SocraticGadfly: Is the Allen Group reading this in Lancaster?

August 03, 2008

Is the Allen Group reading this in Lancaster?

I said this already 2-3 years ago, and despite a scoffing idiot or two in the Dallas suburb, soaring oil prices, likely driven by Peak Oil, are crimping the globalization of trade. That, in turn, has to affect the viability, nay, even the necessity of mega-distribution/warehousing centers, like one proposed for a 10-square-mile chunk of land in Lancaster, Dallas, Wilmer and Hutchins.
“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”

“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”

This is already starting to play out. Some American countries that had factories in Mexico, but moved to China after the WTO agreements, are bringing work back to Mexico. It’s still not in the U.S., but it’s easier to ship point-to-point when you’re already on the same landmass, rather than constricted to just a few ports.

That, then, lessens the need for such warehouses as the Allen Group.

And, because this is shipping by land, there’s no business for an “inland port” designation, to boot.

Why the move back to Mexico, in numbers? The Times story notes that the cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade. In response, container ships have cut their top speed by nearly 20 percent to save on fuel costs. That, of course, adds significantly to shipping times, which may be of importance in some industries.

Canadian investment bank CIBC World Markets says it’s like a 9 percent surcharge or tariff.

Plus, if a “Kyoto II” greenhouse gas treaty includes India and China (and, in essence, stops U.S. companies from exporting pollution), manufacturing costs there will rise even more.

Winners/losers? American wood is staying home for furniture production. U.S. steel production is up.

Winners and losers could include globalization of food. No more cheap Chilean grapes and cherries in winter here, for example.

And, the U.S. might be an overall loser. Too many industries have shuttered too long here; starting them back up in Mexico, even, after more than a decade in many cases, would be difficult.

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