What Politicians are Getting Wrong about Free Trade

The attacks against trade agreements overlook their wide-ranging benefits.

You’ve probably noticed that free trade isn’t getting much love these days. I read the other day that bashing trade has replaced kissing babies as the most popular behavior among presidential candidates. The writer was only half-joking.

When candidates seem unanimous in their disdain for agreements that would lead to new jobs and help exporters grow their businesses, I have to take a stand for reason and reality.

UPS supports trade agreements because they help make the world a safer, more prosperous and more fascinating place in which to live. In the business world, trade creates more competition. That not only benefits consumers, who have more products to choose from, but it also levels the playing field for small- and mid-sized enterprises – helping them compete with companies that have far more exporting experience and far greater resources.

The Trans-Pacific Partnership, which is awaiting final approval, is the largest and most substantial free trade agreement in history. It connects 12 global economies and 800 million consumers across the Americas and the Asia-Pacific region.

By eliminating thousands of taxes in the form of tariffs that countries place on Made-in-America products, TPP makes sure American businesses can compete in the world’s fastest-growing regions.

By eliminating over 18,000 taxes—in the form of tariffs—that various countries put on Made-in-America products, TPP makes sure our farmers, ranchers, manufacturers and small businesses can compete—and win—in some of the fastest-growing markets in the world.

The World Bank estimates that by 2030 TPP will raise GDP by an average of 1.1 percent and will boost exports more than 10 percent for 12 member countries. In addition, the Peterson Institute for International Economics forecasts that delaying TPP by one year would cost the U.S. economy $77 billion.

Trade and e-commerce

Even though international online shopping is the new normal, trade agreements have failed to keep pace. Outdated customs rules, a lack of transparency about the rules of trade and so-called “data protectionism” hinder businesses from taking full advantage of the digital economy.

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

Based on forecasts, digital trade will continue to gain momentum. That’s because traditional retailing is being disrupted by two unstoppable forces: consumers with unlimited expectations and technologies with unprecedented capabilities.

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. In 2015, e-tailers grew more than 11 percent vs. brick-and-mortar’s 2 percent.
While domestic e-commerce is predicted to grow four times the pace of GDP through this decade, global B2C will grow seven times the rate of GDP growth during the same time.

Trade is our business

UPS is playing a major role in the e-economy. Increasingly, it’s a bigger and bigger part of our business.

Trade is not a choice. It’s an inevitability. The only variable – and it’s a crucial one – is how our companies and our nation are positioned to compete and win.
Our company is in the business of helping our customers connect to a world of opportunity through the strength of our network and our people. That puts us at the center of the e-economy.

In full disclosure, trade is good for us. Our business sees a spike every time a trade agreement is passed. We also add or secure a job for every 22 packages that cross a border using our network.

The benefits of trade extend to every segment of the economy and every level of society. In fact, there’s a large body of economic research showing that the sharp increase in global trade since World War II has contributed to increases in life expectancies, women’s rights and household incomes – and declines in child labor, poverty and military conflicts.

At UPS, we tend to be pragmatists. When you’re delivering 18 million packages a day – as we do on average – you see the world as it is. Complete with challenges and opportunity.

Pragmatism also means that we cannot make simplistic arguments. Simply saying “Trade is good – period” is not good enough. We must do everything we can to create equal opportunities for those who are not able to participate in modern commerce or who are displaced by the pace of change.

We’re at a critical juncture in the history of commerce. There has never been more trade policy activity, never more momentum. Never more need to get trade agreements, starting with TPP, over the finish line.

Reality says we must think and act beyond the rhetoric of protectionism and fear.

The world economy and the consumers who support it are sending a clear message. The world will divide between those who listen and those who don’t. It’s time to choose a side.

David Abney serves as Chairman and Chief Executive Officer of UPS. This commentary was adapted from a speech delivered at the Metro Atlanta Chamber of Commerce’s Global Impact Awards event on April 20, 2016.