Creating opportunity through trade.
The following is based on a speech given by Jim Barber, president of UPS International, at the Asia-Pacific Economic Cooperation Forum in Atlanta.
I have deep respect for small and mid-sized businesses and the entrepreneurs who turn on the lights in the morning, stand behind the counter all day and lock the doors at night.
I love to hear the stories about how they took that first step toward entrepreneurship. And how they picked themselves up after that inevitable first misstep.
As they chase their dreams, many put their lives and the livelihoods of their families on the line. So, along with respect, my company and I also feel great responsibility.
We know there’s no step-by-step manual for building sophisticated supply chains that help them compete with larger rivals. So we try to help.
For example, through a partnership with the U.S. Agency for International Development, UPS leads the U.S. ASEAN Business Alliance for Competitive SMEs.
In the last year, the Alliance has trained more than 2,000 SMEs in 10 countries in supply chain management, international shipping and sustainable manufacturing.
We’re also working with organizations in Singapore, Hong Kong, Vietnam and Malaysia to advise SMEs on e-commerce strategies, supply chain optimization and environmental sustainability.
An Entrepreneurial Shift
Throughout the Asia-Pacific, I see signs of SMEs leading a new “entrepreneurial” economy. Small companies are getting into the game, looking and acting a lot like big companies. They can do that because quality, innovation and service – more than size, more than price – now define success.
“Imports have become essential for exports. ”
Few places are feeling the repercussions of that shift more directly than supply chains. And few businesses will see more direct advantages than small- and medium-sized companies.
In this reconfigured value chain, competitive advantage is shifting from the last leg of the supply chain, which was the case historically, to each stop along the way. Imports have become essential for exports.
Roughly half of the world’s imports are intermediate goods that will be improved and then shipped on for either further modification or for sale.
What that tells us is that trade is no longer a zero-sum game, where one nation wins only when another loses.
“Trade is no longer a zero-sum game, where one nation wins only when another loses. ”
But, according to government figures, less than 1 percent export. And those that do tend to stick to one country, usually Canada or Mexico. We have to believe those statistics are equally startling in other countries.
When you factor in cost and complexity, the number of SMEs who stay on the exporting sidelines is understandable. But as the entrepreneurial economy gains steam, their hesitation is starting to give way. That’s because digital empowerment is creating a trade lane for even the smallest entrepreneur.
A recent eBay study gives us a look at how small entrepreneurs are thinking beyond borders. As you might expect, almost 100 percent of the largest sellers on eBay sell internationally.
But the survey also found that 95 percent of the smallest sellers on eBay also export. More than 80 percent are selling to five or more countries.
Most small business owners have never built a global supply chain. Most probably couldn’t afford to try. But that’s where the power of the new era of global networks kicks in. And where a new business model starts to take shape.
The Network of Things
You’ve heard of the Internet of Things? Where objects embedded with sensors create information networks?
SMEs who see beyond borders will use what I call the “network of things” to integrate their businesses into existing supply chains. Plugging into larger supply chains, they’ll become more than suppliers. They’ll become seamless parts of the value chain.
“SMEs will use the “network of things” to integrate their businesses into existing supply chains. ”
That’s where they find margin-pinching tariffs, custom fees that eat into profits and unnecessary, duplicative, valueless and constantly changing rules.
Singularly and collectively, they are creating choke points in trading lanes around the world.
Most SMEs don’t have the capability, the time nor the resources to navigate around these imposing trade barriers. So we all should all pitch in to help them join global value chains.
But what we can do pales in comparison to what governments could do – and should do – to create trade-friendly and business-enabling environments.
Ongoing negotiations for a Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership and the Trade in Services Agreement are important opportunities to open trade lanes, modernize customs and break down regulatory barriers.
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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.