How free trade deals create U.S. jobs

June 22, 2011, 5:15 PM UTC

By Scott Davis, CEO of UPS

It’s time to put politics aside and focus on the positive economic impact of free trade agreements. The benefits provided by free trade should not be held hostage to maneuvering over the Trade Adjustment Assistance Program or confirming nominees to critical trade posts, like the Secretary of Commerce.

President Obama wants to send pending deals with South Korea, Colombia, and Panama to Congress before it recesses in August, but only as part of a broader trade initiative, which is being hotly debated on Capitol Hill. Meanwhile, the clock is ticking, and a wide range of American companies are being put at a competitive disadvantage to their global counterparts.

After more than four years of negotiations, the remaining major issues that were holding back the approval process have finally been resolved. With other countries’ trade agreements quickly coming online, such as the pact between Korea and the EU that takes effect on July 1, we cannot stand still while they increase their global market share. If the Obama administration and Congress do not take action, it is possible that the pending free trade agreements will never be approved.

If 95% of consumers are located overseas, common sense says the only real path to economic growth is by opening new markets to our businesses. Currently only 1% of U.S. companies export, according to the Department of Commerce, and these three trade agreements represent a huge opportunity to grow that number and create jobs. That’s why it is so mystifying that our government leaders would delay action on pending free trade agreements over political wrangling on both sides.

Unfortunately, recent surveys show that many Americans are against free trade agreements because they believe such policies steal jobs and make us less competitive. That belief could not be further from the truth. Trade agreements actually allow American companies to export by breaking down barriers and eliminating unfair taxes.

The pending free trade agreement with South Korea alone could boost U.S. exports by $10.9 billion a year and create 70,000 new jobs, according to the U.S. International Trade Commission. Korea is a $1 trillion economy and is the United States’ seventh-largest trading partner. The Colombian free trade agreement, meanwhile, is estimated to expand U.S. exports by more than $1.1 billion and give key U.S. goods and services duty free access in sectors from manufacturing to agriculture. It will increase U.S. GDP by an estimated $2.5 billion and support thousands of additional U.S. jobs.

For instance, K&N Engineering, a UPS (UPS) customer that started more than 40 years ago as a family-run manufacturer here in the U.S., is now a global company producing air filters, oil filters and performance products for cars, trucks, and motorcycles. The countries under free trade agreements that K&N exports to grew at twice the rate of those without trade agreements over the past 10 years. Exporting to these markets has helped the company grow exponentially.

The numbers don’t lie: UPS’s export volume increased by 28% on average to countries with which the U.S. has recently brokered free trade agreements.

The only loser in the case of further delay is America itself. Global innovation and growth will happen with or without the U.S. If we as a country want to continue being the world’s leading economic power, we really need to step back in the game.

Scott Davis is chairman and chief executive officer of UPS, the world’s largest package delivery company with over 400,000 employees and a global leader in logistics services. Davis is also a member of the President’s Export Council.

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