The Monster Guide and the Bearfoot Travelogue

important to examine and understand just how quickly the world is changing and how often old ideas and ways of doing things are becoming debunked. It’s also interesting to examine issues and trends that have surfaced as a result of the economic downturn.

This past week I have scanned just a few of these issues and here are a few discoveries, assumptions, theories and questions that I would like to share with you.

In the past five years, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September, it surpassed Japan as the largest overseas holder of Treasuries. In recent years, China has bought more than $1 trillion of American debt, but as the global downturn has become more intense, they have begun to keep more money at home, a move that could have painful effects for both American and Canadian borrowers. This year, Beijing is seeking to pay for its own $600 billion stimulus — just as its economy is taking a downturn and its own tax revenue falls sharply. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports; and to local governments so they may build new roads and other community projects.

The declining Chinese appetite for United States and other overseas debt, has surfaced this past month as Fitch Ratings a credit rating agency has forecast that China’s foreign reserve which indicates their purchase of overseas debt will be $177 billion this year which is down significantly from the estimated $415 billion they invested last year and in previous years.

This is bad news for countries planning deficits – with no buyers for their debt, they may have to force domestic interest rates upwards. Regardless, the entire situation continues to place China within an important stakeholder role in areas of global foriegn policy. It will continue to use its position as a holder of US securities to encourage support for a growing Chinese economy anchored by exports to the US and Canada.

As the financial crisis and the government rescue plan dominates headlines, almost everyone overlooked a news item that will have an enormous long-term impact: GE Capital announced the acquisition of five mid-size airplanes—with an option to buy 20 more—produced by CACC, a new, Chinese-government-sponsored airline manufacturer.

Normally this isn’t big news, however 50 years ago Asian automakers took a series of similar small steps to enter the North America marketplace. Today they dominate the automotive industry here. Aviation is one of the few industries where North America is still on the leading edge and dominant, however with the CACC's emergence, a new competitive playing field will further impact the North American economy in coming decades.

In both Canada and the United States we are losing our intellectual advantage in the world and this is now being described as a new "third deficit." Currently, there is a common belief that many economists and policy-makers hold, as they argue that over-regulation is chasing corporations from North America overseas to China. But there is a different take on this event. Presently, hundreds of thousands of engineers are graduating annually in China. This ever-expanding Asian knowledge-base is attracting lawyers, investment bankers, advertising agencies, and accountants from North America all following corporate clients and wealth creation. It’s this attraction to wealth creation that has caused investment-banking activity to migrate overseas and not over-regulation in North America.

We’re losing large portions of our economic value chain. Canada is the world’s largest exporter pf published and printed material, everything from books and magazines to newspapers and service manuals. It’s a huge industry and while we own over 13 percent of the worlds export market, Germany and a number of other European countries are close behind, as is China. Like any other industry, publishing has a value-chain that begins with the author who has an idea which is then published which is a form of manufacturing that involves layout and printing, followed by marketing, sales and distribution. Over the past five years Canada’s publishing exports have grown only 0.5 percent compared with Germany’s which has grown 12 percent. In fact we are the poorest performer in the worlds top ten publishing exporters in terms of growth, and at this rate we will lose our export position by 2010. Much of this loss is due to Canadian publishing companies moving vast portions of their value-chains such as printing from Canada to China, the same holds true for American publishing companies but it's something that European countries are not doing. This corporate behavior is becoming common in nearly all industrial sectors and the result can be described as shipping our ideas overseas where they are produced and then shipped back to us as consumer items.

Shipping products weighs heavier on the planet than shipping ideas. The vast majority—at least 85 percent—of fake Christmas trees come from Asia, so when we buy one of these trees it might be shipped from Shanghai-to-Vancouver, aboard a container ship. A large ship capable of holding 2,125 - 40-foot containers will consume about 1,000 metric tons or approximately 300,000 gallons of fuel during its two-week journey across the Pacific Ocean. Let's say that there's only one container of fake trees on that ship, which means the trees' share of that fuel is roughly 142 gallons. This puts the trees in Vancouver where they now need to be shipped by truck with even more fuel being consumed. It’s a rough calculation but it does beg the question: What is the real cost to our planet when we ship things like fake Christmas trees across the ocean?

Shipping fake Christmas trees is one of the reasons why the Barrack Obama administration will be growing “soft protectionist” ideas. This past Christmas, North American consumers began to cutback purchases on high priced items like flat-screened TV’s. The shipping industry loves those TV’s; a lot of them can be packed into a 40 foot container, and they have high retail value so wholesalers are willing to pay high shipping costs; they also travel a great distance which adds to transportation revenues. Most containers packed with retail items will travel by ship all the way from China across the Pacific to a westcoast port in North America, then by rail across the continent to places like Toronto, Chicago and New York. Then the shipments are broken down and some of this merchandise in smaller quantitities is then shipped by truck, back across the continent to places like Kansas City, Denver and the Okanagan.

In fact, when our economy was hot, approximately 156,000 merchant ships worked steady to move goods around the planet, a booming industry under the banner of globalization.

But since we slowed our buying power because of the economic downturn, we fueled the collapse of the shipping industry which is now in crises. It’s impossible to determine the exact impacts but there could be as many as 4000 ships docked at bay, without a cargo and with no place to go.

What does this mean?

It obviously means lower revenues for local retailers and for manufactures in China and for the transport industry, but there is a diamond in the rough. When those 4000 ships were still moving TV’s and fake Christmas trees for us they consumed the equivalent of 70.7 billion gallons of gasoline which not only placed stress on world oil reserves but remained a major contributor to greenhouse gas emissions. Remember this is a meager portion of the consumption from all merchant ships, but what those 4000 ships consumed is equal to the annual fuel consumed by every automobile and motorcycle in the United States.

So by cutting back on our consumer spending similar to what we did in the past 6 months, for an entire year, would be the equivalent of collectively parking our cars and not driving anywhere for 12 months.

Keep in mind that when we add truck and rail transport into the consumption mix that’s another 70 billion gallons in fuel consumed annually.

Comparing our consumer spending habits with overall fuel consumption requires further analysis, this is a rough scan of the data and is based on some pretty basic arithmetic, but there does seem be some key discoveries here. If we want to retain jobs by keeping our value chains intact and even growing them like Europe has; and if we think that we can radically reduce fuel consumption by lessening our consumer spending on imported goods - then we are embracing a more protectionist economic policy, which in fact might be better for the planet.

The big question will be: Can we in North America implement a more protectionist policy when our debt is held by nations like China which is dependent on the present state of ever expanding global trade?

I believe this will be the dominant question Canada and the United Sates will be debating this coming year, and it's one that deserves close attention from all of us.

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Don Elzer writes and comments about the future, current affairs, lifestyle and the natural world. He is a director of the Watershed Intelligence Network publishers of The Monster Guide, which can be found at www.themonsterguide.com

He can also be reached by email at: treks@uniserve.com