Several years ago, I was sailing from the Bahamas to Palm Beach when I encountered one of those giant container ships. He was about 10 miles away, but I knew that they traveled a lot faster than most people think. I called the captain on the radio and asked if I should pass behind or ahead of him. He call that I should pass ahead of him. Every thing worked out OK. Super container ships is the idea behind this blog.
Let's go back before there were any super container ships. In those days the transportation of a product from China add 20% to the retail cost of a product. Now it is down to only about 5%. Why is this a big deal, you might ask? It is a very big deal and here is why. Think about a product made here in the USA that sells for $100 and a product from China that sells for $95. That is not much and most people would buy the product made in the USA even though it cost $5.00 or 5% more. Now look at the impact of the super container ship. The product from China used to include $20 for shipping, but now with the super container ship the cost is only $5.00. That results in a final retail cost of $80. Now we are looking at a big enough difference of 20% and now you buy the product made in China. Who ever made the USA product is out of job. Simple isn't it?
We are not through. What is the impact of companies like Amazon? It is the same as that of the super container ship. The USA made product that has a retail price of $100 has a total of $25 to support the big box retail stores where the product is sold. When Amazon came along, they cut out the added cost of the big box retail store and reduced the cost from $25 to just $10. This is good, right? Not when it comes to made in the USA and her's is how. The product from China that used to cost $80 now has a cost thru Amazon of $65. The USA product can play this game too and their product now has a retail cost of $85. Notice that it is still that same $20 difference, so what is the big deal?
Before the super container ship, the product from China has the same retail cost as the one made here in the USA. After the impact of the super container ship the product from China had a retail cost of $80. That was 20% less than the USA made product. Now when you add in the impact of Amazon, the product from China has a retail cost of $65 and the USA made product has a retail cost of $85. What is the big deal? Now the product from China has a retail cost of 23.5% less than the product made here. See what is happening? The USA made products are getting less and less competitive with those made in China. China still has their same labor cost advantage as their percent advantage keeps getting bigger.
I hope that you have followed my simple example and see what is happening with world trade and how we are at a big disadvantage and that disadvantage will keep growing. I could come up with many more examples, but I think you can see what is happening!!!
PS--Efficiency does not solve the problem either because China can buy the same equipment and tools. Since we are about 35th in the world in math, our workers are not any better or efficient either. The future does not look too good, does it? All we have is our natural resources and diluting them with immigration will cancel out that advantage too.
Let's go back before there were any super container ships. In those days the transportation of a product from China add 20% to the retail cost of a product. Now it is down to only about 5%. Why is this a big deal, you might ask? It is a very big deal and here is why. Think about a product made here in the USA that sells for $100 and a product from China that sells for $95. That is not much and most people would buy the product made in the USA even though it cost $5.00 or 5% more. Now look at the impact of the super container ship. The product from China used to include $20 for shipping, but now with the super container ship the cost is only $5.00. That results in a final retail cost of $80. Now we are looking at a big enough difference of 20% and now you buy the product made in China. Who ever made the USA product is out of job. Simple isn't it?
We are not through. What is the impact of companies like Amazon? It is the same as that of the super container ship. The USA made product that has a retail price of $100 has a total of $25 to support the big box retail stores where the product is sold. When Amazon came along, they cut out the added cost of the big box retail store and reduced the cost from $25 to just $10. This is good, right? Not when it comes to made in the USA and her's is how. The product from China that used to cost $80 now has a cost thru Amazon of $65. The USA product can play this game too and their product now has a retail cost of $85. Notice that it is still that same $20 difference, so what is the big deal?
Before the super container ship, the product from China has the same retail cost as the one made here in the USA. After the impact of the super container ship the product from China had a retail cost of $80. That was 20% less than the USA made product. Now when you add in the impact of Amazon, the product from China has a retail cost of $65 and the USA made product has a retail cost of $85. What is the big deal? Now the product from China has a retail cost of 23.5% less than the product made here. See what is happening? The USA made products are getting less and less competitive with those made in China. China still has their same labor cost advantage as their percent advantage keeps getting bigger.
I hope that you have followed my simple example and see what is happening with world trade and how we are at a big disadvantage and that disadvantage will keep growing. I could come up with many more examples, but I think you can see what is happening!!!
PS--Efficiency does not solve the problem either because China can buy the same equipment and tools. Since we are about 35th in the world in math, our workers are not any better or efficient either. The future does not look too good, does it? All we have is our natural resources and diluting them with immigration will cancel out that advantage too.
