Fred Smith, the chief executive officer of FedEx, said a rise in protectionism is one of the biggest reasons that world trade is no longer growing rapidly.
Speaking at the TPM 2014 conference this week, Smith said that trade growth has “slowed to a trickle” since the Great Recession of 2008 and that the World Trade Organization projects economic trade growth will be lower in 2014 because of protectionism, even though some large economies will increase.
“We believe even modest growth is not a forgone conclusion without a decisive change in direction by governments around the world,” he said.
He called on his audience to redouble efforts to move government toward trade liberalization, and praised the World Trade Organization's Multilateral Trade Facilitation Agreement, which he said aims to make trade simpler, more transparent and more predictable.
He also said that trade pacts under discussion such as the Trans Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) could drive up world GDP by 5 percent by simplifying trade regulations. He added that the U.S. should join Mexico and Canada's call for "an expanded NAFTA 2.0."
“Over the past several years, almost every trading nation has instituted policies that permit greater regulatory intervention in the trade process,” he said.
Last year, he said, the world’s top 20 economies passed 23 more protectionist measures than in 2009.
Smith said he believes trade has lifted billions out of poverty and that protectionism stifles competitiveness, innovation and consumer choice.
“It is discouraging to watch nations made prosperous by the opening of markets, and the growth in global trade attempt to throttle the very forces that have created their prosperity,” he said. “While the United States’ skirts are not completely clean, in most instances, this country has abided by its trade agreement and for geopolitical interest has often sacrificed its economic interest to the mercantilism practice by other countries — in this regard, first Japan’s and now China’s trade practices have eroded a great deal of the political support in the United States for more trade liberalization.”
Smith said China protects its companies against foreign competitors, but that is done by other countries, as well. He pointed to Canadian opposition to lifting de minimis
customs clearance limits because it might harm its business.
He also mentioned that FedEx was prevented from shipping 3,000 pillows to athletes at the Olympics in Sochi because of Russian customs restrictions.
Since World War II, Smith said, political leadership that focused on the greater good of expanding global markets rather than protecting parochial interests, ended up creating great wealth in many parts of the world.
Reviewing the 40-year history of his company, Smith said the modern airfreight industry was spurred by three factors -- the emergence of Japan and the four “Asian Tiger” countries of Taiwan, Singapore, South Korea and Hong Kong as economic powerhouses; increased production of electronic products; and the Boeing 747 freighter, all cemented by the rise of China as a manufacturing superpower.
He noted that these factors led to several decades of global trade exceeding world GDP by two-and-a-half times.
More recently, as fuel prices have increased, he said, more shippers are turning from international air freight to more economic ocean transportation, while continuing to use international air express for high priority shipments.
Smith said that the mix of revenue for international cargo transport changed markedly from 1994 to 2012, and that globally, spending on international air express has grown from 6 percent to 12 percent, and the amount spent on ocean transport has increased from 55 percent to 63 percent, with both those modes “gnawing” on traditional international air freight, which has declined from 38 percent to 25 percent.