Facing an evolving global economy, inaction is not an option
By: Mark Wallace
Suppose you live in a 50-year-old house in a 50-year-old neighborhood. That copper wire they put in 50 years ago does pretty well for you. The lights go on. The phone works.
But then comes the Internet — and high-speed connectivity — and everything changes. Suddenly, that copper wire that has served you well does only a fraction of what you could do with fiber. And the longer you stay with the old technology, the more removed you are from the possibilities of a new world of connectivity.
When I look at the world of trade, I see the same dynamics — only on a massive scale. The world is well along with what history will show as a great rewiring. It is massively and permanently changing global interconnections that have structured the world as we know it.
But existing trade policy lags far behind possibility — and it is not yet clear whether we have the sense of urgency we need to make sure it catches up.
Just like every day in our business — minutes matter.
Faster than ever, new relationships are forming, technologies are leapfrogging from remote possibilities to standard practice, and emerging markets are investing in infrastructure and becoming global competitors.
It’s easy to assume that technology can do the heavy lifting, but technology alone is just circuits and code. 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 lighting up homes and businesses. The same is true for countries and companies. It’s all about the connections that technology makes — about being able to plug seamlessly into the vast network of networks that this rewiring is creating.
At UPS, we understand the power of networks. Our global network includes:
- More than 2,000 hubs, warehouses and other operating facilities in more than 200 countries.
- More than 100,000 vehicles on the road
- More than 600 owned or chartered jets
- And more than 400,000 employees
Every one of these assets is critical in what we do — but, by themselves, every one of them is virtually irrelevant. Their power is in the fact that we have formed them into an integrated global network. That network allows us to get packages where they need to go by the most efficient means while helping customers build efficient and secure global supply chains.
These networks don’t just talk to each other, they integrate with each other. They change each other, they improve each other, and they fix each other.
Our move to a networked world is reflected in the changing flow of trade and in the nature of trade agreements. In the 20th century, GATT and WTO 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 simply made sense. But as the world has been rewired around supply and value chains, emphasis has shifted to protection of investment and intellectual property — and making sure that flows of goods, services, money, ideas and talent are enabled rather than impeded.
We can no longer see the world as we did 20 or 30 years ago.
As the agreements begin to tackle 21st century issues like digital trade or disciplines on state-owned enterprises, they become harder to negotiate — and harder for most of us to understand. In the face of complex trade agreements, when those who oppose them so often rely on misconceptions and inaccurate data, we all have a role to play in making a strong and consistent push for trade.
There is plenty of ammunition:
- Trade has helped lift a billion people out of poverty — with a billion more on the way.
- 38 million American jobs depend on trade.
- U.S. exports in goods and services were $2.25 trillion dollars in 2015.
- Imports from foreign trading partners lower prices for Americans consumers.
- More than 98 percent of the roughly 300,000 U.S. companies that export are small- and medium-sized enterprises.
I could go on, but all of the statistics lead us to the same place: Growth of trade has coincided with historic progress in building economies, combating hunger, empowering women, expanding literacy and extending life — all of which is raising global living standards faster than at any time in history.
We can no longer see the world as we saw it 20 or 30 years ago. We are at a crucial time — even for Washington, we’ve seldom seen a more critical collection of acronyms.
Be it TTIP (the Transatlantic Trade and Investment Partnership), TiSA (Trade in Services Agreement), or TFA (Trade Facilitation Agreement) — modern trade agreements cover everything from trade relationships to knocking down barriers at borders. But the debate is currently the loudest around the one that is 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. Seven years of negotiations are now in the hands of Congress, Parliaments and the public — and the stakes are enormous.
We have to approve TPP now. Global commerce won’t hit the pause button as we work things out.
This is a deal custom-crafted to the opportunities and demands of a networked world. TPP eliminates thousands of barriers in the form of tariffs and was also built for the needs of digital commerce. It cleans out the clutter at customs — requiring fewer documents and allowing more electronic processes and clearances. And it evens the competition for private service providers, making sure they aren’t hampered by regulations created to favor their government-run competitors.
TPP also acknowledges — with a full chapter — the importance of small business. The Internet has turned the barriers to SMEs reaching international markets into on-ramps to the global economy. But what technology offers, outmoded border processes often deny. Opaque regulations, complex paperwork and slow delivery of small shipments all conspire to discourage SMEs from venturing across borders. TPP will begin to open doors for smaller players across all the member countries.
If we want to compete in the modern and growing global economy, we have to approve TPP now. Global commerce won’t hit the pause button as we work things out.
According a study by the Peterson Institute for International Economics, if we delay approval of TPP by just one year, there would be a lost opportunity cost of $94 billion.
I’ll say it again: Minutes matter.
TPP is approaching the finish line, and we cannot assume that the overwhelming benefits of global trade will be enough to win the day. They won’t. Where we see logic, others see deception. We must step up to the debate, be visible, and be vocal. We have to argue our case in every forum available to us.
The stakes are rising, the misinformation is growing, and the clock is ticking.
Mark Wallace is the UPS Senior Vice President of Global Engineering and Sustainability. This is an adapted version of a speech he gave at the 4th Annual Global Supply Chain Summit in Washington, DC on May 18, 2016.