If you’re used to celebrating Halloween in mid-January, you’re in luck this year. American ports plagued by logistical problems are now unloading Halloween gear from container ships.
Supply chains, which once delivered goods to American stores cheaply, quickly and at the right moment, are today, as Jonathan Bass explains news week, “not cheap, not fast and not just-in-time.”
Bass, CEO of Whom Home and a nearshoring advocate, also notes that retailers are ordering goods nine to 12 months in advance in anticipation of long delays. The shelves of large and small shops are sometimes empty and delivery times can no longer be predicted.
In 2020 the financial times tell us, “a highly synchronized system has been thrown out of rhythm.”
It’s no secret why an extraordinarily efficient global mechanism collapsed. Draconian COVID-19 lockdowns in China closed factories and disease halted trucks and planes in both producing and consuming countries. At the same time, demand for goods from blocked consumers who could not spend their money on services increased. A logistical supply chain with little resilience thus collapsed.
Around 120 ships are currently waiting in front of the twin ports of Los Angeles and Long Beach. In front of China’s ports, the numbers are far higher. For example, at the beginning of November a total of 493 ships lurking around waiting to be loaded. The backlogs are considerable: ships carry around 90 percent of the world’s freight.
So when will the world go back to normal?
Maybe never. It is true that these delays are the result of misguided transportation policies in the US, particularly in California, as well as fundamentally flawed policies in China. But countries are adapting, and as COVID resolves, many problems will eventually go away.
However, these disruptions will have a profound long-term impact on manufacturing. Businesses will be forced to adapt. As Scott Price, President of UPS International, said Financially Just, there will be a “migration to new supply chain models” – in other words, manufacturers will move factories closer to consumers.
But there are not only logistical reasons for companies to shorten the long distance between the factory building and the sales shelf. First, as Alan Tonelson, a trade expert from Washington, DC, points out, China is shortening supply chains by crowding out factories.
“Xi Jinping’s neo-Maoist counterrevolution,” says Tonelson news week, “has made the People’s Republic of China an increasingly unreliable and unpredictable place to do business.”
As a result, some production was shifted to even lower-cost countries in Asia, such as Cambodia and Vietnam. But factories have also migrated to low-wage countries in the western hemisphere. In the middle of last year, for example, the American shoe and clothing company Steve Madden announced that, partly due to supply chain problems, it shifted about half of its women’s production from China to Mexico and Brazil.
Second as Indian analyst Brahma Chellaney observed in a Project Syndicate article “China Turns Into Trade Tyrant.” The country has sought to use its manufacturing and manufacturing power to achieve geopolitical goals, particularly since the end of the first decade of this century.
The most well-known are the Chinese customs authorities sometime in the second half of 2010 imposed an embargo on exporting rare earth metals to Japan to force Tokyo to release the captain of a Chinese fishing boat that had entered Japanese waters around the Senkaku Islands, which China dubs the Diaoyus.
The lawsuit, although unofficial, was a clear violation of Beijing’s World Trade Organization obligations and was dropped after two months. But it wasn’t lifted before Tokyo released the captain, who was part of a Chinese government-led effort to forcefully wrest the islands from Japanese control. China has imposed or threatened other rare earth metal embargoes from time to time.
More recently – March 2020 – China’s official Xinhua News Agency said the regime could plunge America into a “mighty sea of coronavirus.” through the withholding of protective equipment. That threat wasn’t idle: as Fox Business Network’s Maria Bartiromo reported In February 2020, China turned over a ship carrying protective medical gear en route to New York City hospitals.
At the same time, Peter Navarro, President Trump’s director of trade and manufacturing policy, said Beijing has imposed export restrictions on N95 masks and nationalized an American factory that makes them there. “How is anyone supposed to trust China when it comes to keeping their end of the bargain in business again?” asked Bartiromo.
There’s another reason why factories will move closer to the point of consumption: the world is transitioning from a period of general stability to a period of perpetual instability – and perhaps conflict.
Bad actors – China and Russia in the lead – are getting bolder and the rest of the world seems unwilling to stop them. How many ships will leave Chinese ports if China intentionally or accidentally starts a conflict with Taiwan, Japan or the Philippines? In November, the Foreign Ministry actually had to threaten violence against China over dangerous activities in the South China Sea, around Second Thomas Shoal.
Long supply chains stretching halfway around the world will no longer be viable when navies clash.
The latest round of globalization began when post-Cold War countries lowered political barriers to trade. Given the general euphoria of the time, almost no one thought that this form of governance was important. Democracies believed they could trade—and thereby strengthen—with authoritarian, dictatorial, and totalitarian states without affecting national security. Now China has proved this Pollyannaish theory catastrophically wrong.
The world looks extremely dangerous and supply chains are already vulnerable.
Gordon G. Chang is the author of The impending collapse of China. Follow him on Twitter: @GordonGChang.
The views expressed in this article are the author’s own.