• February 23, 2016
  • |
  • Trade

What Does it Mean to Trade in the 21st Century?

Today’s trading environment must adapt to global supply chains and the potential of e-commerce.

When 12 senior representatives announced the highly anticipated conclusion to the Trans-Pacific Partnership negotiations in October 2015, U.S. Trade Representative Mike Froman heralded the deal as an agreement tailored for the modern economy.

“In addition to liberalizing trade and investment between us, the agreement addresses the challenges our stakeholders face in the 21st century while taking into account the diversity of our levels of development,” Froman told the audience in Atlanta.

In the months since the text of the agreement was released, the wide-scale economic benefits of the deal and the need to act quickly have become clear.

The World Bank estimates TPP will raise GDP by an average of 1.1 percent for the 12 member countries by 2030, and exports will rise more than 10 percent.

In addition, the Peterson Institute for International Economics forecasts that delaying TPP by one year would cost the U.S. economy $77 billion.

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Exports will rise more than 10 percent.

Earlier this month, after all the countries’ domestic constituencies had an opportunity to review the deal, the 12 TPP countries finally signed the agreement.

The signing paves the way for efforts in the months ahead to secure support in domestic legislatures across the region to fully implement this deal.

But what is unique to trading in the 21st century, and why do we need a more modern agreement?

As it turns out, quite a lot has changed since 1994 — the last time a trade agreement of this scope was negotiated.

A more modern agreement ensures businesses of all sizes have the tools they need to create global growth, harnessing the power of the technological advances that have occurred since the 90s.

[Also on Longitudes: 2016 – A Good Year To Ace the Trade Agenda] 

Trade Meets E-Commerce

The most obvious evolution in the global economy is the realization of e-commerce. The TPP region is home to 600 million Internet users, and this is reflected in the huge surge in digital trade.

Online sales topped $1.6 trillion worldwide in 2015 — including a 35 percent increase in the Asia-Pacific market, the fastest growing region in the world.

Even though international online shopping is the new normal, trade agreements have failed to keep pace.

Outdated customs rules, lack of transparency about the rules of trade and so-called data protectionism hinder businesses from taking full advantage of the digital economy.

TPP was crafted with digital trade in mind, and it establishes standards to make sure trade expands as fast as the Internet demands.

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TPP was crafted with digital trade in mind.

Under the agreement, foreign companies are forbidden from charging customs duties on goods that are “delivered” electronically, like eBooks and digital music.

It bars governments from requiring companies with software products to share their proprietary codes with government entities or commercial competitors.

TPP requires governments to accept the validity of electronic signatures, so even more purchases can happen online.

Modern trade agreements aren’t just needed to deliver on the promise and opportunity of digital trade — they are also necessary to address recent changes to physical trade.

Gone are the days when goods were made entirely within one country, only crossing a border once to reach an international customer.

Today, goods may cross multiple borders throughout the manufacturing process as part of highly specialized supply chains.

Old school trade rules inhibit such efficient production lines and impose cumbersome trade barriers for owners of small and mid-sized businesses trying to expand into new markets.

TPP establishes a committee specifically tasked with reviewing supply chains across the trading region.

The committee will periodically make recommendations to streamline the flow of goods and services so that as the economy evolves, our trade rules will evolve with it.

[Also on Longitudes: Why Mexico?]

Tearing Down Red Tape

With more complex supply chains and the flood of goods moving due to e-commerce, it’s more critical than ever to process goods quickly when they reach a border — a problem TPP is poised to tackle.

The deal ensures shippers can send customs forms electronically and that express shipments clear border patrols no more than six hours after the shipper submits the necessary forms.

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TPP’s limits will help foster a fairer, competitive economy.

Furthermore, as these new markets open for businesses across the region, TPP ensures they compete on a level playing field. Businesses big and small, domestic and foreign, must have an equal chance to compete.

TPP’s limits on state-owned enterprises, which range from telecommunications companies to postal carriers, will help foster a fairer, competitive economy in emerging markets and developed countries alike.

Giving all businesses their chance to compete ensures that innovative ideas are rewarded and that they can cross borders – to the benefit of consumers everywhere.

The 21st century introduced enormous opportunities for businesses and customers all over the world.

With TPP, legislators have the chance to create standards for global trade that recognize opportunity, stripping away cumbersome and outdated laws and regulations that stifle growth and innovation.

The U.S. Congress and all of the TPP legislatures should act now to be in the frontline of trading countries with the most modern rules of trade in the world. goldbrown2


Every morning, wake up to the blog that gives you the latest trends shaping tomorrow.

Laura Lane is President, Global Public Affairs, at UPS.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.