Eric Cantor and Patrick Cescau point out the often-forgotten benefits of globalisation for citizens and
how businesses can convey the benefits of free trade

After a random internal survey, a manufacturing company based in the United States’ Midwest region was aghast to discover that most of its employees were against free trade.

The company, which exports its goods overseas, began to put a sticker on each piece of equipment made that indicated the country it was bound for.

“All of a sudden, the employees began to support free trade because they realised that otherwise, their jobs wouldn’t be there,” recounted Eric Cantor, vice-chairman and managing director of investment bank Moelis & Company.

Speaking on the sidelines of the Temasek European Advisory Panel (TEAP) meeting held in London in May, Cantor, a former US Republican House Majority Leader, brought up the anecdote as a sobering reminder of the influence that businesses have in conveying the value of free trade to its stakeholders.

Amid growing support for protectionism in several Western economies, including the United States, Cantor says that such anti-trade sentiments from employees, consumers and activists could lead to reactive policies and legislation on both the domestic and international front.

Against the backdrop of a challenging geopolitical and economic environment, this could put businesses’ growth and long-term survival under threat, he warns.
 

Trade Deficits — a Common Misunderstanding

The first thing the public should be made aware of is how trade deficits are often incorrectly used as arguments against free trade.

“Businesses need to highlight the flip side. In the ‘80s, we had great growth in the American economy but also a significant increase in trade deficit because of a surplus in direct investment into the US,” Cantor says.

What stakeholders should also know, he asserts, is that the actual impact of trade deficits on job loss in Western developed economies is limited  —  a point made in the 2017 Organisation for Economic Co-operation and Development (OECD) Economic Outlook report.

The report cited changing consumer preferences, technological advancements and an increasing reliance on services inputs in industry and trade as primary factors in the declining share of manufacturing employment across the 35 OECD economies.

Growing Inclusively

Cantor asserts that multinational businesses can  —  and should  —  provide opportunities for society to grow in tandem with businesses.

By engaging with policymakers and securing their support, Cantor believes businesses can help local communities quickly realise the benefits of globalisation. This is boosted by recent advances in technology, such as providing vital services via drones to underserved rural populations and equipping local vendors with improved commerce infrastructure.

Multinational businesses should also proactively deploy their expertise and resources to assist displaced workers, reduce barriers to occupational and geographical mobility, and equip workers with new skills.

Going one step further, Cantor anticipates business leaders creating broader visions of inclusive growth for affected regions. A possible example lies in turning the former US automobile manufacturing capital of Detroit into a test bed and future technological hub for self-driving vehicles, which could lead to sustainable economic prospects for the population.

Technology, Cantor adds, “gives businesses and stakeholders a way to share a common experience”. As consumers reap the benefits of digital services such as e-commerce, business should emphasise the value of technology beyond it being a convenient vehicle for consumption. “The man in the street is probably not waking up in the morning thinking about free trade, so we have to put across our points via his perspective.”

He stressed, “I think businesses have got to do a better job of personalising the benefits of free trade.”

The Temasek European Advisory Panel (TEAP) brings together eminent business leaders and experts to share insights and perspectives on major political, economic, social and industry trends, with a focus on Europe.