Protectionism?

Today's WSJ has an article (subscription required) about the return of protectionist pressures in global commerce. Russia is considering almost 30 new tariffs. President Obama deflected "buy American" language in the stimulus bill, but the US and the EU are using accusations of dumping to curb Chinese imports. India may add further protections to its steel industry. While these examples have not resulted in new tariffs yet, they are indicative of a broad trend away from free trade. As the global downturn worsens, skepticism is mounting over the benefits of free trade.

World trade had been growing at a 6% annual rate, more than double the pace of global economic growth since the late 1990s. The WTO expects it to shrink by 2.1% this year. The IMF is expecting the decline to be even sharper, at around -3%. Most of this decline is driven by falling consumer spending in the US and Europe. As economic growth slows, labor movements in each country are blaming their woes on outside forces. Workers from the US to Europe to Africa to China are pushing for their governments to protect their jobs from competition. The unstated argument here is the belief that their domestic economy is strong enough to stand on its own.

The implications of a permanent downturn in global trade for the warehouse segment of industrial demand are huge. Tenant demand in the US and Europe has been predicated on continued growth in trade. The supply chain infrastructure (factory and warehouse locations) has assumed that goods will move from production facilities in Asia through major ports to points of consumption in the US and Europe. The return of trade barriers and reduced trade would likely reduce the demand for space in warehouses near ports of entry. Moreover long-distance rail lines would play less of a role in getting goods to markets, reducing warehouse demand near their terminals.

None of this is to say that we will ever return to the high protectionist trade regime of the 1920s. It is entirely likely that we may see some protectionist measures introduced, but maintain the overall goal of free trade... a sort of "free trade with guardrails". But the debate suggests that the future growth of international trade will be slower than it has been over the past decade. Consequently, the expectation of voracious demand for DC space in places like the Inland Empire, Dallas, and South Atlanta (and emerging IDC markets like Savannah and Houston) may have to be scaled back.

Any thoughts on the matter? Is this just a passing fad, driven by cyclical economic fears (closer to my view) or are we in a long-term retrenchment of attitudes toward global trade?

Here are some recent publications from Colliers and Cushman & Wakefield on logistics real estate. Neither mention protectionism as a potential threat to this model.

Introduction

Here we are in the depths of a recession. What better time to start an industrial real estate blog? :-) I'm hoping to use this site as a forum for trends people observe both in fundamentals and investment patterns. Discuss news items... debate policy impacts on the sector... call each other nasty names...

I'm also hoping people will feel free to discuss what they are seeing more candidly than they would if they are speaking for their company. While anonymity is great, one also sacrifices credibility. You decide how much to share.

Anyway, let's get the ball rolling:
Yesterday, Globe St. pubished some data from Grubb and Ellis's Investment Opportunity Monitor showing LA as the top industrial market through 2013. Way to go out on a limb there, guys. Here's one not on their list: Kansas City. We like a lot of things going on there demand-wise and prices never spiked there the way they did in the traditional hub markets.