain fuel and transportation costs, service jobs can be offshore outsourced with almost no supply chain costs whatsoever. And no, putting a toll booth on the Internet super highway is not the answer.
That said, for manufacturing there might be a silver lining to rising energy costs. According to the Wall Street Journal, High cost of shipping goods brings some jobs back to U.S., global supply chain costs are taking their toll:
The cost of shipping a standard, 40-foot container from Asia to the East Coast has already tripled since 2000 and will double again as oil prices head toward $200 a barrel, said Jeff Rubin, chief economist at CIBC World Markets in Toronto. He estimates that transportation costs are now the equivalent of a 9 percent tariff on goods coming into U.S. ports, compared with the equivalent of only 3 percent when oil was selling for $20 a barrel in 2000.
In a world of triple-digit oil prices, distance costs money," Rubin wrote in a recent report. He figures that for every 10 percent increase in the distance of a trip, energy costs rise 4.5 percent.
I was wondering when some lone COO or CFO would actually run a spreadsheet or two on this, maybe they are too busy playing golf!
But, guess what?
While many manufacturers are re-evaluating production strategies, there are limits to how many jobs will flow back to the U.S. One problem is that much of the basic infrastructure needed to support many industries — such as suppliers who specialize in producing parts or repairing machines — has dwindled or disappeared.
Ya got that? Manufacturers jumped on the offshore outsourcing bandwagon so much that those workers with the high skills and all of the support infrastructure are now gone. Duh. I swear to God, many corporations must think workers, when thrown away, are simply stored in a warehouse shelf somewhere to be available later. No, it doesn't work that way. Those workers' skills atrophy, they might be working at Wal-Mart, maybe they are in foreclosure, went bankrupt or become seriously ill because they lacked health care. Point is leaving people hanging out to dry means they are gone. People are not commodities. At least economists might consider looking at people as commodities with an expiration date. I think the United States has one of those expiration dates tattooed on itself at this point as well.
Economist Alan Tonelson notes a major false talking point by offshore outsourcing peddlers has now been exposed. It seems some public relations corporate people tried to claim the reason manufacturing was moved offshore was to get closer to emerging markets. Ha ha, it was about pure global labor arbitrage. It's called displacing US workers and replacing them with cheaper foreign labor to increase profit margins. The reality is most corporations main customer base is still the United States. Gee wiz, now after the fact a few corporations say they might consider analyzing their global supply chain costs. (Where can I get a job like that?)
Open border, globalists and environmentalists take note, wanting the world to be a big global village where we all hold hands and sing songs together, costs a hell of a lot in energy and money. The phrase act local was lost in the sound byte think global.
Oh, think Barack Obama is going to do something to ensure US workers and the United States will be the winners in trade? Sorry, think again, from a recent speech:
A few years ago, I saw a picture of this new reality during a visit to Google’s headquarters in California. Toward the end of my tour, I was brought into a room where a three-dimensional image of the earth rotated on a large flat-panel monitor. Across this image, there were countless lights in different colors. A young engineer explained that the lights represented all of the Internet searches taking place across the world, and each color represented a different language. The image was mesmerizing – a picture of a world where old boundaries are disappearing; a world where communication, connection, and competition can come from anywhere.
There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fortress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off
Note his mention of young engineers at Google as well as a world without borders. Special interests anyone?
It's a damn shame that we cannot obtain pure renegotiation of trade agreements to get a better deal. Ya know, anyone remember a Pig in a Poke? That's what these trade deals are, simply very bad deals. Will we ever get a politician running for the Presidency who is not so beholden to come out and say it? How hard is it to say that? If these very special interests bothered to analyze anything past a few quarters, they might realize they will win anyway and stop demanding their ill-conceived short term profit agendas.
Can we have consideration of the national interest in particular industries, use of VAT, GDP/trade deficit ceilings, immediately tariff reductions set by emerging nations (China)? How about true single payer universal health care like HR 676? How about considering anything, anything at all that countries like Japan or maybe the EU have done to serve their citizenry? Oh no, special interests do not like that and we might actually reduce our trade deficit with such policy! Nope, what is really needed instead of real, statistically based, policy change is more speech writers. That's right, it's all presentation, Americans will be sold as long as the public relations spin is modified.
I'll end with this Teamster video from 2006. Jimmy Hoffa mentions how our jobs are so often traded away for some ill conceived foreign policy agenda where the US of course gets the short end of the stick.