Supply and Demand

This commentary has little to do with economics, but it has much to do with common sense. Let’s look ahead a little and see what might be in store for U.S. consumers/taxpayers, and we’ll begin at the start of the supply chain. Because inconsequential amounts of clothing, housewares, appliances, electronics, etc., etc., are being produced by U.S. workers for consumption in this country, the effects that American producers have on the U.S. economy won’t matter much. What counts will be the volumes of low-priced imports that pour in from countries that are now thought of as “third world” nations. These cargoes are offloaded, mostly by container ships, in some 60 container ports, according to Secretary Mineta. These container ships used to be manageable in every one of those 60 ports but that’s no longer the case. Just a few years ago, when “bigger is better” began to make economic sense to carriers, “PostPanamax” ships began to make their appearance. This transition was the natural response of suppliers to those doing the demanding, and further proof that the supply-and-demand concept in economics will always hold sway. Always.

But here’s what we seem to have forgotten. The U.S. consumers doing the demanding were not demanding goods that could only be produced overseas, they were demanding the lower prices that could only be produced overseas. We are a nation of cost-conscious shoppers, and because too many of our decision-making officials have lost sight of that basic fact this country and its consumers will pay dearly. Here’s how that’s about to happen. We go back to the “bigger-is-better” syndrome, and the logical evolution from “PostPanamax” vessels to “Megaships”. Why not? After all, the sheep … oops! … the buyers don’t seem to mind paying for it. Yes, that’s right … the buyers are paying every step of the way. Little things, not initially noticeable, have a way of compounding themselves into intolerable situations and this is exactly the situation that is developing today. Two adages come to mind on this point. The first one is the caution about allowing the camel to poke his/her nose under the edge of the tent. Unless the animal is discouraged, the uncomfortable result for both the tent owner and the camel is that the whole camel ends up inside the tent. The other adage also has to do with the camel, and that’s the one about the straw that broke the camel’s back. This particular camel isn’t just uncomfortable, though … this camel is dead. It makes for a good analogy.

Only last week the PACIFIC SHIPPER, one of the most reliable of all maritime journals, cited the strain already being placed by these megaships on terminals, truckers and railway systems in China and in Europe, and reminded readers that more than 150 vessels with capacities exceeding 8,000 TEUs will be in service within three years. In this regard some arrogance has begun to show up in the overconfident statements of some highly-placed transportation officials, and this will come back to haunt them. One such official “warned” that unless waterways were dredged to accommodate these megaships, these vessels wouldn’t service nearby ports. Guess who’s expected to foot the dredging bill? Right. The consumer/taxpayer. And guess who has to pay for the extra miles and miles of transportation costs from these megaports to the ultimate end user? Right again. The consumer/taxpayer. So guess who’s really bearing the construction costs of these “bigger-is-better” ships that are so profitable for shipowners?? Do the math. Gradually, cost-conscious shoppers, the “demanders”, will “Buy American” again. It’ll be more affordable.