The forces of trade protection in the United States are on the rise--yet again. The presidential campaign has provided a new opportunity for some to take a more isolationist position on issues of international commerce. However, these interest groups overlook the many ways in which a global marketplace generates, directly and indirectly, very positive long-term effects on American consumers, workers, entrepreneurs, and on the nation in general.
The international business outlook facing citizens of the United States is a promising balance, with a combination of serious threats and substantial opportunities both in the short run, and especially in the longer run. This warrants further explanation.
At the outset, consider where the United States stands. Almost every way you measure it, the US business system is still the largest and most successful in the world. Far more often than not, US businesses are the trend-setters. In industry after industry, US-headquartered companies lead their competitors on a worldwide basis. This is so whether you examine high-tech aerospace design and production, where Boeing has been in the lead for decades, low-tech soap and detergents made by household giant Procter & Gamble, or companies in between the extremes of the technological range, such as EoconMobil, the number one petroleum company worldwide.
On a more micro level, individual brands and company names like Coca-Cola, McDonald's, and Microsoft generate instantaneous worldwide recognition. In fact, Cadillac has nearly become an adjective, denoting a top-of-the-line product. FedEx is often used as an active verb to indicate delivering an item as rapidly as you can. Nevertheless, all this good news does not mean that US-based companies--or any other firms competing in the global marketplace--can rest on their laurels. Some historical perspective helps on that score.
Back in the early nineteenth century, European companies--especially those located in Britain and France--dominated international commerce. Then, a rapidly expanding newcomer in North America (the United States) elbowed its way into the club of leading world economic powers. In absolute terms, the economies on both sides of the Atlantic Ocean continued to expand substantially. But Europe has never regained its dominant share of the world market.
In the second half of the twentieth century, Japan played a role similar to that played by the United States a century earlier. It became an important member of that club of economically advanced nations. Japanese companies such as Sony and Toyota became strong global competitors. Major Western industries continued growing, often rapidly, but many lost some market share.
Today, we are in the midst of yet another such fundamental shift in the array of global economic and market strength. China has rapidly become a powerful force in the international marketplace. By some measures of gross domestic product (GDP), it is already number two, second only to the United States. However we calculate it, the US lead is rapidly diminishing. The fact that the United States initiated the most dangerous global credit crisis since the Great Depression of the 1930s does not exactly enhance perceptions of US leadership in either economic or financial matters. Nor can the United States take much consolation from the sad current experiences of the Eurozone countries.
Forecasts are inherently fragile. That is a kind description from this veteran prognosticator. So I will state the point carefully: there is a reasonable likelihood that, in the next several decades, China will surpass the United States as the largest economy in the world. That shift is surely not inevitable.
Historians remind us that in the middle of the previous millennium--around 1500--China was the most culturally advanced and economically powerful nation on the globe. That is, until one misguided emperor decided to reduce foreign influences by cutting off trade with most of the rest of the world. …