[Congressional Record (Bound Edition), Volume 162 (2016), Part 3]
[Senate]
[Pages 4301-4302]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      HOW TRADE MADE AMERICA GREAT

  Mr. ALEXANDER. Madam President, it was while a Yale undergraduate 
that Fred Smith received a C-plus for his paper outlining a plan to buy 
large airplanes that would carry packages overnight. This plan a few 
years later became Federal Express, now FedEx, a global courier 
delivery services company with nearly $50 billion in revenues and more 
than 340,000 employees. FedEx has become a leading worldwide economic 
indicator all by itself and one of our country's great success stories. 
Mr. Smith not only founded the company, but today still is CEO and 
Chairman.
  Fred Smith's address should be required reading on all college 
campuses, as well as for all others who may have forgotten the 
remarkable contribution trade has made to prosperity not only for our 
country, but for hundreds of millions worldwide. There is no doubt that 
globalization and technology have improved living conditions in our 
country, but they have also bred uncertainty and sometimes fear. For 
many Americans, the cheaper goods we buy from overseas and the salaries 
we make from selling goods overseas come with dislocations that make it 
harder for Americans to find jobs and provide for their families.
  Added to that are actions by some of our trading partners--Japan in 
the 1980s and China more recently--that abuse the trade relationship 
and turn free trade into unfair trade. Nevertheless, before we turn our 
backs on or significantly change our national policy of encouraging 
freer trade with other countries, we would be wise to read Mr. Smith's 
account of the benefits of trade to the average American family during 
the last 50 years--and also to be reminded of the devastation that 
restrictions on trade caused during the 1930s when those restrictions 
helped lead to the Great Depression.
  I ask unanimous consent to have printed in the Record an article by 
Fred Smith from the Wall Street Journal.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Mar. 25, 2016]

                      How Trade Made America Great

                        (By Frederick W. Smith)

       During our years at Yale, the world was a different place. 
     Foreign travel was exotic, expensive and rare among the 
     population as a whole. While some young Americans had been 
     abroad, by far most Americans had not--and those who did go 
     abroad most likely traveled by sea rather than air. In the 
     early 1960s, flying over the oceans was mainly for the 
     affluent.
       Long-distance telephone calls were expensive, international 
     calls prohibitively so. From furniture to TVs and appliances, 
     and especially automobiles, American brands dominated 
     consumer spending in this country. We had just a glimpse of 
     the world to come with the proliferating iconic Volkswagen 
     Beetles and the amazingly small Sony portable transistor 
     radios.
       These imported products in the U.S. represented a global 
     political vision that pre-dated World War II. In the early 
     1930s, President Roosevelt and Secretary of State Cordell 
     Hull believed in liberalized trade as a path to world peace 
     and cooperation. With strong administration support, Congress 
     in 1934 passed the Trade Agreement Act, which allowed Hull to 
     negotiate reciprocal trade treaties with numerous countries, 
     lowering tariffs and stimulating trade.
       This liberalization reversed the epitome of U.S. 
     protectionism, the disastrous Smoot-Hawley Tariff Act of 
     1930, which contributed to a staggering 66% decline in world 
     trade between 1929 and 1934. Integral to Hull's vision was 
     the 1947 General Agreement on Trade and Tariffs (GATT), which 
     was signed by 23 countries and committed the U.S. to steadily 
     liberalizing world trade. A central pillar of American 
     postwar policy was enticing producers from around the world 
     with access to the giant U.S. market.
       The devastation of Europe and Japan and the emergence of 
     Cold War adversaries provided even greater impetus to the 
     opening of American markets, under the protection of the U.S. 
     Navy and the umbrella of various global alliances like NATO. 
     In April 1966 Malcolm McLean launched his first international 
     Sea-Land container operation between New York and Rotterdam. 
     McLean's shipping-container revolution cut the cost of 
     seaborne trade by a factor of 50 versus loose-cargo 
     stevedoring.
       That same month, Juan Trippe (Yale '21) at Pan Am ordered 
     25 revolutionary jumbo 747 widebody Boeing airplanes equipped 
     with equally leading-edge Pratt & Whitney high-bypass 
     fanjets. When the passenger version of the 747 entered 
     service in 1969, it was two-and-a-half times bigger than the 
     Boeing 707 that had pioneered jet travel. The jumbo jet cut 
     overseas travel costs by 70%.
       The 747's hump allowed a freighter version to load cargo 
     through a nose door under the cockpit and into the cavernous 
     fuselage. Because of the cargo-carrying 747F, costs for 
     trans-Pacific airfreight were dramatically reduced, a major 
     factor in the extraordinary GDP growth of the Asian ``tiger'' 
     economies of Hong Kong, Taiwan, Singapore and Japan beginning 
     in the 1970s. Electronics and other high-tech/high-value-
     added goods from these emerging markets could be distributed 
     and sold in the U.S. and Europe in a few days--an amazing 
     development.
       During the 1970s and 1980s, while container ships and 
     planes became increasingly efficient with each successive 
     model, newly developed fiber-optic cables (patented in 1966) 
     began running underseas, connecting the world at the speed of 
     light, lowering voice and data-communication costs by orders 
     of magnitude. Financial markets became globally integrated 
     and transactions multiplied at an astounding rate.
       The U.S. opened its markets to former World War II foes, 
     and Germany and Japan as a result became economic titans. 
     Successive administrations mostly ignored Japan's overt 
     mercantilism and growing trade surplus, given the need for 
     American military bases throughout the country. Eventually 
     exchange rates and domestic political pressure pushed 
     Japanese car makers to set up production plants in the U.S., 
     mostly in the South. Electronics manufacturers such as 
     Panasonic, Sony and Hitachi became world-wide giants on the 
     back of exports from Japan to America and then almost 
     everywhere as global trade steadily expanded.
       Parallel to the technological progress of transportation 
     and telecommunications was a remarkable series of 
     congressional actions and GATT agreements that substantially 
     liberalized transport and trade regulations.

[[Page 4302]]

     During the Carter administration, inspired by extensive 
     academic research and the example of ultra-low-fare 
     intrastate airlines in Texas and California compared with 
     high-cost national carriers, many Republican and Democratic 
     lawmakers alike pushed for federal economic deregulation of 
     transportation. The Republican mantra was ``free market''; 
     Democrats sought ``consumer benefit'' by lowering the price 
     of travel and goods for the masses.
       As a result, legislation was enacted for air cargo (1977), 
     passenger air services (1978), interstate truck and rail 
     transportation (1980), and the federal pre-emption of 
     intrastate trucking in 1994. Both the Civil Aeronautics Board 
     (CAB) and the Interstate Commerce Commission (ICC), the air 
     and surface economic regulators, were abolished, in 1985 and 
     1995 respectively.
       In the 10 years following the Staggers Act of 1980 that 
     substantially deregulated railroads, the perennially loss-
     making rail industry was able to halve the rates charged to 
     customers while restoring financial stability. Surface-
     transport deregulation also spawned an entire new industry of 
     flexible truckload common carriers to meet the needs of 
     emerging ``big box'' distribution and retailing models such 
     as Wal-Mart and Target. Revolutionary production systems, 
     based on just-in-time supply and fast-cycle manufacturing, 
     were made possible only because of the deregulation of 
     trucking.
       From 1977 to 1994, a century's worth of heavy regulation of 
     transportation rates, routes and services that had begun with 
     the railroads was cast aside, with profound effects on the 
     U.S. economy. By the beginning of the 21st century, overall 
     logistics costs were reduced from 16% of GDP during the 1970s 
     to under 9%, thereby making possible substantial increases in 
     government social spending resulting from the Medicare and 
     Medicaid legislation in the 1960s.
       On the global-trade front, the GATT framework of 1947 had 
     been ``temporary,'' as Congress refused to approve the 
     International Trade Organization envisioned by the 
     participants at the 1944 Bretton Woods Conference that 
     established the World Bank and the International Monetary 
     Fund. Even so, under GATT there were seven successive 
     negotiating ``rounds'' and agreements until the World Trade 
     Organization (WTO), a modernized International Trade 
     Organization, was finally established in Geneva in 1994.
       The GATT/WTO did not cover sea trade, given the 
     traditionally liberal rules regarding shipping except within 
     national regulated waters. Thus unimpeded, containership 
     lines of many registrations proliferated, facilitating the 
     astonishing growth in maritime business and the development 
     of megaports in Asia, Europe and the U.S.
       International aviation was likewise a separate regime, but 
     as agreed by 54 nations at the Chicago convention of 1944, 
     international flying was for decades tightly controlled by 
     governments through a labyrinth of bilateral treaties (4,000 
     at present) that limited competition and regulated rates and 
     services.
       Beginning in 1992, however, the U.S. and the Netherlands 
     enacted the first of many Open Skies agreements, which have 
     grown now to 117, including a multilateral treaty with 28 
     European countries. Passenger airlines opened scores of new 
     routes. New air-cargo and door-to-door express services were 
     also initiated.
       Together, these regulatory changes and transport 
     innovations made possible the fantastic growth of travel and 
     trade, which grew two-and-a-half times the rate of world GDP 
     for a quarter-century.
       From less than $50 billion in total trade in 1966, the U.S. 
     now imports and exports over $4 trillion annually in goods 
     and services. Container ships have grown from carrying a few 
     hundred boxes on each trip to the new Triple-E behemoths that 
     transport over 18,000 containers called TEUs, or 20-foot-
     equivalent units. The cost is 1/500th of the shipping rates 
     per pound of the early 1960s. The profusion of agricultural 
     products from the ``Green Revolution'' pioneered by Norman 
     Borlaug, combined with ever more efficient shipping, has 
     resulted in massive amounts of grain traded around the world, 
     something unimaginable to farmers 50 years ago. American 
     railroads were integral to the growth in the nation's 
     maritime trade by moving containers from Pacific ports to the 
     mega markets in the East.
       All of these factors have created a global trade market 
     that exceeds $15 trillion annually. Now, the Panama Canal is 
     being widened, which will permit, beginning later this year, 
     massive container ships to cross the Pacific and unload 
     directly into improved Gulf of Mexico and Atlantic Coast 
     ports, further reducing the cost of Asia-U.S. trade.
       Handling the enormous increase in financial transactions 
     was made possible by a fantastic increase in computer-
     processing power. The emergence of the Internet in 1994 has 
     allowed the ubiquitous offering of millions of products for 
     fast delivery from anywhere in the world to anyone with a 
     desktop computer . . . then a PC . . . then a tablet . . . 
     and now a smartphone. Languages are translated; products can 
     be instantly, visually displayed; and orders effortlessly 
     entered. The capabilities are unprecedented in the history of 
     commerce.
       Three other factors central to the development of these 
     enormous global commercial systems have occurred since 1966: 
     The evolution of a vast world-wide oil market; the 
     integration of the economies of the U.S., Mexico and Canada 
     with the North American Free Trade Agreement (Nafta) of 1994; 
     and the emergence of China as a great commercial power.
       The oil cartel known as the Organization of the Petroleum 
     Exporting Countries overplayed its hand in the 1970s when, 
     for economic and political reasons, OPEC embargoed shipments 
     to the U.S. Market forces finally sorted out oil supply and 
     demand in America after President Reagan in 1981 dismantled 
     the vestiges of government regulation in the industry. Oil 
     has hardly been immune to the vagaries of any commodities 
     market, but the U.S.--thanks to the technological 
     breakthrough of hydraulic fracturing--is the world's largest 
     producer of natural gas and is on track this decade to 
     surpass Saudi Arabia and Russia as the world's largest oil 
     producer.
       True to the central tenet of FDR and Secretary of State 
     Hull that liberalizing trade is inherently beneficial, the 
     U.S. led the effort for China to join the WTO in 2000. 
     Beginning with the Nixon-to-China rapprochement, the 
     industrialization of America's Cold War enemy has lifted more 
     people--hundreds of millions--out of poverty, faster, than 
     ever in history. From the late 1980s and accelerating after 
     the WTO accession, efficient Chinese manufacturing, 
     especially technology-based goods, has rewarded Western 
     consumers with low-cost products that have substantially 
     improved standards of living. Americans and Europeans don't 
     need to be affluent to afford cellphones, digital TVs, 
     furniture and appliances.
       China, however, has followed Japan's mercantilistic 
     practices, which have led to a $300 billion trade surplus 
     with the U.S., thanks to state support of Chinese industry 
     and restrictions on foreign competitors. These policies have 
     created a strong political backlash in the U.S., which made 
     the recent congressional renewal of Trade Promotion 
     Authority--which allows the president to negotiate trade 
     treaties and was for years a routine process--extremely 
     difficult.
       Today, given low growth in most of the world, rising wages 
     in China and petroleum costs declining because of U.S. 
     fracking technology, the trajectory of the world's commerce 
     is somewhat uncertain.
       Trade and global GDP are now growing roughly at parity. 
     Following the 2008 financial crisis, protectionism has shown 
     a troubling popularity in many countries, including the U.S. 
     Stringent new security regulations have also slowed goods 
     crossing many borders.
       The Nafta pact has clearly been an economic success. Over 
     the past 20 years, U.S. trade with Mexico and Canada has 
     risen to $1.2 trillion in 2014, from $737 billion. While the 
     immigration issue often gets erroneously conflated with 
     Nafta, the economic numbers tell a clear story. Moreover, 
     some production is now moving back to North America from 
     Asia, given lower transport costs, faster delivery, the 
     increase in Chinese production expenses, easier customs 
     clearance, and the more balanced nature of Nafta trade 
     compared with the massive U.S. deficit with Asia--
     particularly China and Japan.
       Once again, in its own messy, unpredictable political 
     fashion, the U.S.--after a hiatus during the first Obama 
     administration--is pushing for further trade liberalization, 
     with initiatives such as the Trans-Pacific Partnership, the 
     Trans-Atlantic Trade and Investment Partnership, and the 
     Trade in Services Agreement. The WTO likewise continues to 
     push for a new Trade Facilitation Agreement dealing with 
     security and customs issues; the WTO Information Technology 
     Agreement; and a new overall world-wide trade agreement--the 
     so-called Doha Round negotiations. These efforts by many 
     nations under the WTO show continued commitment to further 
     global integration despite the well-publicized difficulties 
     in doing so.
       More than three billion people are now connected to the 
     Internet. Billions more have aspirations for a better life 
     and are likely to come online as global consumers. The odds 
     are good, therefore, that today's remarkable transport 
     systems and technologies will continue to improve and 
     facilitate an even larger global economy as individual trade 
     is becoming almost ``frictionless.''
       History shows that trade made easy, affordable and fast--
     political obstacles notwithstanding--always begets more 
     trade, more jobs, more prosperity. From clipper ships to the 
     computer age, despite economic cycles, conflict and shifting 
     demographics, humans have demonstrated an innate desire to 
     travel and trade. Given this, the future is unlikely to 
     diverge from the arc of the past.

                          ____________________