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Economic Crisis Cannot Justify Trade Restrictions


Abstract:

Scott Davis, chairman and CEO, addressed attendees of the CEO Leadership Series hosted by the U.S. Chamber of Commerce in Washington, DC. In his remarks, Davis stressed that global trade is one of he most important tools we have to help lift the country out of the financial crisis and that current conditions cannot justify trade restrictions.

You know that just a year ago, we were worried about oil, global warming, health care, and the wars in Iraq and Afghanistan.

We now have a new name for that period - the good old days.

Certainly, those are still pressing issues. But something new has moved to center stage.

We are in the grip of a financial crisis that is changing lives, closing businesses, shattering economies, and sweeping us toward a very uncertain future.

There's an urgent need for action on multiple fronts.

But right now, there are more hard questions than clear answers. One of those questions is the fate of global trade.

It's taken a back seat to issues like housing and troubled assets. It should not.....

I have a simple message today, and it's this - global trade is one of the most important tools we have to help lift us out of the financial crisis.

In fact, at the risk of over-simplifying, it may be the most important tool.

Let me repeat that - increased global trade could be the number one antidote to the current fiscal crisis.

But frankly, we need to ask ourselves a question. Will we have the foresight - and courage - to build on history's most powerful force for economic gain and improving people's lives?

Or, will we allow the financial crisis to cloud our judgment and threaten one of the most important tools we have to pull us out of this downward spiral?

Proponents of free trade - frankly, most of us in this room - find ourselves with an increasing challenge these days.

The facts are clearly on the side of trade. But popular perception clearly is not.

And it's no surprise that politics follows closely on the heels of perception.

Today I'd like to do two things. One: discuss the distinct and measurable advantages that flow from free and open trade. And two: propose a proactive rather than a reactive approach to the global trade issue.

The facts are squarely in our favor, we simply must do a better job telling the story.

But first, full disclosure. UPS has an obvious interest in trade. We are the global conveyor belt for commerce.

As we speak today, our network of airplanes and trucks is moving about six percent of U.S. GDP and two percent of the world's GDP. We see what free trade means to our customers.

We see what growth can mean to employment, to the tax base, and to the strength of a community.

We see how access to global markets can move a new business from a backyard garage, to a local warehouse, to a global network.

My own company started out 102 years ago as a bicycle delivery service in a 6-foot-wide office under a sidewalk in Seattle. Many of you work for companies that have similar stories.

Our deep and extensive experience with global commerce makes us unrelenting, unyielding believers that the future of the global economy depends upon a rational and open system of free trade.

No argument against free trade can justify the negative impact to economic and human development that we would face without free trade. None!

But it's equally clear that a new world of global commerce and competition demands adjustment. That adjustment isn't easy in the best of times, let alone in a time of such widespread economic pain.

So while we remain passionate in our support of free trade, we are just as determined in our belief that the U.S can be both a leader in the global marketplace and a society that cares about those who find themselves on the outside looking in.

That means benefits for the unemployed, training for the displaced, health insurance that bridges jobs, and trade assistance programs that help businesses, and workers, to get in the game.

Fortunately, the new Administration and the Congress share these values. Everyone in this room must also share them. We must share them because they are critical to getting through this crisis and coming out as a country and an economy ready to grow.

Those values must extend from national policy to company policies. At UPS, for example, we invest hundreds of millions of dollars each year to train and retrain our people. We want them to stay abreast of the latest technology and changing business conditions.

As our own business becomes more global, and as we evolve our own business model, we want employees who are capable of moving with the opportunities.

With that balance of responsibility in mind, let's focus on the compelling arguments favoring global trade - and they are indeed compelling.

All of us who are proponents of free and open trade must be able to clearly articulate the facts. Frankly, we haven't always done a great job at this.

I see several persuasive reasons that global trade should be the cornerstone of any economic recovery plan. Let's take a moment and look at a few of these.

The first reason is that increased global trade has resulted in a better, safer, more hopeful and more prosperous world. It has lifted millions out of poverty.

Study after study shows a direct connection between the degree of economic freedom and the pace of economic growth. Many countries are increasingly prosperous and stable because of their determination to be players in a free and open global economy.

Countries like Taiwan, Singapore and Chile are good examples. The path wasn't always smooth, but they got there. I believe we could see the same thing with our pending FTA partners, Panama, Colombia and Korea.

Look at China. Despite being a single party state, its citizens clearly have far greater freedom of choice, freedom of movement, and freedom of association than they did 30 years ago. That was when the country took its first, tentative steps into the global trading system.

We see the story repeated over and over again, from Latin America, to Eastern Europe, to Russia.

Let me share an interesting story. Last fall, UPS hosted a global trade conference in Barcelona, and Mikhail Gorbachev was our keynote speaker.

In an informal chat with President Gorbachev, he told me about how his grand-daughter loves to shop for shoes - internationally, online.

He mentioned that her only problem was how long it takes for UPS to deliver the goods.

I think it was an attempt at a joke. I hope it was anyway!

I had to tell him, of course, that it's not UPS. It's the sad state of customs in his country that impedes the free flow of commerce. And he agreed.

The point is that his grand-daughter is one of hundreds of millions of relatively new entrants into the global marketplace.

Simply put, trade opens societies and builds bridges.

It creates new rules of global engagement, where the prize isn't territory, or ideology, or religion.

It's market share.

When people are busy creating opportunity together, they are much less likely to shoot at each other.

As the noted statesman Cordell Hull once said: "Where trade crosses borders, armies do not."

I firmly believe that where there is prosperity, there is less appeal for the violence that can strip it away.

Where there is economic stability, there is a platform for improved education, for innovation, and human progress.

Where a country can build up its own economy, and provide opportunity for wealth at home, its citizens will not cross borders to find a better life elsewhere.

The WTO estimates that cutting trade barriers across agriculture, manufacturing and services by one third would add $613 billion to the world economy.

This isn't just theory, and it is something that could be achieved through the Doha Round Negotiations.

There is the very real potential for millions more people to see the transformative power of prosperity and hope.

But, the very real threat today is that the progress can be diminished and the promise may be denied.

There will always be global trade. It's been part of us since the days when the Phoenicians sailed the Mediterranean.

Nobody directs it. Nobody controls it. Nobody owns it.

Over recent decades, global trade has become an evolving creature of improved information, better transportation, stabilizing societies and more effective economic management.

However, progress is not locked on fast-forward. It can be diverted. It can be frustrated, and it can be delayed.

Another reason global trade is so important is jobs. It's probably the biggest issue surrounding the trade debate.

Ironically, this should be a strength for the proponents of global trade, but it has become a liability and a political hot potato.

Why? Because there is a growing perception, especially here in the U.S., that globalization and free trade are siphoning off jobs to far away places.

But let's examine that for a moment.

Average American workers have much more to fear from a systems developer in their own company than they do from a production worker in Mexico.

The Bureau of Labor Statistics reports that in layoffs of 50 or more people, between 1996 and 2004, less than 3 percent resulted from import competition or overseas location.

Think about that for a moment. Less than 3 percent.

We need to recognize, of course, that the 3 percent represents human beings, and it reinforces the importance of support programs and retraining.

Let's flip the focus for just a moment from the jobs lost from free and open global trade to the jobs created.

We have not emphasized often enough or well enough just how many jobs global trade creates.

In my own company, trade is clearly creating American jobs. UPS is the nation's second-largest private employer with 425,000 people.

Each time we add 40 new international packages in the U.S. - in other words, 40 packages imported or exported by our customers - we create another new U.S. job somewhere in our system.

Last year we grew the international portion of our business by more than 10 percent, creating thousands of new job opportunities at UPS for U.S. citizens.

And these are quality jobs: mostly well-paying, union positions with the full array of benefits.

And each of those jobs reflects the importance of global commerce to our customers. UPS is not alone in this area either. Consider these amazing facts...

According to Treasury Department estimates, as many as 57 million Americans are working for companies that engage in global commerce. 57 million!

To put that in perspective, it means that two out of every five U.S. non-farm jobs is linked to exports and imports of goods and services.

The facts point to only one conclusion: global trade generates jobs. Lots of them.

The final compelling reason we should encourage free and open trade really involves debunking a myth. That myth?

Advocates of trade restrictions argue that our manufacturing base is being depleted, and we no longer make things.

Again, let's look at the facts.

The U.S. retained its title last year as the world's leading manufacturer, representing nearly one-quarter of the global manufacturing output.

That percentage has been stable for some time.

The U.S. also retained its title as the world's largest exporter of goods and services, with exports reaching $1.8 trillion.

Exports of services are growing faster than almost any other category.

They surpassed $550 billion in 2008.

The U.S. trade surplus in services reached $144 billion last year.

These exports - which include financial services, telecomm, and my favorite - express delivery - are often called "invisibles," but they support millions of American jobs.

All of these are compelling arguments and powerful numbers favoring free and open trade. But the need to support global trade grows more urgent by the day.

Global trade has become the emotional punching bag of many politicians and protectionists.

What should we do?

How do we restrain the opponents of global trade from erecting barriers just at a time when the future depends on tearing them down?

That issue is a matter of national policy.

Most of the people in this room do not make policy.

But we can contribute to it. We can promote it. And we can defend it.We can - and we should.

How?

Well, of course, you start with a speech to the U.S. Chamber of Commerce.

Seriously though, we have to take full advantage of every opportunity that comes with the recent transition here in Washington.

We have to reach out and engage with the Administration, the legislature, the labor unions, and all others engaged in the process.

Our new President clearly wants to lead this nation to economic prosperity. He has demonstrated a desire to take bold steps.

We need to support the President's efforts to rebuild the bridges that will bring us back to a bi-partisan consensus on trade.

With that consensus we'll be better positioned to re-engage in the trade dialogue that began at Doha, pass the Free Trade Agreements, and move forward with a more robust trade agenda where the benefits are widespread.

We have to make the case - city by city, state by state, congressional district by congressional district - that trade is a major force for good, for growth and for jobs.

And we have to make this case in a way that resonates at the local level.

We can't argue economic theory at the gates of a closed factory.

We must take an abstract debate and make it real.

We, the proponents of free trade, have tended to talk from the head.

The anti-trade forces talk from the heart about lost jobs, lost homes, lost hope.

In the court of public opinion, the heart wins.

None of this is a quick fix.

And there will never be universal agreement. But we have to start.

The facts are on our side.

We can't sit back and hope for logic and market forces to do the job for us.

If we do, then we will squander the best hope we have to get through this historic downturn with minimal damage.

Worse, we may be sitting on the sidelines when the protectionists push us off the cliff!

I'll close by coming back to a simple reality.

There will be global trade.

Millions of new consumers will continue to want the things that a better, safer, and healthier life offers.

Millions of poor will want to repeat the transformations that we've seen in countries like China and India and get a job so they can provide more for their families.

Global trade will continue to ignore geography and time zones.

Companies will continue to pursue growth in new markets.

And, painful as it is, some jobs will continue to migrate to places where the work can be done most efficiently.

The only variable is whether global trade will be a tool of long-term economic and societal progress or a weapon of short-term political positioning.

All of us - countries, companies, communities and workers - have a huge stake in the answer.

Free trade under a fair, rational and compassionate system is the only viable route to a universally prosperous future.

We must stay on course.

Thank you. Now I'd be happy to take some questions.

For more information, contact:

404-828-7123

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