Remember the World Trade Organization? I ask because an entire generation of business leaders have started companies since the WTO accomplished anything significant. Mark Zuckerberg was 17 when the on-going Doha Round of free-trade negotiations began in 2001. Trade ministers from the 161 countries that make up the WTO are scheduled to meet next month in Nairobi, Kenya. No one is expecting much.
That doesn’t mean there isn’t interest in trade. Quite the contrary. Canadian parliamentarians will spend the next number of months assessing the merits of the Trans-Pacific Partnership, or TPP, the 12-nation pact the United States put together with other like-minded countries from the Pacific Rim. Prime Minister Justin Trudeau is facing pressure from President Barack Obama to ratify the agreement, while Canada’s auto-parts makers and former Research in Motion chief executive Jim Balsillie are among the voices calling on Trudeau to walk away. Similar friction exists in all the countries party to the deal. Ratification is likely, but not assured.
Free-trade agreements benefit society by giving people access to the best stuff and at the cheapest prices. Companies gain access to bigger markets, which can boost profits. More often than not, that results in greater employment. (At least one estimate suggests the TPP will lower the number of unemployed people by 2% to 5% in Canada, Japan, New Zealand and Mexico.) Increased competition forces formerly protected companies to either up their games or devote their skills and resources to something else. Either way, overall productivity gains. That means more wealth. The more countries that participate in a free-trade agreement, the greater the overall benefit.
The TPP is the new big thing, but only because trade ministers now prefer to think small. The current fashion is for such “plurilateral” deals, not global confabs. The U.S. also is negotiating a trade agreement with the members of the European Union, similar to the one former prime minister Stephen Harper signed with the EU. China is the leading member of a group of 16 Asian countries that is working on something called the Regional Comprehensive Economic Partnership. Beijing also wants the members of Asia Pacific Economic Cooperation, or APEC, to form a free-trade area of the Pacific region. Leaders maintain their priority remains the WTO. Their actions suggest otherwise.
Enter Jack Ma, founder of Alibaba Group Holding Ltd. and one of the new generation of corporate titans. Ma owes a great deal to the WTO. China became a member in 2001, gaining access to the markets of all the group’s members. The country became the world’s dominant exporter, helping to boost its gross domestic product by US$9 billion, or roughly the equivalent of the annual total economic output of Germany, France and Italy combined. Alibaba rode that wave. To get an idea of its scope, consider that the company sold more than $14 billion worth of goods at its annual Singles’ Day sales event on Nov. 11, a 60% increase from last year. Its shares are worth almost US$200 billion.
Ma wants to reboot global trade talks. “WTO 2.0,” he said in a speech at the Asia Pacific Economic Cooperation summit in Manila last week. “We should be using WTO to support small guys.” It’s the big buys that currently control the global trading system. They built it, as they alone had the resources to spread out around the globe. That’s less true now. Platforms such as those offered Alibaba, Amazon and others mean the smallest company should be able to access a vast market. Ma said trade ministers should focus the WTO on those companies, making a priority of slashing and burning whatever needless brush that prevents people from selling goods and services to other people. “Trade is a freedom. Trade is human right,” Ma said. “Trade should not be used as a tool against other nations.”
Would Alibaba benefit from a surge in small-business commerce? Certainly. But that is no reason to sniff at Ma’s intervention. Such zero-sum thinking is one of the big reasons WTO negotiations have stalled. He suggested a global agreement that would allow companies with annual sales of less than $1 million to ship their goods around the world free of duty. I can’t think of a reason any politician would object. Leaders are desperate to jump-start global trade, which has slowed to a crawl. The leaders of the Group of 20 nations pledged to help smaller companies access to global value chains at their summit in Turkey on the weekend. That’s a good idea, too. We’re on the verge of a new trade agenda. Ma should keep pushing, and all the “small guys” out there should get behind him. There’s more to trade than the TPP.
MORE ABOUT INTERNATIONAL TRADE:
- CETA could be huge for Canada—if companies are ready to adapt
- The age of global trade requires training a new kind of salesperson
- With this TPP deal, chalk up a victory for Stephen Harper
- How the Trans-Pacific Partnership will grow Canada’s service exports
- The real opportunities in China today are found farther inland
- Canada’s big opportunity in China is services, not just resources