Annual Review & Outlook 2013: Consolidators International

One of the major trends in 2013 in American industry and its handmaiden, transportation, will be a surge in insourcing from a trickle to a flood. A number of factors will contribute to production returning to the U.S.

The U.S. is heading toward self sufficiency in oil, and our natural gas tanks are full, making it no longer dependent on often-unstable foreign sources. With cheaper energy and less of an imbalance between U.S. and foreign labor costs (they are constantly rising while ours at best remain static), U.S. manufacturers will have persuasive reasons to establish plants and factories locally to make a variety of goods. This trend of bringing home industry won’t be confined to the U.S. European nations including the U.K., France and Italy will follow our example. These countries need home-grown industries perhaps even more than we do with a deep, stubborn recession causing major social and political unrest. Only Germany in the European Union is genuinely prosperous. Interestingly, Germany remains the strongest nation in Europe because it shrewdly expanded its industrial base rather than concentrating on service businesses.

I predict a lowering of corporate taxes in the U.S. and Europe as governments strive to provide every inducement to expand manufacturing at home.

The U.S. has found a comfortable level in the value of the dollar, making it more competitive in world trade. Although President Obama’s goal of doubling exports in the five years to 2014 is overly ambitious, outbound trade from the U.S.will increase significantly. A comparable lessening of imports will occur. Retail chains such as Wal-Mart and Target no longer will have 95 percent of their wares originating from abroad. Our trading relationship with China will weaken as that nation continues to experience serious economic and political disturbances.

In our world of transportation in 2013, too many planes and too many ships will transport too little freight at too low a cost. More older planes and ships will be laid up while new shiny vessels will enter international trade lanes. Whether this new equipment will help turn red ink into black is an open question.

World economies, however, will get a boost as trade returns to more of a two-way street between industrial nations. There will be less of an imbalance. No longer will container ships stuffed with merchandise be sailing eastbound with empty containers traveling in the opposite direction. This will offset the huge costs, high rates and inefficient use of resources that one-way trade creates.

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