The cost of shipping goods across hemispheres may foster regional food movements.

By LARRY ROHTER

When Tesla Motors, a pioneer in electric-powered cars, set out to make a luxury car for the American market, it had the global supply chain in mind. Tesla planned to manufacture 450-kilogram battery packs in Thailand, ship them to Britain for installation, then bring the mostly assembled cars back to the United States.
But when production began this spring, the company decided to make the batteries and assemble the cars near its home base in California, cutting more than 8,000 kilometers from the shipping bill for each vehicle.
“It was kind of a no-brain decision for us,” said Darryl Siry, the company’s senior vice president of global sales, marketing and service. “A major reason was to avoid the transportation costs, which are terrible.”
The world economy has become so integrated that American shoppers find relatively few T-shirts and sneakers in Wal-Mart carrying a “Made in the U.S.A.” label. But globalization, faced with fresh challenges, may be losing some of the inexorable economic power it had for much of the past quarter-century .
Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon.
“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, ” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”
“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”
Many economists argue that globalization will not shift into reverse even if oil prices continue to rise. But many see evidence that companies looking to keep prices low will have to move some production closer to consumers.
Globe-spanning supply chains - Brazilian iron ore turned into Chinese steel used to make washing machines shipped to California, and then trucked to appliance stores in Chicago - make less sense today than they did a few years ago.
“If prices stay at these levels, that could lead to some significant rearrangement of production, among sectors and countries,” said C. Fred Bergsten, author of “The United States and the World Economy.”
“You could have a very significant shock to traditional consumption patterns and also some important growth effects, Mr. Bergsten said.
Until recently, standard practice in the furniture industry was to ship timber from American ports to China, where oak and cherry would be milled into sofas, cabinets and chairs, which were then sent back to the United States. But with transportation costs rising, more wood is now going to traditional domestic furniture-making centers in North Carolina and Virginia .
To avoid having to ship all its products from abroad, the Swedish furniture manufacturer Ikea opened its first American factory in Danville, Virginia, in May. And at an industry fair in April, La-Z-Boy announced a new line that will begin production in North Carolina .
“There’s just a handful of us left, but it has become easier for us domestic folks to compete,” said Steven Kincaid of Kincaid Furniture in Hudson, North Carolina, a division of La-Z-Boy.
Soaring transportation costs also have an impact on food, from bananas to salmon. Higher shipping rates could eventually transform some items now found in the typical middle-class pantry into luxuries and further promote the so-called local food movement.
“This is not just about steel, but also maple syrup and avocados and blueberries at the grocery store,” shipped from places like Chile and South Africa, said Jeff Rubin, chief economist at CIBC World Markets and co-author of its recent study on transport costs and globalization. “Avocado salad in Minneapolis in January is just not going to work in this new world, because flying it in is going to make it cost as much as a rib eye,” he said.
One likely outcome if transportation rates stay high, economists said, would be a strengthening of the neighborhood effect. Instead of seeking supplies wherever they can be bought most cheaply and outsourcing the assembly of products all over the world, manufacturers would concentrate those activities as close to home as possible.
In a more regionalized trading world, economists say, China would probably end up buying more of the iron ore it needs from Australia and less from Brazil, and carrying out a greater proportion of its manufacturing work in Vietnam and Thailand.
Similarly, Mexico’s maquiladora sector, the assembly plants concentrated near its border with the United States, would become more attractive to manufacturers with an eye on the American market.
But a trend toward regionalization would not necessarily benefit the United States, economists caution. Not only has it lost some of its manufacturing base and skills over the past quarter-century, but it is also far from the economies that have become the most dynamic in the world, those of Asia.
“Despite everything, the American economy is still the biggest Rottweiler on the block,” said Jagdish N. Bhagwati, the author of “In Defense of Globalization” and a professor of economics at Columbia University in New York. “But if it’s expensive to get products from there to here, it’s also expensive to get them from here to there.”