The NY Times On Shipping Costs and Globalization

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Global Trade, Macroeconomics

Yesterday we talked about a study on the rising costs of freight and its effect on globalization. The study, in our opinion, contained some factual inaccuracies which could lead the reader to a false conclusion. One factual inaccuracy relates to the cost of shipping a 40′ container from Shanghai to the US eastern seaboard (the study cited $8000 as the cost). We know the true cost is probably a little over $4000 per container.  

Of course shipping costs have risen. The study is bothersome, however  all the same because it is cited by prominent publications such as the New York Times as supporting evidence in the case against globalization. In that Times article which appeared in Sunday’s paper, author Larry Rohter writes of all the growing movements against globalization citing the rising concern of global warming, jobs that have been exported, food safety concerns and the collapse of trade talks and the whole “buy local” movement. These are all valid concerns and in the case of “buy local” a trend but the discourse on global trade would be better served by covering the true underlying causes to shifts in trade patterns rather than the mis-information supplied  about shipping costs.

Many  in the “we-hate-globalization”  camp fail to talk about the many trends and macro-economic conditions that drive global sourcing decisions. And though reducing one’s carbon footprint is certainly one reason to “buy local” we would argue the bigger drivers of sourcing decisions do not relate to “green” at all but rather to the value of the dollar (a low dollar reduces imports), re-valuation of global currencies, changing export taxes and rebates and rising production costs in overseas markets. In all fairness, the Times article does point to many of these factors. But by mis-representing the true cost impact of freight (or lack thereof)  on global trade decisions, we all do ourselves a disservice.

The irony of the anti-free trade argument is that America’s exports have been a major factor in preventing a US recession thus far. If we push the anti-free trade agenda too far, we’ll only end up hurting ourselves.

–Lisa Reisman

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