In a world that is being rewired and transformed, policy must keep pace, starting with approval of the largest and most far-reaching free-trade agreement in history.
The following is based on a speech given by Mark Wallace, UPS senior vice president of global engineering and sustainability, at the Global Supply Chain Summit in Washington, DC.
“ Growth of trade has coincided with historic progress – building economies, combating hunger, empowering women, expanding literacy and extending life.”
But with this transformation, we must ask two big questions: First, is trade policy up to the task of steering and leveraging the power of a re-wired world? And second, do we have a sense of urgency to make sure that it is?
The answer to the first question is: No, policy is lagging far behind possibility. The answer to the second question is: We’re not sure yet. But we may know soon.
America has much riding on the outcome. Because as we dither and delay, the world is moving on. Just like every day in our business, minutes count.
Emerging markets are investing in infrastructure and becoming global competitors with incredible speed. Power has shifted from seller to consumer, with empowered consumers demanding unlimited choice, convenience and control.
For those in the supply chain business, this rewiring brings both historic opportunity and historic challenge. Both center on how to make the rewiring of the planet work to the advantage of customers and consumers.
It’s easy to assume that technology can do the heavy lifting. But technology alone is merely circuits and code.
The textbooks say Edison’s genius transformation was not the light bulb. It was the electrical grid – a network that provided the power to make the light bulb useful in illuminating homes and businesses.
At UPS, we understand the power of networks. We’re a company that operates on the strength of assets that ride on the back of our integrated global network. Those assets – vehicles, aircraft, facilities and people – are critical. But their real value is demonstrated when they come together and form a network.
Our move to a networked world is reflected in the changing flow of trade and in the changing nature of trade agreements.
The Power of Trade
The General Agreement on Tariffs and Trade and World Trade Organization created rules for a global economy, where goods were made in one place and sold in another. So the focus on tariffs and other trade barriers made sense. But as the world has been rewired around supply and value chains, trade agreements have become broader, harder to negotiate and to understand.
There is plenty of ammunition for pro-trade disciples like ourselves. In the first full year after a free-trade agreement is reached, our business gets a 20 percent bump on average. What’s more, for every 22 packages that cross a border as part of our network, we create or maintain a job for a UPS employee.
We also know that trade has helped lift a billion people out of poverty, that 38 million American jobs depend on trade and that imports from foreign trading partners lower prices for Americans.
“ If we see the world as it is, if we want to compete in that world seamlessly, effectively and with leverage, TPP must be approved.”
All of this makes a compelling argument for the transformative power of global trade. But just as real is the fact that the blessings of trade have not been universally shared.
Income inequality is a fact. Stagnating wages are a fact. Jobs lost to less expensive countries are a fact.
We can argue that there are co-conspirators, whether robotics or recession. We can argue that trade drives exports and exports create jobs.
But none of that compares to the reality of a lost job or the fear that the loss is possible. For the vast majority, trade is conceptual and complicated. Mortgage payments are not.
As the two sides of the trade argument clash, the debate is currently the loudest around the agreement closest to the finish line – the Trans-Pacific Partnership.
TPP is the largest and most far-reaching free-trade agreement in history, connecting 800 million consumers in 12 nations across the Americas and the Asia-Pacific region.
It was built for the needs of digital commerce – to ensure that trade rules recognize the power, growth and special demands of interconnected consumers.
It breaks up the loggerhead at customs. It evens the competition for private service providers. It eliminates thousands of taxes in the form of tariffs, making American businesses more competitive in one of the world’s fastest-growing regions.
It acknowledges – with a full chapter – the importance of small business. Opaque regulations, complex paperwork and slow delivery of small shipments conspire to discourage small- and medium-size enterprises from venturing across borders. TPP will open doors for smaller players across all the member countries.
If we see the world as it is, if we want to compete in that world seamlessly, effectively and with leverage, TPP must be approved.
TPP is approaching the finish line, but there are still obstacles in its path. As we near the finish, it’s critical that we avoid two big mistakes.
One would be to assume the logic that free-trade advocates see in the rightness of global trade will win the day.
The other potential mistake is to be afraid to step up to the debate. We have to be visible. We have to be vocal. We have to argue our case in every forum available to us.
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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.