FedEx Chairman and CEO Fred Smith warned that President-elect Trump's campaign promises to pull back on international trade agreements could be “catastrophic.”
Smith told the audience at the National Council on Competitiveness Forum, “Trade has made America great, and expanding trade has been a bipartisan pursuit for over 80 years. The failure to continue to do so would be a severe mistake with enormous consequences for America and the world.”
He noted that while the U.S. is facing many major economic challenges, including slow economic growth, national debt, low federal and business investment, deteriorating infrastructure, increasing protectionism here and abroad, and too many citizens feeling that they’re being left behind, these problems should not be blamed on trade.
In addressing the Trans-Pacific Partnership agreement (TPP) negotiated among the U.S. and 11 other countries, Smith said, “We urge the Trump administration to put its stamp on a revised TPP by addressing any concerns it sees, and making any additional improvements to promote trade, rather than restrict it.”
As for the benefits of U.S. trade with Mexico and Canada, Smith advised that while the North American Free Trade Agreement agreement could be updated and strengthened, withdrawal from the agreement “would have massive economic repercussions.” He added, “There are myriad reasons why that would be catastrophic for the U.S. economy” due to the supply chains throughout the region.
NAFTA trade more than quadrupled in 20 years, which boosted the economies of all three countries. Nearly 14 million jobs depend on trade with Canada and Mexico, he said.
“Few people understand how NAFTA has woven the productive capacity of North America into one integrated platform,” he explained. “The United States, Canada and Mexico make so many things together…. The auto industry is a great example. A November 10 Wall Street Journal article cited an example in which a seat had parts from four U.S. states and four Mexican locations.”
Among other examples of times when protectionism has not worked, Smith noted, “We have the best example of protectionism from our own history. The devastating Smoot-Hawley Act of 1930 raised tariffs on more than 20,000 items. This contributed to a 66% decline in world trade from 1929 to 1934. This misguided act of Congress ignited the Great Depression.”
Smith emphasized that “trade is a two-way street, in which both imports and exports are vital.” He said American farmers, manufacturers and other companies — and the jobs they support — depend on foreign markets. “Overall, trade supports over 40 million U.S. jobs, or more than one of every five in our nation. Tens of thousands of those jobs are at FedEx.”
Smith noted that the U.S. currently has free trade agreements in place with only 20 trading partners. “Contrary to public perception, the U.S. enjoys a surplus with those trading partners in manufacturing, and has global surpluses in services and agriculture.” In fact, he said, these 20 free trade partners buy nearly half of all U.S. exports. “The U.S. wins when we enter free trade agreements.”
Full text of the speech is available here.