Is global trade a threat or opportunity? The age-old argument resurfaces 21st century-style, as modern developments and technology spawn new sources for materials and customers on a scale never before possible. Along with the golden opportunity for expanding open trade among companies and countries, however, many see the other, darker side.

Author:Champy, Jim
Position:Cover story

Globalization of life and trade in the 21st century and beyond is upon us. And, like the Chinese philosophical concept of yin and yang--which describes two opposing but complimentary principles or global forces--open global trade among nations and companies is often viewed from two perspectives: opportunity and threat.

Regardless of which view is held, however, the time and pace of events and developments are driving change in the essence of trade among nations and companies. Instead of fighting or avoiding the inevitable, smart companies--and countries--are rapidly expanding their capabilities and know-how to embrace the opportunities and overcome potential threats.

When the National Academies (of Science, Engineering and Medicine) published its 2005 report on U.S. global competitiveness, open global trade certainly looked like a threat to U.S.-based companies and the U.S. economy. The title of the report, Rising Above the Gathering Storm, signaled what's ahead.

A follow-up essay published by Norm Augustine, chair of the committee that developed the Rising Storm report, noted (among others) the following alarming conditions:

* The U.S. share in the world's leading-edge semiconductor manufacturing capacity dropped from 36 percent to 11 percent in the past 7 years;

* The U.S. "Big Three" automakers announced the closing of 26 plants in the U.S. over the next several years, while Japan-based companies are opening four new plants in the U.S. between 2006 and 2008;

* Only one of the 25 largest initial public offerings in 2006 took place on American exchanges;

* American companies spend three times on litigation what they do on research; and

* The U.S. ranks 17th among nations in high-school graduation rate and 14th in college graduation rate.

In another reference to the threat of open global trade, Augustine titled his essay, "Is America Falling off the Flat World?", a nod to Thomas Friedman's blockbuster book, The World is Flat. Friedman fairly assesses the impact of open global trade: access to new sources of supply, talent and customers. But the flat world also means new competitors that will change the structure of industries and the basis of competition.


Examples already abound of the force of such new competitors: Nokia Corp., of Finland, in cellphones; Infosys Technologies Ltd., of India, in information services; Lenovo Group Ltd., in China, in personal computing. These companies, and others like them, are providing quality products and services at highly competitive prices.

Many U.S. Companies Are Strong

Not all prognoses for U.S. competitiveness, however, are gloomy. The World Economic Forum has just published its annual assessment of the competitiveness of countries. It ranks the U.S. as the world's most competitive country, up from sixth place a year ago. The good news is that most U.S. companies continue to be highly innovative, both in the products and services they provide, as well as how those products and services are delivered (see sidebar on the next page).

However, the study's author, strategist Michael Porter, warns that the larger economic condition of the U.S.--balance of payments and dependencies on foreign sources of energy, along with a weakening dollar--puts the U.S. and its companies at risk.

Global conditions aside, a look at individual U.S. companies shows that they can and do compete. The Boeing Co., for examples, continues to write orders for its jumbo jets--in spite of the competition from Airbus. Multiple European governments have helped Airbus grow, while U.S.-based Boeing flies solo.

Boeing is applying highly innovative engineering and manufacturing capabilities to building its jumbo jets. It's reengineered how it sources globally, and its planes utilize the most advanced carbon fiber technologies. These innovations will eventually change how all airliners are manufactured.

For Boeing, global trade means access to more markets and customers. From its position of innovation and competitive strength, it's clear that global trade presents no threat, but rather a big opportunity.

The Opportunity

For companies that embrace global trade and build the capabilities to operate globally, open markets will be the key to growth. The U.S. economy alone may no longer support the growth of many companies.

How will global trade support growth? Information technology now enables access to millions of additional highly skilled and motivated workers. Companies in the information services business are all adopting a global delivery model, a way of operating that puts work onshore, offshore or near-shore--wherever it can best be performed at the best price. And work is moving not only because of price, but because of talent and skills.

Companies like IBM Corp. and Accenture, for example, would find it almost impossible today to...

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