FedEx chief Frederick Smith has gone on the offensive against President-elect Donald Trump's trade proposals, warning of dire consequences if the nation pursues the protectionist policies Trump espoused during the campaign.
The Memphis-based company's chairman, president and chief executive said following through on Trump's threat to withdraw from Nafta, the North American Free Trade Agreement, would have "massive economic repercussions." He cited research that a full-blown trade war against China and Mexico would throw the United States into recession and cost 5 million American jobs.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
He said the Trump administration should focus on improving and winning ratification of the Trans-Pacific Partnership among 11 Pacific Rim nations, China not among them; continue negotiations on the Trade in Services Agreement or TISA and the Transatlantic Trade & Investment Partnership with the European Union; and continue work on the Bilateral Investment Treaty that the U.S. is negotiating with China.
Trade is FedEx's lifeblood, Smith said. FedEx is Memphis' largest private employer, with more than 30,000 employees in the metro area and 36,000 in Tennessee.
"FedEx is at the nexus of global trade. We move 12 million shipments daily, serving 220 countries and territories, so we see the value of trade every day. In fact, the largest customs clearance port of entry in the U.S. is the Memphis airport, where our FedEx Superhub is located. We at FedEx are passionate about supporting trade, and we consider all FedEx jobs to be trade jobs."
Smith made the remarks while speaking to the National Competitiveness Forum, organized by the U.S. Council on Competitiveness in Washington. In his speech, entitled "How Trade Keeps America Great," Smith argued the benefits of trade to U.S. and world economies far outweigh the drawbacks.
Protectionism, rooted in the notion of building a fence around American jobs, has had disastrous consequences through history, such as the runup to the Great Depression, Smith said. Free trade agreements helped the United States, Germany and Japan become economic superpowers after World War II.
Smith has met with Trump in New York since the election, at the invitation of Vice President-elect Mike Pence, to discuss issues of importance to the U.S. economy.
Regarding Nafta, Smith said it would be smarter to expand on it, incorporating solutions to 21st-century trade issues that are addressed by the proposed TPP.
"There was also a great deal of negative talk about Nafta during the election campaign. But Nafta is the linchpin of our current economic competitiveness," Smith said.
He cited findings that Nafta makes the United States $127 billion richer each year and that private-sector jobs in the U.S. have risen by 32% since Nafta began in the early 1990s.
"Nafta has made the United States the centerpiece of a huge North American production platform. Nearly 14 million U.S. jobs depend on trade with Canada and Mexico [by U.S. Chamber figures]," Smith said.
"Modern trade agreements like TPP address 21st-century trade issues such as e-commerce, cross-border data flows, state-owned enterprises, small businesses and global supply chains. All these improvements, plus others in the areas of labor and environment, are included in TPP."
"If President-elect Trump wants to improve Nafta, he could start with these types of provisions, many of which have already been agreed to by Mexico and Canada as part of TPP."
Smith also had plenty to say about China as well as corporate tax reform.
"The U.S.-China relationship is the most consequential global relationship of the 21st century. It comprises the two largest economies in the world, two economies that are highly interdependent. We have numerous common interests and challenges. Many of the toughest global issues cannot be solved without Sino-U.S. cooperation."
"The list of troubling Chinese economic and trade policies includes the 'indigenous innovation' initiative, support of national champions, massive investment in state-owned companies, intellectual property violations, including cyber-espionage, and forced technology transfer," Smith said.
"China should understand that under a Trump administration there will be stronger and more rapid consequences for 'closed-door' commercial practices. How China reacts to this will be critically important. All the while, we support President Xi’s stated commitment to a more open Chinese economy," Smith continued.
"To these ends, we hope the Trump administration will take another look at TPP and realize not only its benefits to the U.S. but also the consequences if it’s not approved. TPP is a bulwark against current Chinese practices, and China is aggressively moving ahead with its own regional trade agreement — the Regional Comprehensive Economic Partnership. Many TPP member countries have said that without TPP they’ll have no choice but to move closer to the [Chinese] model," Smith said.
Smith said U.S. success in the world economy depends equally on corporate tax reform, worker retraining and investment in infrastructure.
"First, we must overhaul our corporate tax code. Our 35% federal corporate tax rate is one of the highest in the world and is inconsistently applied across industries. In addition, the United States and Chile are the only two major economies with a worldwide tax system. That means we tax earnings of U.S. companies anywhere in the world, making our goods more expensive overseas and our companies less competitive. We need a territorial system like every other advanced economy. This, combined with a lower corporate rate, will resolve many of the disadvantages I’ve talked about today..."
"Second, we must train our workers for the innovative jobs of tomorrow. A McKinsey study reported that in a few years, employers worldwide could face a shortage of 85 million high- and medium-skilled workers. So we should strengthen our trade adjustment and assistance programs to provide the retraining of workers impacted by global trade and automation. A large number of those jobs will stay in the U.S. if we adopt the policies I’ve mentioned today."
"Third, we must modernize our infrastructure. Unless we make major improvements to our roads, ports, airports and other facilities, we’ll lack capacity to handle a growing economy and the global supply chains that supports it. Our federal and state governments must urgently work toward modernizing our infrastructure for maximum competitiveness."