An air freight executive recently warned his air cargo colleagues “not to put all your eggs in the China basket.”
Speaking at the Trans-Pacific Air Cargo Conference held in Los Angeles, Julian Keeling, President & CEO at Consolidators International, Inc. (CII), a leading air freight wholesaler and forwarder, stated, “While China-US trade is receiving the lion’s share of attention within the shipping community, substantial growth in this market cannot and will not last.”
Keeling chastised the air cargo community “for being hypnotized by China.” He said the growth of the China economy “was truly remarkable particularly in light of that nation living under a communist regime.”
He gave full credit to the industriousness, work ethic and capabilities of the 1.2 billion people of China “who have transformed the nation from a basically rural and undeveloped country to becoming “the factory to the world” in less than two generations.
He added, however, “Nothing goes on forever.
“Already, there are disturbing signs emanating from China of slowdowns in a number of industries. Also, governments including the US and some in the European Union are becoming alarmed at the flood of imports. They are starting to take protective measures.” He noted that textile quotas are cutting into the import of raw and finished textiles from China “and this may mean the beginning of a restrictive trend for a wide variety of imported merchandise.”
Keeling said, “The ultimate irony lies in the fact that while US combination and all-cargo airlines are rushing to increase service to China, air freight volume between China and the US may have reached its peak. Lufthansa is reporting a small but worrying drop in China traffic. Other airlines are advising quietly to forwarders that once fully committed space ex-China now is available.”
Keeling pointed to the sad experience of the Mexican maquiladora plants as an example of misplaced enthusiasm. “Twenty five years ago, American manufacturers began constructing plants along the Mexican-US border to take advantage of low labor costs and government subsidies.
Freight forwarders followed their customers by opening full service facilities along the border in such cities as El Paso and Brownsville.
Alas, today many of these manufacturing plants are shuttered and freight offices closed as industry has moved elsewhere—primarily to China. How long will China retain this transplanted industry?” wondered Keeling.
The CII executive said that his bet was on Eastern Europe to take up the production reins from China. “Nations making up the former Soviet bloc are hungry for work, have skilled and experienced yet low cost labor forces, offer tax abatements and other public assistance to encourage the establishment of production and distribution facilities by US and Western Europe corporations. Another important advantage,” added Keeling, “is the similar cultural, social and political heritage shared by the US, Western and Eastern Europe.”
Turning to other matters of interest to his air cargo audience, Keeling, ever the iconoclast, averred that cargo code sharing by the airlines, “are useless and a waste of time. They do not work and should be abandoned,” argued Keeling.
He also derided the need for 3PLs “who promise much and deliver little. How can high priced ‘consultants’ lower air cargo costs?” asked Keeling. “The two are mutually exclusive.”
Keeling commented that the “old fashioned” telephone remains the instrument of choice with the freight forwarder. “Funny,” he remarked, “but whenever there is a cargo emergency, the shipper never goes to his computer but instinctively picks up the phone to find out what’s really happening.” He predicted the computer never will replace people.