The once-thriving practice of outsourcing manufacturing may be thwarted by rising energy costs.

According to the Wall Street Journal, many U.S. manufacturers have halted plans to build factories overseas because the costs to transport goods back home have risen. Some, such as the heater manufacturer DESA LLC, are even considering moving production back to the U.S. "My cost of getting a shipping container here from China just keeps going up — and I don't see any end in sight," said DESA retail heating division president Claude Hayes. The company now considers itself lucky to have kept its old U.S. factories.

The return of DESA's heaters to the U.S. coincides with a new report by CIBC World Markets called "Will Soaring Transport Costs Reverse Globalization?" The report argues that high energy costs could potentially reverse the outsourcing that has occurred in some areas of manufacturing. Foreign trade cannot expect the same opportunities to develop markets in India as there were 30 years ago because of today's high energy costs. This situation could give countries closer to the U.S. like Mexico a little more appeal in the future than current economic giants such as China.

But do not expect outsourcing — the major transformer of world economies in the last 30 years — to go silently into the night. As Andrew Leonard points out in his article "Who Needs Tariffs When You Have Expensive Oil?" high energy prices do not affect all aspects of global trade, including the areas of telecommunications and computers. For example, the software industry in India will continue to thrive because it thrives on cheap Internet and not natural resources. So while some manufacturing may feel the pressure of high oil prices, American companies will continue to outsource in other ways.

Energy costs won't likely come down anytime soon. Could American manufacturing make a comeback?

Photo: Mark oh! (flickr)

One of India's most famous exports, Darjeeling tea, is under threat from an indefinite strike by an ethnic Nepalese Gorkhas demanding greater autonomy in the region.

Protesters clashed with police last week, disrupting transport links, blocking road access, and shutting down many businesses in the Darjeeling hills, home to hundreds of tea gardens that produce the world-famous tea.

The crisis comes at a critical peak period for plucking highly priced "second flush" tea leaves. According to Siliguri Tea Traders Association's secretary, the unrest has caused the country's tea industry to lose the equivalent of $470,000 a day.

The Gorkhas are fighting for a separate state in West Bengal. They claim that the Indian government discriminates against them, and that they don't receive the services and infrastructure they deserve.

But while local tea exporters are becoming increasingly worried, those hardest hit by the shutdown are the tens of thousands of workers and their families whose economic wellbeing depend on the tea gardens. According to NDTV, "the shutdown means uncertainty for over 50,000 permanent workers in the tea gardens, and no wages for around 100,000 temporary workers."

Government officials are hesistant to grant the Gorkhas autonomy because they fear losing control of one of their prized exports. But the unrest threatens the tea industry's health, which is why West Bengal officials are said to be "keen" on talks to resolve the issue.

A Darjeeling tea estate in India. Photo: nac888 (flickr)

Throughout the past 40 days, South Koreans have vehemently opposed a government proposal to lift a five-year suspension on the import of U.S. beef. Fear of meat tainted with mad cow disease prompted 100,000 Koreans took to the streets of Seoul. Korea suspended the imports in 2003 when the first case of mad cow was discovered in American beef.

The public outcry over the proposal to lift the ban is President Lee Myung Bak's first big challenge as he tries to improve relations between the U.S. and South Korea. Though the president and his administration took office in February, already the uproar has prompted the president’s entire cabinet to offer their resignations. The divisive trade deal and a trucker’s strike over the surging price of fuel could further slow the South Korean economy.

This Al Jazeera video shows some of the more striking images from the demonstrations and gives an overview of the political climate that has led to the near- daily protests.

"If you've ever smoked a major-brand cigarette, the chances are you've smoked Malawian tobacco," says the BBC. "Virtually every western cigarette uses a bit of the produce from this small southern African nation in its blend."

The battle between cigarette companies and anti-tobacco campaigns poses a challenge for Malawi, one of the poorest nations in the world. In Malawi, tobacco production contributes to 10 percent of GDP and is the second-largest employer in the country.

Proponents of tobacco production argue that tobacco is a crop of choice for farmers because it is easy to grow on marginal soils that yield little else, and earns about seven times more than maize and 22 times more than cotton. In Malawi, revenues from tobacco production are generated from a mere 2 percent of the country’s arable land.

Critics of tobacco production argue that the wealth generated by this resource is not spread evenly across the country. With the price of tobacco constantly fluctuating, those hardest hit are small farmers who are often forced to sell their produce at a loss when tobacco prices fall below market value. According to The Malawi Tobacco Control Commission (TCC), a local government watchdog, it takes US$1 for farm workers to produce a kilogram of tobacco, but that kilo is sold for only US$0.70. As a result, farmers on the big tobacco estates become bonded laborers, forcing whole families to work and repay the landlord. One study found Malawi's tobacco industry employs 78,000 children.

What's not in dispute is that Malawi's tobacco industry is struggling. The government is starting to push alternatives. One is farming mushrooms, where there is already a"brisk local market" — and a potential to meet unmet global demand.

On the tobacco auction floor. Photo: joellaflickr (flickr)

Kabul, Afghanistan. Photo: twocentsworth (flickr)

China has entered the business of producing and selling burqas-- and Afghani women are responding to the "modern" designs. With the resurgence of the Taliban and violence, many women are choosing (or being forced to) cover up. The result is that China's new industry is driving out the traditional Afghani burqa industry.

Check out the Wall Street Journal article and video about China's growing presence in the burqa industry from this week's Post Global.

Most assume that China will experience a significant downturn in growth as a result of the recent scare in the US economy. But on January 3rd The Economist published an article suggesting that growth of GDP in China is less dependent on the export of cheap goods to Western consumer markets.

The headline ratio of exports to GDP is very misleading. It compares apples and oranges: exports are measured as gross revenue while GDP is measured in value-added terms…
Once these adjustments are made, Mr Anderson reckons that the "true" export share is just under 10% of GDP. That makes China slightly more exposed to exports than Japan, but nowhere near as export-led as Taiwan or Singapore.

Steven E. Landsburg outlines a few simple ways to wrap your mind around the concept of free trade and outsourcing in the New York Times op-ed, What to Expect When You're Free Trading.

Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?

Internally torn about free trade vs. protectionism? Well worth the read.

A sobering piece on Chinese/American trade by James Fallows in this month's issue of The Atlantic:

Through the quarter-century in which China has been opening to world trade, Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus—$1.4 trillion and counting, going up by about $1 billion per day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China.

Fallows concludes:

Like so many imbalances in economics, this one can’t go on indefinitely, and therefore won’t. But the way it ends—suddenly versus gradually, for predictable reasons versus during a panic—will make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere.