The impact of high oil prices has been felt across oil-intensive industries in the US Airlines are moving toward shakeouts; the $4-a-gallon gas has forced the first fall in gas consumption since the Gulf War of 1990-91; and last June, the sales of new cars and trucks plunged to their lowest level in more than 10-15 years.
A sustained trend would reinforce the kind of trade diversion that was seen in the 1970s, which made trade more regional. American importers would substitute Latin America for East Asia, Japan would import more from China; China's Guangdong trade engine would be challenged; Mexico's maquiladora plants could thrive again, and so on.
During the past 30 years, global economic integration has supported extraordinary global growth. The take-off of large emerging economies, particularly China, has had a great positive impact on the world economy. If the cost of moving things and people continues to soar, globalization will erode and regionalization will gain.
(China Daily July 9, 2008)
