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Clearing Barriers to Global Trade
David Abney, UPS Chief Executive Officer

UPS Chief Operating Officer David Abney spoke to the World Affairs Council of Atlanta about ways to increase global trade.

It's great to see such a nice crowd. I don't know if you saw the news this week but we just passed the 1,000-member milestone. 

I think our growth is also testament to the importance of our mission, developing a greater awareness of the international issues that touch the lives of people in our community.

I'll try to add to that understanding a bit here tonight.

If you've attended our meetings, you know that our speakers are discouraged from embellishing their remarks with PowerPoints or other visuals.

I understand the emphasis on ideas and substance over bells and whistles.

But tonight, I decided I needed a visual aid, so I brought one.

Actually, I brought three. Please meet Taki Skouras, Jaime Brown and Joseph Brown.

Gentlemen, please stand.

Taki, Jaime and Joseph are partners in a company called Cellairis, which they started while they were in college.

They're also UPS customers, which I really appreciate.

Today, Alpharetta-based Cellairis is the world's largest franchiser of wireless accessories.

Cellairis develops products in Georgia, manufactures them in Asia, imports them back to our state by air freight and warehouses them in its distribution center in Alpharetta and then ships them by ground and air to franchisees.

You'll find Cellairis phone cases, screen protectors and armbands in mall kiosks and stores throughout North and South America and Europe. 

Here's a phone case with an image of Justin Bieber that Taki gave me. I think my grandchildren are going to think this is very cool.

As successful as Cellairis has been, its future is being affected by forces largely out of its control.  Let me explain.

Cellairis has just about saturated the domestic market. So, like a lot of companies, it's looking to foreign markets for future growth.

But Cellairis, like so many other companies, faces obstacles to global trade and, therefore, its growth.

I'll mention just a few of the impediments, starting with tariffs.  

Tariffs, of course, are effectively taxes that governments impose on certain imported goods. 

Although import tariff rates have dropped by about two-thirds over the last three decades, from about 30 percent to about 10 percent. They're still too high. Especially when you consider that countries impose tariffs on a product's gross value each time it crosses a border. 

Combined with taxes and other duties, tariffs can consume as much as 10 percent of the revenues of certain products.

Customs fees also add up. Customs fees can account for 10 percent of trade costs or sometimes twice the cost of import duties.

Then there are all the tariff codes, customs regulations and documentation requirements that often differ from country to country and add time and confusion to the process.

These are hurdles that slow the efficient and affordable flow of goods and services for an untold number of businesses.  

Line them up around every curve in the road and they make international shipping far more complex and frustrating than it needs to be.

These obstacles to global trade concern me for a number of reasons.

They concern me because many of the companies affected by these obstacles are our customers.

Our 400,000 employees worldwide come to work every day with one goal in mind: giving our customers an advantage in the global marketplace.

So, obviously, our futures are closely aligned.

But barriers to global commerce should concern all of us. Including members of the World Affairs Council of Atlanta.

Maybe you're a business that increasingly relies on global shipping.

Or maybe you're a business that's just beginning to evaluate opportunities outside the U.S. and North America.

But even if you're neither, members of this organization understand as well as anyone that trade is a vital economic engine for our city, our region and our nation.

There's something else that's altering the global trading landscape. Call it the global value chain.

Half of the world's manufacturing imports today are intermediate goods, mostly parts and semi-finished components.

What that tells us is that imports are critical to exports, and that trade is no longer a zero-sum game, where one nation wins only when another loses.

It also tells us that competitive advantage is gained not necessarily at the final stage of the supply chain as was the case historically but at each stop along the way.

But as companies like Coca-Cola, General Electric, and Boeing develop their "global value chains" where products are designed, sourced and assembled in 10, 20 or even 30 different countries, the notion that one nation's success at exporting is another's failure is no longer true.

Consider that of every $1 of Mexican exports that arrive in the United States, 40 cents comes from parts and materials made here in the U.S.  

As a result, imports have become essential for exports. Roughly half of the world's imports are intermediate goods that will be improved and then shipped back out for either further modification or for sale, somewhere else in the world.

One thing that hasn't changed, it's only being reinforced, is that trade is good. 

Trade is good for a lot of reasons.

It opens societies and builds bridges to new opportunities.

Trade also helps lift the world's poor out of abject poverty.

As borders have opened following the fall of Communism and global commerce has spread like daisies after a rain, the global poverty rate has been cut in half as a percentage of the global population, from 1.9 billion people to 1.2 billion people.

This past April, the president of the World Bank, Jim Yong Kim, set an ambitious goal of bringing the last billion people out of poverty by 2030.

Lifting the trade barriers that prevent a peasant artist or craftsman in India, China or Mexico from selling their wares around the world is the best move we can make to end global poverty in our lifetimes.

Trade also means peace.

Cordell Hull was a Tennessee native who served as Secretary of State under FDR, served in the U.S. Senate and who was awarded the Nobel Peace Prize for his efforts to create the United Nations.

The late Senator Hull once said, "Where trade crosses borders, armies do not."

Trade promotes not only an exchange of goods and services, but also ideas and innovation.

Trade also means jobs.

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

But today, less than 1 percent of the 30 million businesses in the U.S. export and of those, nearly 60 percent ship to just one country.

There's no reason why those numbers shouldn't be higher. As the world continues to shrink, every mom-and-pop business, with a little help, could act like a multinational.

In a still sluggish economy, where the foundation for sustainable traction seems less certain than what many economists first thought, trade is one of the most accessible levers we can pull to stabilize our recovery.

Consider this forecast from the World Trade Organization:

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

But for that prediction to become real, political leaders, NGOs and others will need to work together to make tough decisions.

I'm pleased to say that we're making progress.

Last month, European and U.S. trade negotiators began work in Washington on the Trans-Atlantic Trade and Investment Partnership, known as TTIP.

Its goal is to bring about a comprehensive EU and U.S. trade agreement.

Trade between the U.S. and EU, which represents approximately $30 trillion in annual output, is almost half the world's total.

That number could be even higher if the world's two largest economies can come to an agreement.

In fact, the European Commission estimates that passage of an agreement could boost overall trade between the two regions by as much as 50 percent.

Our company has taken a leadership role advocating for the TTIP on both sides of the Atlantic.

We believe the Trans-Atlantic partnership has the potential to address several of the trade obstacles we have discussed here tonight. Among them: eliminating tariffs and reducing the cost of differences in regulations and standards by promoting greater compatibility, transparency, and cooperation.

An expanded trade agreement with Europe would certainly open new opportunities and improve global competitiveness for small, medium, and large businesses on both sides of the Atlantic. And that's one of the best things about the Trans-Atlantic partnership - its benefits are balanced for both sides.

Both the U.S. and the EU will see a boost in exports and new U.S. jobs.

At UPS, we see tremendous possibilities in what the Trans-Atlantic partnership will mean to our customers and our business.

In fact, we estimate that a new Trans-Atlantic partnership could boost our trading volume by 13 million packages and support an additional 2,400 jobs in each of the next 10 years. 

Meanwhile, discussions continue in support of the Trans-Pacific Partnership.

Now in the third year of negotiations, the Trans-Pacific Partnership is a regional free trade agreement involving the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand,Peru, Singapore, Vietnam and Japan.

If implemented, this is a trade pact that would cover nearly 40 percent of the global economy and make it the world's largest free-trade agreement.

UPS serves as a co-chair of the business coalition supporting Trans-Pacific Partnership negotiations and eventual implementation. 

We support the Trans-Pacific Partnership for the same reasons we support the European initiative, it will promote increased international trade, which is vital to economic growth and recovery. 

With its rapid growth and sizeable markets, there is no region with which expanding trade is more vital than Asia-Pacific.

Efforts are underway to drive negotiations to a successful conclusion as quickly as possible.

In both cases, with the Trans-Atlantic and the Trans-Pacific Partnerships, the stakes are high.

It's not overstating to say the agreements could be game-changers for international commerce.

Trade agreements such as those now being considered would make it easier to move goods and services across borders, directly impacting any business, large or small.

Removing impediments to trade opens new opportunities for growth.

It also follows that when it's easier to cross borders, it's also less expensive to cross borders.

But if you pay attention to the quagmire that is our political landscape these days, you know an agreement will not come easily or quickly.

So here in this building, and throughout our company, we're not waiting.

We're bullish about a future built on the untold possibilities of global trade.

So we're continuing to invest in technology, in systems and in people to accelerate trade and support our customers.

I'll mention just two areas where we're focusing our attention and investment dollars.

The first is emerging economies.

According to a McKinsey study, emerging market nations will be responsible for nearly three-quarters of global GDP growth over the next 15 years.

What's more, by 2025, consumption in these countries is predicted to increase from $12 trillion to $30 trillion and represent almost half of all global consumption.

Roughly a billion people in developing countries are hungry for the goods and services they see on display in the developed world.

But for those goods and services to get into their hands, trade must be easier.

And it's got to make economic sense for companies to enter what can be the daunting world of global commerce.

Like Cellairis, most companies today have no choice. If they're going to grow, they're going to have to cross borders to do it.

We have a number of innovative programs and systems that help them do that. Not to mention those 400,000 UPSers around the world.

But we could use a little help here, too.

A second area that we're focused on is global e-commerce.

Today, global commerce is predominantly conducted on a B to B basis.

But, as the world shrinks and becomes more interconnected, B to C, business to consumer will become just as prevalent.

I can see the day when someone from Sandy Springs can purchase a single scarf from a boutique in Prague and have it shipped to their door in time for a loved one's birthday, just as easily as if it came from a local mall.

The implications of B 2 C e-commerce are enormous.

As a consumer, the world becomes your store. As a business person, the world becomes your customer.

The world now has the talented people, the technology and the infrastructure to make that happen.   

We just need to remove a few of the barriers standing in the way.  

Like I said earlier, I know this group understands the challenges and the benefits of global trade better than most.

I hope I've added to that understanding a bit more tonight.

I want to thank the gentlemen from Cellairis, Taki, Jaime and Joseph, for allowing me to use their company as an example of the issues businesses face on this front.

To everyone else, thanks for being here and for your support of the World Affairs Council of Atlanta.

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