The Powerful Truth about Free International Trade Flow

In a recent speech to Harvard graduates, Facebook CEO Mark Zuckerberg addressed the class of 2017 as ‘citizens of the world’, and called upon them to champion the forces of knowledge, immigration and free international trade flow. To those who, like Zuckerberg himself, had ‘grown up connected’, he delivered a call to action to embrace the ‘forces of freedom, openness and global community against the forces of authoritarianism, isolationism and nationalism.’

 

While the current U.S. administration toys with policies that would curb the flow of trade, Zuckerberg is right to champion the forces of free international trade. The powerful truth about unfettered international trade flow is that it does appear to be all upside for humanity. There is a direct correlation between increased global trade and a sharp decrease in the share of the world’s population living in absolute poverty.

 

According to world trade growth statistics, between 2005 and 2015, international trade in merchandise grew by over 55%, from just under $11 trillion to just under $17 trillion. Simultaneously, humans living in absolute poverty dropped by over half – from well over 20% to 9.6%. 

A look at world trade share by country reveals that indeed, developing countries have outpaced the developed world in growth of imports and exports.

 

These countries have played a central role in trade dynamics of the 2000s, particularly after the global financial crisis of 2008-2009 when developing countries contributed 54% to the overall recovery.

 

The reason Zuckerberg gives for his call to embrace globalization is to give ourselves ‘a sense of purpose’. And while being a part of a force that reduces worldwide poverty may appeal to the more progressive sides of our nature, there is also a practical advantage to championing free international trade flow – especially for small businesses.

 

With 95% of the world’s consumers and 70% of the world’s purchasing power residing outside the U.S., small businesses that have launched themselves into the global economy with exports have fared quite well, and their numbers are growing. Small businesses that export, and the value of their exports, have grown by double digits in the last 10 years. Growth in small business export value, in fact, has outpaced large enterprise exports by 35%. And small business exporters grow faster and pay better than their non-exporting counterparts.

 

Small business importers also reap the rewards of free international trade flow, shoring up cheaper and more diversified supply chains. In particular, high demand imports like furniture, shoes, clothing and food are lucrative markets with margins reaching up to 700%.

 

So while free and unfettered international trade has ushered in a new era of dramatically falling poverty across the globe, American businesses don’t necessarily have to take up cause of freedom, openness and global community, or rally against authoritarianism, isolationism and nationalism in order to make a real difference. The powerful truth about free international trade flow is that it’s just plain good for humanity – and good for business.