Globalization vs. Regionalization

Globalization vs. Regionalization
August 6, 2008

The litmus test of the 21st century global economy is the clothing label inside the garment purchased at the local Wal-Mart. Chances are very good that the t-shirt with the popular television cartoon character emblazoned on the front does not carry a "Made in the U.S.A." tag inside.

Over the past quarter-century, the world economy became extremely integrated caused, in part, by the profits to be made through the lure of cheap oil and cheap foreign wages. However, oil that cost $10 a barrel a decade ago now costs more than $120 a barrel. Moreover, as more Americans are looking for work, the call has gone out to keep jobs at home. Many economists feel that globalization is about to undergo serious change.

There is no escaping the reality that rising prices throughout the economy will force America to re-assess the management of its economy. Transportation costs are now a major factor in pricing, especially of large ticket items. Previously, raw materials, like iron and wood, were shipped abroad for processing and manufacturing in countries where labor costs were a fraction of those in the U.S. Now, more companies are returning to regional manufacturing. Production close to the point of origin is the economic choice today. The higher cost of domestic labor is more than offset by the savings from lower transportation costs.

Some economists worry, though, that reverting to regionalization may not be a smooth transition. A generation of Americans has lost some of its manufacturing base and skills to the more dynamic production centers of Asia. A return to "Made in America" may not occur overnight. Other concerns, though, may outweigh these.

Americans have become far more environmentally conscious. Many American companies are doing their part to protect the environment and the effects of global warming by adopting green policies meant to reduce fuel consumption and carbon emissions. The same cannot be said of many companies in the far-east where emission standards are far less stringent than in the west.

The same worry about lax standards applies to food products. Lack of rigorous inspection at food production plants abroad may cause Americans, concerned about disease and health standards, to re-consider purchasing imported food products and may shift a large percentage of this market to domestic production.

Business executives and economists know that many factors determine the flow of international trade. The decision of where to invest in a new factory or from where to buy a product is determined not only by shipping costs but by exchange rates, labor costs, consumer confidence, government regulations, and availability of skilled management. But, as certain factors begin to outweigh others, the decision making process will change accordingly.

After years of buying products produced abroad, the day may soon be at hand when Americans will once again buy a traditional La-Z-Boy recliner with a tag stating "Made in America".

Doubt Cast Over Mexican Truckers' English Proficiency

Doubt Cast over Mexican Truckers’ English Proficiency
Friday, April 04, 2008

Mexican truck drivers, traveling throughout the United States under the patronage of a pilot program created to test how safe Mexican trucks are on U.S. roads, are required by law to demonstrate their English-language proficiency. However, according to a testimony on March 11th at a Senate hearing, U.S. Department of Transportation regulations allow those drivers to answer questions in any language other than English when proving they recognize U.S. highway signs.

Senator Bryan Dorgan, who has always been an opponent of the program, has expressed his concern over such a clear disparity between the legal requirement and that particular regulation, arguing that the Mexican truckers’ English proficiency is an integral component of the safety issue. In addition, he has accused the Bush administration of not requiring Mexican truck drivers to meet the same level of safety standards that U.S. truck drivers meet. Chairing the Senate Commerce, Science and Transportation Committee hearing, which was called to examine the six-month-old pilot program, Dorgan demanded an explanation from Transportation Secretary Mary Peters.

Peters admitted that during border inspections Mexican truck drivers are allowed to use any language that a U.S. inspector understands when answering questions to prove they recognize U.S. signs. However, she proceeded that inspectors determine the drivers’ English proficiency through other questions, such as asking them their names, what their trucks are carrying, and where they are going.

The Transportation Department's inspector general Calvin L. Scovel III told the panel that the road-sign test is only one factor that inspectors take into account while determining the Mexican truck drivers’ English-language proficiency. However, he acknowledged in an issued assessment report that the pilot program still suffers from some serious defects.

William Quade, associate administrator at the Federal Motor Carrier Safety Administration, said after the hearing that inspectors normally wait until Mexican truck drivers have demonstrated their English-language proficiency before they begin to ask them to identify signs. He adds that once the Mexican drivers’ English proficiency has been proven, the inspection needs to be carried on in any language that inspectors and drivers understand.

While opponents of the program have sought to shut it down through legislation and litigation, U.S. transportation officials state that a comprehensive inspection process confirms that Mexican trucks allowed in the program are just as safe as American trucks.

The Bush administration regards the program as a step forward toward more north-south trade between the U.S. and Mexico, a trade which would benefit the economies of both countries.