Even China isn’t immune to the world’s economic hangover. The country’s export growth in September is 4.2% less than for all of 2007 and 11.2% less for exports to the U.S., specifically, according to China’s customs bureau. In fact, China will see its economic growth slowed by .3% in 2008, compared to a 2.6% jump in growth in 2007.
Economists Jeff Rubin and Benjamin Tal argue that China’s trade slowdown can be attributed to fuel and shipping costs. In their piece titled "Will Soaring Transport Costs Reverse Globalization?" they point out that a standard 40-foot container shipping from Shanghai to the Eastern seaboard of the U.S. cost $3,000 in 2000, when oil was at $20 a barrel. As the price of oil soared earlier this year, the cost to ship that container jumped to $8,000 – and will cost $15,000 should oil ever hit $200 a barrel. Oil prices have since come back down (a little over $80 a barrel at the beginning of the week), but the economic alarm has hurt China in the short-term and portends greater damage in the long-term. "Ultimately," write the CIBC World Markets economists about past oil shocks, "soaring transport costs were borne by consumers, and markets responded accordingly, substituting goods that could be sourced from closer locations than half-way around the world carrying hugely inflated freight costs.”
Counselor Top 40 supplier Broder (asi/42099) does less than a quarter of its private label business in China. The company, which also works with the rest of Asia and both South and Central America, says lead times (10 days for South America compared to 30 for China) also play a factor in where it does business. "The increases [in price] are all over the place," says Cheron Coleman, director of global sourcing, "so it’s doesn’t matter where you go, you’re still going to have an increase in costs just because of the fuel situation."
China’s exports to the U.S. may have taken a hit in the short-term, but they could jump noticeably once the existing import caps on Chinese textiles expire at the end of the year. The limits were put in place by the Bush Administration three years ago to prevent an influx of cheaper Chinese textiles from sabotaging the domestic market. Textile trade associations and a bipartisan group of 73 U.S. representatives have sent letters to President Bush and the U.S. Secretary of Commerce to urge that those caps be extended. "Definitely our government has to put some type of program in place just to monitor the situation, just because China’s going to start devaluing the price of their garments," says Coleman. "It’ll be like what happened a couple years ago when the quotas were lifted and everyone flew to China just to get the decrease in costs."
