Asia - flattened by an Un-Flattening World

Excellent note from MS last night entitled HIGH TRANSPORT COSTS TO 'UN-FLATTEN' THE WORLD in which their economists note, in a glass-half-full sort of way, that with high oil prices driving transportation costs through the roof and the Asian export model under serious threat as a result, the development of domestic and regional consumption is a positive.

"We believe that, with rising transport costs, trade globalisation may slow significantly and the world will 'become more round'. Asia's trade model will be particularly affected. The near-term impact, in our view, is not positive for Asia; however, in the long run, this shock could coerce Asia into moving away from the export-led growth model."

(Maybe India rather than China has it right after all? Just a thought!)

The FT writes this morning, coincidentally, of P&G's rethinking of its supply network in the light of massively higher transport prices:

"Soaring energy prices are forcing Procter & Gamble to rethink how it distributes its products, with the world’s biggest consumer goods company shifting manufacturing sites closer to consumers to cut its transport bill."

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I wrote about the effect of transport costs on Asia recently here and here, but obviously didn't think it through quite as far as MS (and P&G)!