FedEx's Smith: No Growth Without 'Decisive' Change in Global Trade Policies

Mar 4 2014, 7:00pm CST | by

FedEx's Smith: No Growth Without 'Decisive' Change in Global Trade Policies
Photo Credit: Forbes Business

Protectionism is a major reason for the slowdown in global trade growth, according to Frederick W. Smith, chairman and chief executive officer of FedEx Corp.

What’s more, even a modest rise in trade in the years ahead is unlikely without “a decisive change in direction by governments around the world,” Smith said at the Journal of Commerce’s Trans-Pacific Maritime Conference in Long Beach, Calif. this week.

Smith blasted world leaders for enacting a spate of measures that restrict the flow of imports and exports. They are attempting to throttle the very practice that is responsible for their economic prosperity, he said.

“Last year,” said Smith, “the top 20 world economies passed 23 percent more protectionist measures than in 2009.” Argentina alone was responsible for 168 such actions, he claimed.

Smith reaffirmed FedEx's support for all actions that liberalize trade, including China’s accession to the World Trade Organization in 2001. He singled out for praise the North American Free Trade Agreement, which he credited for a near-quadrupling of economic activity in the U.S., Canada and Mexico over the past 20 years.

President Obama should join Mexican President Enrique Peña Nieto and Canadian Prime Minister Stephen Harper in fashioning “an expanded NAFTA 2.0,” Smith said.

Most nations appear to be headed in the opposite direction, sometimes to bizarre effect. During the just-concluded Winter Olympics, Russian customs authorities blocked a shipment of 3,000 pillows to athletes in Sochi, citing a five-pillow import limit. “I suspect someone’s quality of life probably suffered due to … lack of sleep,” Smith remarked.

More seriously, he noted that the WTO has lowered its estimate of trade growth for 2014, citing delays in multilateral trade negotiations.

“The key to global prosperity since World War II is crystal clear,” he said, adding that an end to trade barriers would increase U.S. gross domestic product by $500 billion over several years.

Smith called on world leaders to “redouble” their efforts at trade liberalization. He endorsed the two massive multilateral pacts now being negotiated between the U.S. and its trading partners: the Trans-Pacific Partnership (TPP) on the Pacific Rim, and Transatlantic Trade and Investment Partnership (TTIP) in Europe. Both agreements face stiff opposition in Congress, which also opposes granting President Obama fast-track negotiating authority for concluding them expeditiously. Such action would severely limit input from Capitol Hill.

In years past, fast-track authority has been “routinely” granted to the executive branch by Democrats and Republicans alike, Smith said. The concession expired for new agreements in 2007.

Just by simplifying trade regulations, the TPP and TTIP could drive up world GDP by as much as 5 percent, Smith claimed. “If enacted, that’s millions of new jobs around the world.”

For the most part, he said, the U.S. has abided by the agreements that it has signed. But the country has failed to exert its historical leadership, which led to creation of the General Agreement on Tariffs and Trade and its successor, the WTO.

Smith urged governments to attack the “root causes” of the trade-growth slowdown. “The problem is not cyclical,” he declared, “it’s systemic. “History proves that protectionism squelches competition and lowers economic growth.”

Source: Forbes Business


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