CIBC World Markets: “Globalization is reversible”

Proving that once again Local is in the Zeitgeist (see previous posts here, here and here), the Globe & Mail reports on a CIBC World Markets research (.pdf here) that shows rising oil prices will cancel out globalization benefits.

The rising price of oil is making international trade of heavy cargo prohibitively expensive, and acting as an incentive for importers to find products such as steel closer to home, new research by CIBC World Markets shows. For heavy products, rising shipping costs are eroding the low-wage advantage of China over North America, say chief economist Jeff Rubin and senior economist Benjamin Tal. If oil prices continue to rise, the soaring cost of global transport will act like a major tariff barrier and lead to a substantial slow down in international trade, they argue. “Globalization is reversible,” they state. (…)

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(Flickr photo by photohome_uk)

Persistently high oil prices will also cause many commuters to consider moving to the city, reversing the allure of the suburbs, he said. And it could also force a change in eating habits, as foreign food becomes too expensive to ship. “It means forget about that 50-mile commute from Cooksville to Toronto, and also forget about that avocado salad in January.” More fundamentally, the soaring oil price will prompt a major rethinking of how production is organized, Mr. Rubin argues, and could even lead to a revival of North American manufacturing.

“In a world of triple-digit oil prices, distance costs money,” they say in a paper released Tuesday. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

What it means: the same way an increase in gas prices at the pump changes car purchase behaviors, rising shipping costs might create permanent changes in the way we buy products. I’m surprised we haven’t seen major product search verticals embrace this local concept, promoting locally-made (or regionally-made) products. It seems like the perfect positioning for the next successful product vertical. And, as I’ve stated before, this is a brilliant positioning for any directory publisher, “Search in Yellow Pages, Buy Local, Save the World”.

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