Trade: What’s Its Role in Our Changing World?
Debate about the benefits of U.S. global trade — the fundamental exchange of goods and services between the U.S. and other countries — has dominated political discussions and news headlines for months. If you’re a small-business owner, chances are you’re on the pro-trade side of the debate: The FedEx Trade Index, released in September 2016, revealed that 7 in 10 U.S. small businesses saw global trade as improving the U.S. economy.
Also among trade’s supporters are most business school students, says Paul Tiffany, senior lecturer at the Haas School of Business at the University of California, Berkeley. “My students aren’t just MBA students,” Tiffany says. “They’re our future leaders, the innovators who are going to be running companies in the future. These people believe in world trade.”
A Brief History Lesson
Economics is about efficiency, Tiffany notes, because in a world of scarce resources, you don’t want to waste resources. “You want people and firms and countries to be efficient in what they do,” he says. That’s why, as countries throughout history became more advanced and could look beyond basic needs, they moved toward producing what they were best at and then trading those goods for whatever else they needed. Trade, in one form or another, has connected the world’s countries and continents for centuries.
Waves of protectionism have played out, as well. In the last century, protectionism rose sharply after World War I, for example, culminating in the Tariff Act of 1930. The act raised U.S. tariffs on more than 20,000 imported goods to their highest level in history, contributing to a 66 percent decline in world trade between 1929 and 1934, and the Great Depression. Soon, however, President Roosevelt’s administration made a case for liberalized trade as a path to world peace and cooperation. That enabled globalization to take root following World War II, with the development of NATO, the United Nations, the World Bank and the International Monetary Fund (IMF), as well as the 1947 General Agreement on Trade and Tariffs (GATT), which was signed by 23 countries. Decades of prosperity followed — fast-forward to innovations from “disruptors” such as Bill Gates, Steve Jobs, Michael Dell, Elon Musk and Mark Zuckerberg.
Trade Isn’t a ‘Zero-Sum Game’
Not everyone has benefited from trade, however. “Automation and technological advances have transformed the global economy, and you don’t just walk away from people who were affected by that,” Tiffany says. “But you don’t walk away from globalization, either. As a country, we have to work toward good policies to help those who have been hurt by this transition. How as a nation can we work together to share some of those benefits with people who have been left out?” Education and new training opportunities top the list, he says.
Reworking elements of trade deals may be in the cards, too. “But trade is not a zero-sum game,” Tiffany says. “The idea that our win is somebody else’s loss or that when others win, it’s our loss — that isn’t true.”
Ultimately, the benefits of trade are diffused and the pain is localized — a point Frederick W. Smith, chairman and CEO of FedEx, has made multiple times in recent speeches and media interviews. The average U.S. family, he notes, enjoys lower-priced goods because of trade, and one-third of U.S. crops and one-fourth of U.S. manufactured goods are exported to other countries.
Trade also benefits jobs. “We’re passionate about supporting jobs,” Smith says. “All FedEx jobs are trade jobs.” Trade means more markets and greater opportunities for all U.S. companies, he adds, especially for small and medium enterprises, which make up 90 percent of all U.S. exporters.
As the U.S. considers revisiting agreements — and, along with countries such as the United Kingdom and potentially France and Italy, considers more nationalistic policies — it’s clear that conversations about the future of trade are far from over. In the coming weeks and months, look to U.S. business leaders and workers to continue their discussions with the president and members of Congress.
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