The Box - Marc Levinson [147]
The globalization of the late twentieth century took on quite a different character. International trade is no longer dominated by essential raw materials or finished products. Fewer than one-third of the containers imported through southern California in 1998 contained consumer goods. Most of the rest were links in global supply chains, carrying what economists call “intermediate goods,” factory inputs that have been partially processed in one place and will be processed further someplace else. The majority of the metal boxes moving around the world hold not televisions and dresses, but industrial products such as synthetic resins, engine parts, wastepaper, screws, and, yes, Barbie’s hair.6
In international production-sharing arrangements of this sort, the manufacturer or retailer at the top of the chain will find the most economical place for each part of the process. This used to be impossible: high transportation costs acted as a trade barrier, very similar in effect to high tariffs on imports, sheltering the jobs of production workers from foreign competition but imposing higher prices on consumers. As the container made international transportation cheaper and more dependable, it lowered that barrier, decimating manufacturing employment in North America, Western Europe, and Japan, by making it much easier for manufacturers to go overseas in search of low-cost inputs. The labor-intensive assembly will be done in a low-wage country—but there are many low-wage countries. The various components and raw materials will come from whichever location can supply them most cheaply—but costs in different locations often are quite similar. Even small changes in transport costs can be decisive in determining where each stage of the process will occur.7
The economics of containerization have shaped these global supply chains in peculiar ways. Distance matters, but not hugely so. A doubling of the distance cargo is shipped—from Hong Kong to Los Angeles, for example, rather than Tokyo to Los Angles—raises the shipping cost only 18 percent. Places far from the end market can still be part of an international supply chain, so long as they have well-run ports and a lot of volume.8
Container shipping thrives on volume: the more containers moving through a port or traveling on a ship or train, the lower the cost per box. Places with lower demand or poorer infrastructure will face higher transport costs and will be far less attractive manufacturing sites for the global market. In the 1970s and 1980s, when many U.S. industrial centers were dying, Los Angeles thrived as a factory location because it was home to the nation’s busiest containerport, and Los Angeles thrived as a port because it was well located to handle import volume from Asia, not just for California, but for the entire United States. The Pacific Rim became the world’s workshop for consumer goods, in good part, because large ports for containers gave it some of the world’s lowest shipping costs. Antwerp spent a stunning $4 billion on port expansion between 1987 and 1997, including expropriation of 4,500 acres (2,000 hectares) of land, just to keep itself in the game. Conversely, African countries with inefficient ports and little containership service are at such a transport-cost disadvantage that even rock-bottom labor costs will not attract investment in manufacturing.9
Shippers in places with busy ports and good land-transport infrastructure not only enjoy lower freight rates, but they also benefit from the shortest shipping times. Before the container, when breakbulk vessels like the Warrior carried most of the world’s trade, cargo typically left the factory weeks before the ship departed, sailed at a glacial 16 knots, and spent an unproductive week in the hold each time the vessel called at an additional port. In the container age, a machine manufactured on Monday can be dropped