In December 1791, United States Treasury Secretary Alexander Hamilton submitted his Report on Manufactures to Congress. In it, he made the case for transitioning the country’s economy from a primarily agrarian model to an industrial one that would level the trading playing field with Europe. An important part of his proposal was to introduce tariffs that would deter imports of products that could compete with the nascent U.S. manufacturing sector. Less than two years later, the Yellow Fever epidemic struck the United States. Hamilton and his wife fell ill and recovered.
And hopefully that’s where any parallels with the present day end.
The first half of the 18th century saw one of the most active periods of protectionist tariffs in the history of the United States, largely as a response to interrelated economic and military wars that the country was engaged in at the time with trans-Atlantic continental powers. As we emerge from the COVID-19 pandemic in 2021, it would likely be premature to claim that the U.S. has resolved its trade conflicts across both oceans. Some argue that the new administration will be unlikely to ease trade policies (and tariffs) against China, in particular. However, there is a view that a policy of more open engagement with other overseas partners – particularly historic allies – will lead to less protectionism in the coming months and years. And that this can aid the economic recovery that the country urgently needs to pursue as we address the damage inflicted by the pandemic across many areas of our economy
That view is certainly supported by a significant number of U.S. business leaders. In a survey of 500 senior business executives recently conducted by DHL and Vanson Bourne, nearly 9 out of 10 (89%) said that their organizations’ economic recovery will rely upon robust international flows of trade over the next 12 months. 81% of the same group = each representing companies with at least USD 1 billion of sales - also believe that their organizations’ profitability would increase if the U.S. were to move away from some of the protectionist trade policies of recent years.
The DHL Global Connectedness Index (GCI), produced by researchers from NYU Stern’s School of Business, has since 2011 provided a clear illustration of the correlation between more global connections and prosperity. The GCI researchers have argued that countries could achieve GDP increases of up to 5% by implementing policies that increased the flow of trade, capital, people and information. While the U.S., by virtue of the size of its economy and population, has a low level of international trade flows relative to its domestic economy, it enjoys some of the broadest trade relationships globally, ranking second in this dimension of the GCI. North America is the top region globally in terms of information and capital flows, which is testament in large part to the global reach of both Wall Street and Silicon Valley. As the survey respondents assert, by unleashing even more of its trade potential, and perhaps even copying aspects of the “free-flowing” model that it has applied to establish itself as a global leader in capital and information, the U.S. has an opportunity to unlock economic growth and bolster its post-COVID recovery.
There are some low-hanging fruits already in place. Closer to home, the USMCA has already laid some of the foundations for international cooperation. Modified to reflect a new digital economy, the agreement will undoubtedly support U.S. businesses that are looking to trade with Canada and Mexico, particularly online. We at DHL have seen first-hand the increasingly prominent role that e-commerce has played in the economy throughout the pandemic, and while this has been fueled by social distancing and lockdowns, we see it simply as a rapid acceleration of a trend that was already in play. COVID has brought e-commerce forward – both for B2C and B2B businesses – by 7-10 years within just one year. Much of our consumption will remain online even as things return to “normal.” North America was a top three priority market for 78% of respondents in our survey, and U.S. companies will likely see outsized online demand from our neighboring markets over the coming years.
Perhaps most significantly, U.S. business leaders also recognized in the survey the value of leadership and engagement on global issues not directly related to their next 10k earnings report. An overwhelming majority of business leaders - 96% - see it as important for the U.S. to reconnect with its allies on climate change and specifically to reengage on the Paris Climate Accord. This clearly reflects that business leaders have kept longer-term challenges such as guaranteeing the longevity of the planet for future generations in view, despite the short-term challenges posed by the pandemic and a more inward-looking policy agenda.
The case for more free trade and the desire for closer integration with the international community are clearly evident from our research. While international trade will undoubtedly be competing with many other policy issues on the agenda of the new U.S. administration, the U.S. business community has signaled that the COVID-19 pandemic has created both an imperative for action on trade and an opportunity for this country to once again reassert its leadership both economically and morally on the world stage.
