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      - page 35 / 47





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movement of considerable amounts of production by Japanese multinational companies to locations overseas.

In a survey of U.S. manufacturers in 2008, 40% of 500 survey participants indicated that the value of the dollar had an effect on where they choose to source their business. At the time of the survey, the value of the dollar was falling, and nearly half of the responses said that they were already sourcing more business in the United States.

  

Global supply chains could not exist without efficient transportation networks supported by infrastructure (ports, roads, railroads, airports, etc.) that enable products within the manufacturing network to move freely from one segment of the chain to the next. Infrastructure also can be defined to include the electrical grid, pipelines, the Internet, or telecommunications equipment. The issue of infrastructure in general is beyond the purview of this report. 62

One part of infrastructure and transportation that is critical to global supply chains seems to be oceanic shipping and air freight. The oceans are no longer a barrier that isolates and protects countries. Instead, modern communications and transportation have brought markets of the world onto each other’s doorsteps. The oceans and skies have become avenues of interaction rather than barriers of separation. Shipping, however, raises certain issues for public policy. These revolve around risks in the supply chain, particularly costs, security risks and delays in shipping.

The spike in petroleum prices in 2007-2008 exposed a vulnerability of oceanic and other transportation to a critical cost variable. When the price of oil rose to $140 per barrel, the cost of shipping a standard 40-foot container from Shanghai to the United States rose to $8,000 compared with $3,000 early in the decade. Shipping speeds also were reduced to conserve on fuel. The increase in shipping costs was equivalent to a 9% import tariff on trade or what amounted to a reversal of most of the trade liberalization that had been accomplished over the previous three decades.63 the net result of the rise in shipping costs was that some companies switched production to locations closer to home, some in the United States. 64

For example, in October 2007, the cost of shipping residential heaters from China to Bowling Green, Kentucky became too high for Desa LLC, and the company shifted manufacturing operations back to the United States. Not only had the cost of ocean shipping risen but the 2,000 mile inland trucking costs from the West Coast to Kentucky (along with a cut in the export rebate

62 For policy discussion, see CRS Report RL33206, Vulnerability of Concentrated Critical Infrastructure: Background and Policy Options, by Paul W. Parfomak; CRS Report RL31116, Water Infrastructure Needs and Investment: Review and Analysis of Key Issues, by Claudia Copeland and Mary Tiemann; CRS Report RL30153, Critical Infrastructures: Background, Policy, and Implementation, by John D. Moteff; CRS Report RL34567, Public-Private Partnerships in Highway and Transit Infrastructure Provision, by William J. Mallett; CRS Report RL34127, Highway Bridges: Conditions and the Federal/State Role, by Robert S. Kirk and William J. Mallett; and CRS Report RL33875, Electric Transmission: Approaches for Energizing a Sagging Industry, by Amy Abel.



Larry Rohter, "Shipping costs start to crimp globalization ," International Herald Tribune. August 2, 2008. David Blanchard, "The Latest Global Hotspot: The USA," Industry Week, October 2008, pp. 54-56.

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