Policy at the Pace of Innovation
In today’s slow-growth business environment, access to global markets has never been more important — nor its benefits more profound.
Ask Krishan Guptaa, CEO of Organic India. Guptaa recently rejuvenated the once-struggling Indian brand by relaunching it in the global marketplace. With business thriving, he’s able to provide higher wages to the farmers who grow tea and herbs for him. Guptaa’s even established a new foundation funded by 5 percent of the company’s profits. Today, the Organic India Foundation is providing free healthcare to the very same village communities that support his business.
A Need for Speed
Good things happen when we connect people and possibilities around the world. Business people, like Guptaa, tap new markets, grow their business and hire people. Their success is contagious. Jobs help boost the local economy, injecting communities with hope and vitality.
We call this the Access Effect, and it’s a worldwide story. In the last 50 years, global trade volumes have increased 16 times. The rise in global living standards as measured by GDP per capita is now 350 percent higher than it was in 1963.
Today, the world is changing faster than ever, and trade policies must keep up with the times. Technology continues to reboot the way we live and do business. Trade in services has become one of the most dynamic sectors of the global economy, but it still faces barriers that lock out or constrain business.
Trade = Opportunity
FedEx supports free-trade agreements (FTAs) because they empower businesses to better access growing global markets. This translates into business growth, economic growth, jobs, higher living standards and a more efficient pipeline for goods. Despite concerns with globalization, the benefits of trade are real, as documented in a recent study by Matthew Slaughter, associate dean, Center for Global Business and Government at Dartmouth’s Tuck School of Business. “Global growth and global supply networks tend to create American jobs. Annual income is at least $1 trillion higher than it would have been absent decades of trade and investment liberalization,” Slaughter says.
Globally engaged U.S. companies also create jobs in other American companies, including small-business suppliers. The U.S. parent company of the typical multinational company buys more than $3 billion in goods and services from more than 6,000 American small businesses.
I want to point out that global trade is defined by much more than the flow of goods across borders. We haven’t come close to realizing the full potential of trade in services, which include consulting, finance, retail, information technology and more. Worldwide services make up about 70 percent of economic output and jobs. FedEx is pleased to see the U.S., the EU, Japan and 18 other economies make serious efforts this year to negotiate an International Services Agreement (ISA) in Geneva.
The case is compelling: Growth in the service sector goes hand in hand with higher GDP growth. Services employ more than 80 percent of Americans and drive more than 75 percent of GDP. About 3 million additional jobs could be created through policy reforms and other U.S. services initiatives.
Exports Create Jobs
Trade negotiations opened a two-way street between the U.S. and Panama on Oct. 31, 2012. One of the fastest-growing economies in Latin America presents a new opportunity for U.S. businesses. Trade barriers and high tariffs, some as high as 81 percent on manufactured goods like construction equipment and agricultural products, have been eliminated. That’s worth celebrating because every $1 billion of U.S. goods and services exported last year supported more than 5,000 jobs, according to the U.S. Trade Representative.
Recent U.S. FTAs with Colombia and South Korea also represent tremendous opportunities for businesses large and small. South Korea is the most commercially significant U.S. FTA in the last 16 years. On a larger scale, eleven countries are working to conclude the Trans-Pacific Partnership. An agreement could support the creation and retention of high-quality jobs at home by increasing American exports to a region that represents more than 40 percent of global trade.
We must continue to make smart policy choices, but they must keep pace with the changes and opportunities that are defining the 21st century. Only then can companies and communities worldwide reach their full potential for growth and a better way of life.