Free Trade: It Takes One to Know One

Did you know that 85% of all consumers worldwide live outside the U.S.? So what does that mean for us? It means that if we can’t access markets around the world freely, we can’t sell to many of them – not products, not services, not ideas, not anything. In a time of economic uncertainty, it’s instinctual to want to hunker down, protect what we have, and think about closing down the borders to trade. But that’s dangerous thinking.

Let’s take a moment to remember how trade liberalization benefits us in our everyday lives. Those benefits are dispersed (and thus easy to overlook), but they are very, very real. Walk into your supermarket anywhere but California, and those year-round fresh vegetables are a product of liberalized trade. And so is that iPad you’ve been dying for and the inexpensive clothes from Old Navy. We live in a truly interconnected world where R&D, design, manufacturing, commercialization and retail are distributed in a way in which we’ve never seen before. And that’s a good thing.

At the Global Innovation Forum, sponsored by the National Foreign Trade Council, the U.S. Trade Representative Ron Kirk moderated a panel about the triumphs and tribulations of international trade liberalization. For knowledge-based companies like Google and Facebook, censorship is becoming the biggest barrier to free trade (Did you know that Google’s YouTube is blocked in over 20 countries including, Turkey?). For the pharmaceutical and software industry, lack of intellectual property (IP) protection and prosecution acts to deny access to markets (package software is a $80 billion a year market, but Microsoft estimates that over $50 billion of market opportunity is left on the table due to pirated software). And the list goes on and on. With President Obama’s commitment to doubling exports over the next five years, the U.S. will need to be vigilant in driving improvements in these areas.

But our hands aren’t so clean either. Applied is the world’s largest manufacturer of equipment to make solar photovoltaic (PV) panels. And it happens that about half of those are manufactured in China. But the stimulus funds for renewable energy projects contained a “Buy American” provision, disqualifying some of our customers from supplying panels to build solar farms. That had the double negative effect of slowing down solar deployment in the U.S. and driving investment away from solar, which is proven to provide the most jobs of any renewable energy investment. Similar protectionist sentiments are circulating in Europe.

We’ve got some big markets to penetrate outside the U.S. and we need a robust and powerful pulpit from which to drive significant liberalization of key trade barriers. We need to influence our trading partners to enforce IP protection and penalize piracy. But we can’t do that if we’re busy building our own barriers to trade.