The dynamics of world trade could be changing in the next couple of decades due to technological changes.
The Technology Quarterly of the Economist magazine dated May30th-June 5th ,2015 had an article as to how a robotic sewing machine could throw garment workers in low-cost countries out of jobs. At present it takes a human to stitch two pieces of material together. It had to be aligned and fed steadily through a sewing head to ensure that it did not slip or buckle. A company in Atlanta has now invented a machine which tackles this problem with software and high speed photography to create the alignment and tension as the fabric passes under the needle. Also Nike is using a technology called Flyknit to make the uppers for trainers. This combined with 3D printing technology will allow shoes to be manufactured onshore in the United States. Divergent Microfactories in San Francisco is about to show off a prototype of a high-performance, lightweight car designed to be built in small volumes in low-cost factories around the world. If all of this and other such innovations are successful it will have a major impact on employment in low income countries.
The first step in the development or industrialization of a country was the introduction of manufacturing garments, electronics and trainers for exports. This helped countries such as Japan, Korea and Hong Kong to industrialise and increase their per capita income. The second wave led to countries such as Indonesia, Malaysia , Thailand, Vietnam and China . The third wave is now happening in Bangladesh and countries in Africa.
With new technology the whole dynamics of international trade will likely change. Countries such as China, Bangladesh and Vietnam primarily act as assemblers. The raw material is imported and processed elsewhere and the complex web of raw materials, parts and assembly is put together by middle men such as Li & Fung from Hong Kong. The value added from even countries such as China is actually very small.
The goods are then shipped to the United States, Europe , the Middle East and Africa. What will change is that the role of China and Vietnam as exporters will decline as the goods will be manufactured closer to the markets such as the United States, Canada or perhaps Mexico. The labor component will be become even smaller.
The basic commodities which will be imported from Latin America and Africa will be processed in countries which have the ability. Some of this will be migrating back to countries such as United States as the cost of electricity has come down considerably due to shale oil and gas.
The new model will be intra country assembly and distribution for countries with large populations such as the United States, China, India, Brazil, Mexico and Indonesia and intra regional for smaller countries within South East Asia. This will affect the smaller countries in Asia,Africa and South America. The impact will also be on shipping companies who are continuing to build ships with ever increasing capacity for carrying containers.
What will increase is the trading of soft and hard commodities. As countries such as China and India continue to industrialize and with the population increase, their ability to grow enough to feed themselves will shrink and they will become more dependent on agricultural imports.
Obviously all these changes will not happen suddenly but will be over a period of time. This is of course a personal and perhaps a simplistic view. I could be totally wrong and none of this might happen, but I would bet the odds are in my favor.
The Technology Quarterly of the Economist magazine dated May30th-June 5th ,2015 had an article as to how a robotic sewing machine could throw garment workers in low-cost countries out of jobs. At present it takes a human to stitch two pieces of material together. It had to be aligned and fed steadily through a sewing head to ensure that it did not slip or buckle. A company in Atlanta has now invented a machine which tackles this problem with software and high speed photography to create the alignment and tension as the fabric passes under the needle. Also Nike is using a technology called Flyknit to make the uppers for trainers. This combined with 3D printing technology will allow shoes to be manufactured onshore in the United States. Divergent Microfactories in San Francisco is about to show off a prototype of a high-performance, lightweight car designed to be built in small volumes in low-cost factories around the world. If all of this and other such innovations are successful it will have a major impact on employment in low income countries.
The first step in the development or industrialization of a country was the introduction of manufacturing garments, electronics and trainers for exports. This helped countries such as Japan, Korea and Hong Kong to industrialise and increase their per capita income. The second wave led to countries such as Indonesia, Malaysia , Thailand, Vietnam and China . The third wave is now happening in Bangladesh and countries in Africa.
With new technology the whole dynamics of international trade will likely change. Countries such as China, Bangladesh and Vietnam primarily act as assemblers. The raw material is imported and processed elsewhere and the complex web of raw materials, parts and assembly is put together by middle men such as Li & Fung from Hong Kong. The value added from even countries such as China is actually very small.
The goods are then shipped to the United States, Europe , the Middle East and Africa. What will change is that the role of China and Vietnam as exporters will decline as the goods will be manufactured closer to the markets such as the United States, Canada or perhaps Mexico. The labor component will be become even smaller.
The basic commodities which will be imported from Latin America and Africa will be processed in countries which have the ability. Some of this will be migrating back to countries such as United States as the cost of electricity has come down considerably due to shale oil and gas.
The new model will be intra country assembly and distribution for countries with large populations such as the United States, China, India, Brazil, Mexico and Indonesia and intra regional for smaller countries within South East Asia. This will affect the smaller countries in Asia,Africa and South America. The impact will also be on shipping companies who are continuing to build ships with ever increasing capacity for carrying containers.
What will increase is the trading of soft and hard commodities. As countries such as China and India continue to industrialize and with the population increase, their ability to grow enough to feed themselves will shrink and they will become more dependent on agricultural imports.
Obviously all these changes will not happen suddenly but will be over a period of time. This is of course a personal and perhaps a simplistic view. I could be totally wrong and none of this might happen, but I would bet the odds are in my favor.
