Home ›› 05 Jul 2022 ›› Opinion
It is perhaps a wonder that it was not until experiencing the fallout from a global pandemic, that most Americans were forced to read or hear the words ‘supply chain’ or ‘logistics.’ Surprising both because it is on these things that the basic essentials of modern life are dependent and because of the revolutionary changes in these arenas over the past generation. Yet with COVID still haunting the global economy, as of this writing China is only just emerging from the largest COVID lockdown since Wuhan, and with inflation at the highest it’s been in decades, uncertainty about supply chains lingers.
Over the past twelve months this uncertainty has assumed many forms. There have been reports of shutdowns of factories in Asia, with workers reluctant to return to their jobs, ships backed up by the dozen at American ports, a shortage of truck drivers, and exploding wealth for the likes of Jeff Bezos. Obviously, the immediate trigger to the crisis would appear to be a mix of COVID and as a result Americans greatly increasing their online shopping. According to U.S. Census Bureau data, e-commerce sales jumped nearly 32 percent in 2020, and 50.5 percent since 2019. Overall, online sales now account for 19 percent of retail. Given the $400 billion in government stimulus and much of the outdoor service economy locked down (i.e. restaurants, movies, sports events, etc.), Americans spent nearly $1 trillion more in goods in 2021 compared to pre-pandemic times. Hard to see any supply chain not getting strained. Still, in May 2022 only 11 percent of shipments from Asia arrived in North America on time, down from 59 percent in May 2020.
By the end of 2021 the cost of shipping from Asia to the west coast of the U.S. had risen 330 percent in one year. According to the Freightos Baltic Index, as of June 22nd the average global price to ship a 40-foot container was $7261, down from a peak of over $11,000 in September 2021, but still five times higher than before the pandemic. The United Nations Conference on Trade and Development (UNCTAD) estimated that higher shipping rates during the lockdown raised the inflation rate by 1.5 percent.
Step back further though and a fuller picture emerges, one featuring globalization, exploitation, and deindustrialization. It is no secret that the U.S. has lost millions of manufacturing jobs over the past generation- about 7.5 million since 1980. While automation has been a big factor in the decline, so has outsourcing and subcontracting. From 1970 to 2010 the number of manufacturing jobs in East Asia more than tripled from 31 million to 97 million. In the decade from 1997 to 2007 value of East Asian exports increased from $269 billion to nearly $1.5 trillion. Of course, the emergence of China as the world’s factory played a vital role. Foreign direct investment into China increased from $57 million in 1980 to $114.7 billion in 2010. Imports from China reached $506 billion in 2021 (with $151 billion in exports headed the other way, a trade deficit of $355 billion). Imports from Vietnam have also exploded over the past two decades. In 2020, Vietnam was the 6th largest supplier of U.S. imports, up 21.2 percent from just 2019, and 436 percent from 2010. In a way, Vietnam has been the winner of the U.S. trade war with China. The U.S. trade deficit with Vietnam exploded nearly threefold to $90 billion since 2018 (as for the effectiveness of the U.S. tariffs: a good amount of the exports from Vietnam originate in Chinese-owned factories). Indonesia imports are up 23 percent since 2010.
Nothing exemplifies the supply chain crisis quite like the sight of cargo ships backed up by the dozens outside the Ports of Los Angeles and Long Beach. Containerships transport 90 percent of global trade and these two ports handle about 40 percent of U.S. imports. A ship from China takes 15-20 day journey to an American port. The process of turning a ship around from China to the U.S. typically takes around 60 days. The process is supposed to be timed for maximum efficiency, one ship in, one out. Covid-19 fouled up the system. At peak chaos there were over 100 ships waiting to dock. If all the waiting containers had been laid out the line would actually have stretched from Los Angeles to Chicago.
In a perfectly surreal example of built-in absurdity, the price hike made a trip from Asia to the U.S. 20 times more expensive than a trip going the other way. Therefore through the pandemic there were reports of ships returning to Asia with many of their containers empty. The shippers have been rejecting U.S. agricultural exports. It is more profitable to simply return to Asia and refill there rather than wait for food to be loaded and carried back. This past holiday season, some of the largest U.S. retailers were chartering their own, smaller ships to get around the backlog, docking at smaller ports around the country. Of course, this option was beyond the great majority of U.S. businesses.
Counterpunch
