Politics, Education and Reality in Global Trade

How do we convince US enterprises that global markets are the key to growth?

Less than 1% of US small businesses export, import, engage in FDI or participate in global trade. Only 2% of these sell to more than one country.

In a populist and protectionist political environment, how do we convince US enterprises that global markets are the key to growth?  In an ecosystem that is uninformed and uneducated as to the opportunities, how do we educate and inform on how to achieve success in global trade? This is the challenge we face in 2017.

Mr. Trump, our POTUS, attacks China’s becoming a World Trade Organization member as representative of the US’s destructive and job-costing trade treaties. That’s the politics.

The reality is that China or any other country or major economy becoming a WTO member is not the result of a US trade treaty. It is inevitable for China, a country of 1.3 billion people, to achieve this status. Was this market not supposed to participate in the global economy? The fact that this cost the US some 3 million jobs is as much a comment on the lack of competitiveness of US enterprises in global trade as it is on the effects of global trade itself.

There is a close relationship between education and global trade success and the related economic growth. Many studies document the relationship between higher education and GDP growth. One of these is Higher Education and the Economy by Grover J. “Russ” Whitehurst.

To quote from Whitehurst’s study:

“Today in Austin President Obama renewed his call for America to regain the world lead in college graduates by 2020.  He tied doing so to our future economic competitiveness.

The statistical backdrop for the president’s remarks is that we have fallen from 1st to 12th place internationally in the percentage of young adults with postsecondary degrees.  This is not because our rates have gone down (they have been rising) but because other countries have leapfrogged us.  Improving the education of our citizens is a worthy goal, and the president is to be applauded for using his bully pulpit to push our aspirations higher.

A presidential address is not the place to address subtleties, but policymakers and practitioners in higher education will need to do so if our increased emphasis on attaining college degrees is to pay the expected dividends.  In that sense, focusing on the horserace may be counterproductive.

The relationship between years of schooling and economic output at the national level is complex, to say the least.  A small but consistently positive relationship between long-term growth and years of schooling is found in econometric studies, but there are many caveats and exceptions that are relevant to designing higher education policy in the U.S.  For one thing there is tremendous variability in the relationship.  For example, Germany has a stronger economy than France but half the percentage of young adults with a college degree.  Further, France has increased its percentage of young adults with college degrees by 13 percentage points in the last 10 years whereas Germany’s output of college graduates has hardly budged, yet the economic growth rate of Germany has exceeded that of France over this same period.  Obviously increasing educational attainment is not a magic bullet for economic growth.  Education credentials operate within boundaries and possibilities that are set by other characteristics of national economies.  We must attend to these if more education is to translate into more jobs.

A growing body of research suggests that policymakers should pay more attention to the link between job opportunities and what people know and can do, rather than focusing on the blunt instrument of years of schooling or degrees obtained.  In international comparisons, for example, scores on tests of cognitive skills in literacy and mathematics are stronger predictors of economic output than years of schooling.  Within the U.S. there is evidence that for many young adults the receipt of an occupational certificate in a trade that is in demand will yield greater economic returns than the pursuit of a baccalaureate degree in the arts and sciences.

A single-minded pursuit of regaining the world’s lead in college graduates may blind us to the fact that one size does not fit all nations or all young adults.  One of the distinctive feathers of the U.S. higher education system is its diversity.  We have over 6000 institutions of all manner and stripe serving students of many ages and needs.  In contrast, the higher education system is most of the countries with which we compete is centrally managed and homogenous.  We should make diversity our strength by establishing national policies that encourage institutions to adjust quickly to changing needs in the marketplace for learning.  A good place to start would be creating much better information on the graduation rates and employment outcomes associated with particular degree and certificate programs at particular institutions.  If we’re to win the international horserace we will need to create the conditions for horse races among postsecondary institutions in this country with finish lines of productivity and employment.”

My comment:

Success in start-ups and success in global trade are tied but not in a fashion explained in or by the above. Success is closely tied to the nurturing provided by managers who are experienced and skilled in business and are willing to share their expertise with the more youthful leadership of startups.

This guest article was written by William Laraque who is the Managing Director of US-International Trade Services.

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