SINGAPORE -- Asian manufacturers from computer disk-drive makers to auto giants are scrambling to speed up shipments to the United States and Europe ahead of an Iraq war, bracing for disruptions to shipping and air freight.
Many fear a war, even a short one, could deal a blow to the well-oiled global supply chain linking low-cost factories in Asia with markets in the United States and Europe, potentially siphoning billions of dollars from global trade.
In the meantime, some firms are shipping early to avoid a conflict.
"Some of the companies that are not willing or cannot take the (war) risk because of insurance issues are exporting their goods early to avoid any possible interruption," said Hong Kong Logistics Association executive vice president Anthony Wong.
Exports from Asia were surprisingly strong in the first two months of 2003, climbing 32.8 percent in China from a year earlier, 24.2 percent in South Korea, 12.2 percent in Taiwan, and 20.4 percent in Singapore which excludes oil products.
"We believe these strong increases were at least partly due to stock building at the distributor level globally on fear of war in Iraq, and further increases in commodity prices," said investment bank ABN AMRO's chief Asia economist Eddie Wong.
Exports from China to the United States rose 31.9 percent in January-February from a year earlier, while those to Japan increased 25.2 percent and those to the Europe Union 36.7 percent.
"These are phenomenal numbers given the current situation of these economies," he said. "The situation seems to be quite global," he added, noting a 57 percent leap in China's imports in the first two months of the year from a year earlier.
He said the danger now was a drop in Asian exports in the next three months. "Since part of the external trade has been front-loaded, exports could disappoint in the second quarter."
JUST IN TIME -- FOR WAR
For many companies there is a bigger worry -- the looming cost from building up global inventories, from sneakers and other finished goods to the raw chemicals used in drug manufacture, as war in Iraq draws closer.
Companies have revolutionized cost-cutting in the past decade, finding cheap products in low-cost Asia, then using third-party logistics companies to arrange shipments with precise delivery targets to save on warehousing costs.
This "just in time" delivery system allows companies to avoid stock overhangs, but it also exposes them to disruptions in the supply chain.
"The dual threats of terrorism and war may be able to achieve what anti-globalization forces have not -- a significant decline in global trade and investment," Gail Fosler, chief economist of independent U.S.-based business advisory group the Conference Board, wrote in a report this month.
Fosler estimates that more than 40 percent of all U.S. requirements for both consumer and industrial goods in footwear, apparel and computers are made overseas. Much of that comes from Asian exporting nations such as Japan, China and Singapore.
BRACING FOR THE WORST
Already, companies are veering from the just in time model.
Since February, Japanese automaker Honda Motor Co. Ltd. has shipped an extra two weeks worth of inventory to its British plant. It fears the closure of Egypt's Suez Canal that links the Mediterranean and Red Sea.
Honda spokesman Masaya Nagai said the company feared a closure of the canal, forcing shipping round the Cape of Good Hope on the southern tip of Africa, taking an extra 10 days.
"Our biggest priority is to keep the factories running smoothly, because the cost of idling a factory line is much more than stockpiling some extra parts," he said. Honda has only a few weeks' worth of stock with its global dealers, he said.
Japan's biggest automaker, Toyota Motor Corp., said reports that it was stockpiling parts and cars were not true.
"We're mapping out various scenarios, but there's no way of knowing how and which countries will be affected until it happens, so we don't want to tamper with inventory levels," said Shinya Matsumoto, manager of international communications.
Matsumoto said Toyota would fly parts or use other routes when the time comes, if necessary.
Shipping lines and logistics companies are already counting the cost of war. Fuel costs are at their highest level in a decade, and shippers are paying thousands of dollars more to insure their vessels for each trip.
"The effect of potential war is already felt," said Poh Choon Lay, chief operating officer at Accord Express Holdings Pte Ltd, a Singapore-based logistics firm. "This already spells higher costs to the supply chain."