G20 Executive Talk Series

September 2016

Global Trade

Authored by: Andrew N. Liveris

Ushering in a New Era of Global Progress and Prosperity through Trade

News around the world this year has been dominated by familiar acronyms: TPP, T-TIP, RCEP and more.

These letters have been scrolling across news tickers from New York to New Delhi in a banner year for free trade agreements (FTAs). The largest trade deal in history, the Trans-Pacific Partnership (TPP), was signed in February, and negotiations are progressing on another enormous FTA, the Transatlantic Trade and Investment Partnership (T-TIP). Together, those two agreements alone would cover over 60 percent of the global economy.

Political coverage has focused largely on public concerns surrounding these negotiations. This is expected, as new FTAs always bring back old debates about the benefits and drawbacks of globalization. But these conversations can be confounding to the business community and among economists, where the importance of trade has long been considered a settled question. Indeed, trade provides enormous opportunities to businesses large and small and to consumers as well: greater scale and more competition lead to lower-priced, more readily-available consumer goods, resulting in a higher standard of living. More access to markets, particularly in emerging economies where incomes are rising rapidly, fuels economic growth and job creation. Increased economic interdependence strengthens the bonds among nations.

Another benefit of FTAs – one that is frequently underestimated – is their ability to establish higher and more consistent standards: stronger protections for workers, the environment, and intellectual property. When these safeguards are in place, the benefits of free trade are more broadly experienced.

These standards are important for a couple reasons. First, we are all better off when workers are treated fairly, when our environment is protected, and when innovation is incentivized around the world. High standards ensure that while making products more efficiently, companies are also making them more sustainably.

The second reason that higher standards are important is that they help level the playing field for countries around the world. When countries adopt widely divergent regulatory regimes, it is often more expensive to produce goods which are shipped globally, especially for small business. But when regulatory systems are based on common standards and practices – to ensure universally strong rules grounded in sound science – everyone has a chance to compete. Clearly, far from instigating a “race to the bottom,” robust trade agreements are instrumental in ensuring high levels of protection combined with economically competitive regulatory practices.

Fortunately, TPP contains some of the highest standards of any trade agreements in history, and parties involved in negotiations have stated that T-TIP will as well. When these agreements enter into force, nations comprising more than half of the global economy will have agreed to FTAs that not only open their borders, but also mandate fairer treatment inside them.

TPP contains some of the highest standards of any trade agreements in history, and parties involved in negotiations have stated that T-TIP will as well.

This is a vital development, both for the health of the global economy and for the future of humanity – because the next several decades will bring challenges greater than any we have experienced before. Rapidly growing middle classes in China and India will drive even higher consumption of vital resources. Exponential population growth and global climate change will strain these resources even further, with far greater need to sustainably generate food, water, and energy.

These challenges belong to all of us. And they must be solved by all of us – not only by G-20 leaders at major global summits, but by governments and businesses, and by academia and civil society, in a multitude of ways every day, sharing ideas and solutions at these intersections. We see this strongly at my company, The Dow Chemical Company, where we are working together, at 179 sites in 35 countries, to develop solutions to these great global challenges – from energy-efficient housing in China and Germany to cheaper, purer water in Africa and Saudi Arabia to lightweight, eco-friendly transportation in Europe.

Global trade agreements allow these scientific advances to create positive change around the world by removing the barriers that inhibit collaboration. Our work stalls when tariffs prevent us from transporting raw materials, for example, or conflicting regulatory processes impede a new product from going to market, or weak IP protections undercut the incentives for R&D. But when these barriers come down, sustainable technologies can be more easily developed and deployed across the world.

It takes global collaboration to solve global problems. It is time we tear down the outdated and regressive barriers that obstruct progress. When we do, we can truly work together – across sectors and across national boundaries – toward a better future that is shared by all.

Andrew N. Liveris is Chairman and Chief Executive Officer of The Dow Chemical Company, a materials, polymers, chemicals and biological sciences enterprise, with 2015 annual sales of nearly $49 billion.