In the midst of the financial crisis, another threat is nipping at the global economy's heels: the re-emergence of protectionism.
Both the World Trade Organization (WTO) Director-General Pascal Lamy and the outgoing European Union Trade Commissioner Peter Mandelson are among those warning that the economic troubles could breed protectionism, which would curtail economic growth when we need it most.
These admonitions come on the heels of the breakdown of the Doha round of trade talks and after much public rancor over pacts including the U.S.-Colombia Free Trade Agreement.
Nothing would be worse for the global economy than responding to the current crisis by closing the doors of opportunity that free trade unlocks. Free trade fuels momentous, positive change. According to the WTO, cutting trade barriers in agriculture, manufacturing and services by one-third would boost the world economy by $613 billion--that's equivalent to adding an economy the size of Canada's to the global marketplace. Free trade raises income--just look no further than the clear emergence of China and India's middle class for proof. In the U.S., exports have created 12 million jobs.
Beyond the economic benefits, free trade, if pursued with a long-term, fair and sustainable approach, can also build bridges among people and nations. At a time when the world seems constantly on edge, global trade presents a unique opportunity to help us overcome some of our differences and problems, whatever they may be.
One of the many lessons today's turmoil offers is that a company's success should be viewed in decades, not quarters. Having a long-term vision and the commitment to stick with it--fine-tuning as needed--sustains a company through downturns and propels steady growth.
Investing for the long haul was UPS's (nyse: UPS - news - people ) approach to building its international operations, which began in earnest 20 years ago this month. Our decision to "go global" was met initially with some internal skepticism, in part because our leaders knew it was going to be a very expensive and labor-intensive proposition.
They also recognized that it represented a big departure from our core competency as a domestic delivery service, but ultimately our executives did not waver from their vision of building an international company. As the Berlin Wall fell and China began to open its doors, they saw the emergence of a global economy. They knew that if UPS didn't adapt and become global itself, it would become irrelevant.
Today, the once-questioned decision to go global is helping to insulate UPS against the U.S. economic downturn. In part that's because many of our customers are experiencing tremendous growth even in these difficult times, because they're growing global businesses.
When U.S. companies grow internationally, they learn that long-term relationships are imperative to doing business around the world. Following the demise of some of Wall Street's most trusted names, I believe that business relationships are going to take on even more importance. For multinational companies, hiring locally wherever they operate is a key part of forging these relationships.
When UPS first set up operations around the world, we made the mistake of sending in large groups of U.S. expatriates to run the business. But we soon realized that we would not succeed without local knowledge and relationships. UPS's philosophy of developing "home-grown" talent and promotion from within has helped us establish a sustainable and community-conscious business model, while providing us a deep bench of talent that understands the local culture, language and business values.
That, in turn, has earned UPS the trust of the communities we serve. For example, 99% of our 5,500 employees in China are Chinese nationals. That played a big role in China's selection of UPS as the official logistics and express delivery sponsor of the Beijing Olympics.
While much of the world's trade growth has come as a result of shipping lower-cost goods from emerging markets to mature ones, higher fuel costs are shifting this pattern. Businesses in the European Union and the U.S. are finding it more cost effective to source their products from nearby locations in Eastern Europe or Mexico, respectively, forming a new trend called near-sourcing. This is helping companies better distribute risk, which is an important part of financial growth and stability. And it's also providing new opportunities. For example, in Mexico, the best-paying jobs now are export-related.
Sectors that export 60% or more of their production pay Mexican workers wages that are 39% higher than the rest of the economy, and maquiladora plants typically pay 3.5 times the Mexican minimum wage. These new economic opportunities can serve as a catalyst for educational development, positive political and regulatory reforms and social stability--all of which benefit us collectively.
The root cause of Wall Street's recent problems, and ultimately those of the world's financial institutions, won't be solved by global trade. But the ripple effect of those problems--which have been felt by virtually everyone on the planet--can be mitigated by ensuring the free flow of goods, information and funds around the world. Protectionism is a misnomer, as trade barriers don't protect.
The world is already so integrated economically that the greatest force impacting the greatest number of lives is business. How we react to our current challenges will be critical to our future. Let us keep the doors open.
The author, Dan Brutto is the President of UPS International.
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
