Digitization and the Future of Jobs: Rise of the Re-Invention Economy

Today I published a piece in GE’s Ideas Lab on why automation and artificial intelligence will create more jobs than they will destroy: http://www.ideaslaboratory.com/post/102950967429/rise-of-the-re-invention-economy

As automation and computerization expand, anxiety about jobs is at a fever pitch.

Some say computers will displace a vast array of human work.Many others argue it polarizes the labor market: in a widely cited paper, David Autor and David Dorn argue that automation has forced middle-class workers easily replaced by machines into low-skilled jobs such as cooking, cleaning and healthcare; high-skilled workers capable of abstract thinking unmatched by computers are also surviving. In another paper with Gordon Hanson, Autor and Dorn show how globalization — import penetration from China — has further hollowed out the middle, or blue-collar U.S. manufacturing jobs.

But as technology and globalization expand, the ends of the barbell economy are feared to be at risk. Is the gloom warranted?

Labor market angst is nothing new. The 1990s kick-started blue collar blues — fears that U.S. manufacturers would either offshore or be demolished by Chinese imports. In the 2000s rose white collar worries — that call centers, data processing, financial analysis, web design and hip surgeries would be outsourced from in India, placing a quarter of U.S. jobs at risk. While not unwarranted, these fears proved much overblown. A more forceful cause of job losses has been technology, as immortalized in Kodak moments, falls of giant corporations and workers unprepared for the digital era.

High-skilled knowledge workers and low-skilled service workers have seemed immune to the twin forces of technology and globalization. But now smart machines are doing what high-skilled do — aptly crafting sales presentations, choosing medical treatments and routinely making the millions of decisions needed to manage complex supply chains. Knowledge work can now be done from anywhere, and not only on the back of the cloud and Skype. Soon executives — as well as financial advisors, accountants, data analysts, coders, etc. — could appear as holographic 3D avatars projected onto venues around the planet right from their home offices. By 2025, hypersonic flights could take an executive from Shanghai to New York in two hours — a doable commute even twice a week.

At the lower end, jobs for greeters, telemarketers, retail workers, waiters, accountants, even carers of the elderly could be offered virtual assistants that work 24 hours a day, seven days a week — and never ask for a raise.

This leads one to believe that those not automated out will be outcompeted by globally footloose virtual and hypersonic workers. Yet five factors paint a much brighter future.

First, as Autor has recently pointed out, knowledge workers are still much less likely to get outsmarted by machines than to use machines to do their jobs better and faster. Excellence (and survival) at work is increasingly about demonstrable abilities to problem-solve, intuit, think creatively and exercise common sense, areas where computers — excelling at optimization, logic, statistics and so on — are still human pre-schooler equivalents. And it is unlikely that everyone would love to be hosted or cared by a virtual avatar if a real human is available for a moderate premium.

Second, smart technologies make the labor markets more adaptive. Predictive analytics will enable workers to anticipate better what jobs are on the rise. With advances in metrics and analytics of employees’ ever-important soft skills and attributes, labor markets can become much more differentiated, with artificial intelligence applications matching workers to jobs much faster globally. The web has already reduced joblessness — in a recent U.S. International Trade Commission study, U.S. unemployment rate was 0.3 percentage points lower in 2012 than it would have been at 2006 Internet usage level. Where the Web is newer, it has squashed unemployment even more — in Russia, by 2 percentage points; in China, by 2.5 points; in Brazil, by 1 point.

Third, makeovers will be easier. Hiring is increasingly for discrete tasks rather than occupations, such as crowdcasting, corporate-sponsored calls for problem-solving among a curated group of people. In a task-based labor market, terminal degrees weigh less than retooling in real time — continued education powered by massive online courses and digital on-the-job learning. Career moves can be less daunting than going from the factory floor to a computerized office — for example, coding, programming and web design are increasingly accessible even to lower-skilled workers.

Fourth, there will be more companies hiring. It is fashionable to argue that digital economy superstars will be skimpy employers. For example, at the same market valuation of $25 billion, the 1990s star multinational Dell employs 111,300 people, while the newer digital superstar Twitter employs just 2,700. But the math is too simple. Technologies from 3D printing to ecommerce and Big Data are making it much easier for small businesses — the backbone of U.S. jobs — to launch, scale and compete globally. If future companies staff fewer people, there will also be far more of them, each offering a differentiated product or service to a global customer base. New companies can also spawn entrepreneurial ecosystems around the planet, not unlike Apple has done for app developers or Uber for drivers.

Fifth, technology unlocks latent economic growth that spurs hiring. Digitization of products cuts the costs of moving goods across borders, a key driver of trade-led growth. Technology can overhaul healthcare and education, sectors with stagnant productivity making up a fifth of the U.S. economy. Strokes of the old-fashioned pen are needed, as well: cutting red tape and boosting regulatory certainty would recharge the U.S. and several major economies, such as France, India and Brazil.

The giant question mark in tomorrow’s economy is the adaptability of workers. Not everyone will thrive on the churn and change and self-reinvent. Existing tools, such as the Trade Adjustment Assistance that has helped retrain more than 230,000 workers impacted by trade over the past decade, are not made for the digital economy — where competition is ubiquitous and amorphous, not only about offshoring or import penetration.

Of course, governments can shut down the virtual highways where tomorrow’s commuters beeline — such as by making overseas nationals more complicated. A better answer would be a public-private partnership between the government and the resented “tech elite” companies such as Facebook to deploy corporate PR and social responsibility dollars to fuel the retooling and rehiring of digital era workers, in exchange for cuts in income and payroll taxes. With some imagination, technology and good policy can be job-creators also in the global digital economy.

Posted in Uncategorized | Tagged , , , , , , | Leave a comment

Making Middle Market Companies Realize their Export Potential

New blog on TradeUp:

A new study points out that the latest data show there are almost 200,000 middle market companies. While most companies are smaller and middle market companies account for only 3 percent of all businesses in the United States, these firms created 70 percent of all jobs in 2013, and collectively generate about one-third of all private employment, and of U.S. GDP. Yet middle market companies punch way below their weight, the study finds. Only 40 percent of middle market export, and these companies make up only nine percent of all U.S. exports. Our blog explains why:


Posted in Uncategorized | Tagged , , , , , | Leave a comment

Equity for Exporters

A historic shift is taking place in the world economy: record numbers of small and mid-size companies, microenterprises, and garage entrepreneurs are going global. Before content to sell in the giant U.S. market, now even the smallest American businesses are courting overseas shoppers. One attractive target is middle classes in emerging markets, a $30 trillion market by 2025. Aiding these globalizing companies are disruptive technologies such as digitization of products, 3D printing, Bitcoin, and ecommerce, all of which are shrinking costs for small businesses to do cross-border business.

Today’s exporters are smaller and younger than ever. Many are “born global” companies that internationalize very early in their life cycles, and sell in many markets all over the world. The shrinking of exporters is most intuitive in consumer products sold online: 97 percent of U.S. eBay sellers, most of which are micro and small businesses, also export, to an average of 28 markets – a stark contrast to the traditional pattern where 1 percent of American companies export on average to 1-2 markets. Exporters are small also in such sectors as IT, biotech, and cleantech, where U.S. technologies can be even better suited for emerging markets than they are for the U.S. market. One of countless examples is Sunsaluter that provides energy off-grid for underdeveloped markets, devised by a 21-year Princeton grad Eden Full. But also smaller “heartland” companies in manufacturing, food and beverage, and financial services, among others, have realized that overseas markets are often great fits for what they have to offer.

But problems loom. The export infrastructure writ large, from complex customs procedures to high fixed costs of international transactions and benefits of shipping large volumes in bulk, is created for the traditional engines of U.S exports, giant corporations.

Finance is a particular pain point. Exporting is a capital-intensive endeavor. Globalizing companies need substantially more money than the domestic companies, to cover the many up-front costs associated with going global, such as creating overseas distributor networks and rejiggering products to meet foreign standards. The costs of each transaction also grow in the international context: there are higher shipping, logistics, and trade compliance costs. Companies need quick access to working capital when needing to fulfill large international orders. And toughest of all is to secure growth capital to expand a company’s sales force and production capacity to serve the global buyer.

The new generation of exporters is hard-pressed to handle these costs by borrowing – because many of them are the types of companies that can’t access debt. In the past, companies globalized sequentially – scaled at home first, then started exporting to one market, and then entered one new market at a time. These companies could get loans: they had long-standing relationships with their banks, and a solid borrowing base – and faced none of the post-crisis stringent underwriting criteria. Today’s exporters are turning this sequential model on its head. They have no patience nor reason to grow into large companies at home before going global.

Today’s exporters are “born global” companies that internationalize very early in their life cycles, and sell in many markets all over the world. Being young and small, these companies have much more limited access to traditional sources of capital; being fast-growing gazelle companies, they also need larger injections of capital to fuel their international growth than banks can stomach. Today’s exporters need equity.

Getting equity is tough. A small business owner’s priority is to get clients in the door. If touring the world to meet with foreign customers, she has limited time and bandwidth to court investors, a full time job for three people. This is one reason why only a limited number of companies succeed: only about a fifth of companies that try succeed to secure angel investments, a decidedly easier pathway to capital than venture capital.

The government helps only with debt. The Export-Import Bank and Small Business Administration guarantee a sub-set of export working capital loans issued by banks. The Overseas Private Investment Corporation (OPIC) provides 75 percent of an emerging market project in debt, as long as there is at least 25 percent U.S. equity participation. Canada’s export credit agency, Export Development Canada, helps Canada’s born global companies secure equity from funds and has even made direct investments in some Canadian companies. There is no equivalent in the United States.

Notice: we are not talking about overseas investments or equity in overseas assets. This is equity investing in U.S. companies – only ones that are growing both in the United States and internationally. This is exposure to an American business, with assets in America and a diversified, massive client-base, one in and outside the U.S. This is international upside with U.S. risk. What better deal?

Yet mainstream source of financing for companies, banks have yet to match the needs of the next generation of American exporters, largely because these exporters are too small to interest banks. If we are serious about helping American companies go global in a world where even the most nascent businesses globalize, this has to change. We need equity for exporters. That’s what our company TradeUp does – helps companies gain visibility with a range of equity investors – angels, private equity funds, VCs. We cooperate with lenders, to help their clients and clients-to-be to secure adequate growth capital. And we are supporting policy reforms that will open exporters’ access to capital.

What’s in it for investors? As I laid out in a prior blog, access to globalizing companies, a high-growth, outperforming asset class with global growth prospects and mitigated downside. International upside at U.S. risk. With equity to exporters, everyone wins.

Posted in Uncategorized | Tagged , , , , , , | Leave a comment

Why Should Exporters Use Crowdfunding?

Today I had an opportunity to speak about How Exporters Can Use Crowdfunding at the West Coast Trade and Export Finance Conference in Los Angeles. Conference site: http://lnkd.in/bzJiUXM. Here is the PPT: http://www.tradeupfund.com/uploads/2/6/0/4/26048023/exporta_l.a._-_suominen_101614.pdf

Posted in Uncategorized | Leave a comment

TradeUp Opens to Accredited Investors – So What’s in It for Investors?

I just published this blog on TradeUp site: http://www.tradeupfund.com/blog/tradeup-whats-in-it-for-investors

This week we opened TradeUp to accredited investors – angels, PE funds, VCs, banks, lenders. So what’s in it for investors to get on TradeUp? Here are 7 answers:

1. How is TradeUp different in the crowdfunding space?

TradeUp Capital Fund (tradeupfund.com) is the first equity crowdfunding platform for globalizing companies and savvy accredited investors. We enable globalizing companies and accredited investors (angels, super angels, VCs, PE funds, family offices, lenders, etc.) to connect and transact on debt and equity deals of $100,000-$20 million.

In contrast to the many crowdfunding platforms that cater to pre-revenue businesses, companies on TradeUp are proven and pre-screened, and typically have been in business successfully for several years. Most companies are U.S.-headquartered.

We are also different from other platforms in that all companies on TradeUp are already exporting – or at the very minimum have very clear pathway to go global, such as some have foreign purchase order ready to go. In short, these are companies with global growth potential with mitigated downside.

If you want to stop reading now and go and browse deals on TradeUp, please see home page tradeupfund.com; to sign up and see company documents and interact with companies, please go to http://tradeup.platform.crowdvalley.com/sign-up and select as your role “investor”.

2. Why focus on globalizing companies?

Globalizing companies are a stand-out asset offering a unique portfolio diversification strategy: they outperform the broader market in revenue, productivity, and stability.

Leading academic research across multiple rigorous studies on practically every continent has found that exporters outperform companies that do not engage in international trade. Our white papers lay all this research out. In the United States and elsewhere, exporters and importers alike pay higher wages, are more skill-intensive, and have higher sales and labor productivity than their purely domestic peers, and that they are also more stable. Companies that have made investments overseas are even more productive.

If there is one iron law of economics – and as a PhD on the topic with nine books under my belt I can say there aren’t many – it is that globalizing companies are superior to companies serving only the domestic market.

3. Why exactly do globalizing companies outperform?

One hypothesis is that engaging in international trade makes companies better. That is true. Leading academic research shows that after firms internationalize, they score a number of gains – revenue diversification across markets that reduces the volatility of sales and vulnerability to any one market’s business cycles; increased capacity utilization and scale economies; and “learning-by-exporting”, or improved managerial practices, innovations, and discovery of new global market opportunities.

These dynamics boost company revenues, productivity, and stability. Anecdotal data is illustrative: U.S. manufacturing and services small and mid-size enterprises (SMEs) outperform their domestic counterparts in revenue growth (figure 1). Exports in fact kept manufacturing SMEs afloat during the worst of the 2008-09 crisis as emerging markets drove global demand; SMEs targeting only the flailing U.S. market lost out.

Figure 1 – Globalizing Companies Outperform: Recent Revenue Growth of U.S. SMEs
(click to see bigger)
Source: U.S. International Trade Commission (2010) based on a survey of 1,176 manufacturing and,1,175 services SMEs (<500 employees).

But there is a further, deeper reason why globalizing companies outperform domestic companies: it is the high-performing companies that self-select to international markets to begin with. This is because high-productivity companies have superior managerial and organizational capabilities to seek international growth and make it to the global marketplace, and they are also better able to manage the high sunk costs associated with internationalization, such as costs incurred in locating new markets and adapting products to foreign consumer demands and regulations.

Take a recent GE study on U.S. middle market companies: the best performing companies are also ones that are most actively pursuing international opportunities (figure 2). These are not just correlations: the finding that exporters are better are echoed in numerous rigorous econometric studies around the world.

Figure 2 – Growth and Globalization Correlate: Highest-Growth U.S. Middle Market Companies Are Also Most Globalized
(click to see bigger)
Source: Ohio State and GE (2011), based on a survey of 1,447 SMEs (companies with $10mm to $1bn in revenue).

4. So how big is this market – how many globalizing companies are there?

Right now, record numbers of small and mid-size companies around the world are seeking growth through exports. There is enormous latent capacity just in the United States: only 300,000 of America’s 30 million SMEs export. Recent surveys indicate that three-quarters of current SME exports and a near-quarter of non-exporters look to expand their exports. Trends are very similar among Canadian, Latin American, European, and Asian SMEs.

One reason for the explosive growth in the number companies engaged in trade is that the cost of doing global business are lower than ever. For example, digitization of products, 3D printing, and cross-border e-commerce enable even small businesses to attain global scale and expand their visibility in international markets. And of course, many tech companies are “born global”, practically inherently global out of the gates. Come to think of it – TradeUp too is such as mini-multinational as we serve companies and investors globally.

Another reason for why companies are going global is of course policy. The fact that tariffs and other trade barriers have been coming down over the past 20 years has diminished the hurdles form companies to roam on the global stage and set up global supply chains.

Still another reason for the boom in globalizing companies especially in the U.S. and Europe is the growing purchasing power in emerging markets. This wallet space is starting to grow again on the back of the expansion of middle classes and infrastructure spending across the emerging world, and rapid growth in the frontier economies in Africa, Latin America, and Asia. U.S.-based companies are also eyeing at Japan and Europe, collectively a 630 million consumer market. America’s own recovery and macroeconomic fundamentals – lowering energy costs and high-productivity, competitively-priced labor – are also fueling optimism and real investments.

The timing is right. World economy is back, and world trade is bound to grow at 8 percent annually through 2030, doubling by 2022 from 2013 levels – and while growth is strong now, it will start peaking in 2016. This is the time to get in, for companies and investors.

5. Why are globalizing companies raising – and not going to banks?

What’s really interesting to us is a market inefficiency: even though globalizing companies outperform, they also see obtaining financing as the main hurdle to doing trade. In a U.S. International Trade Commission survey of over 2,351 companies, U.S. SME manufacturers rated access to financing as the number one steepest hurdle to trade, out of 19 hurdles, while SMEs in service sectors rated access to capital as the third hurdle to trade, well above such challenges as high tariffs, locating foreign sales prospects, identifying foreign partners, and establishing affiliates in foreign markets.

This finding too is echoed around the world. In an OECD survey of 230 SMEs across advanced economies, access to working capital was ranked as the greatest hurdle to trade, out of 47 hurdles. In a European Commission survey of nearly 9,500 European SMEs, 54 percent of SMEs viewed lack of capital as an “important barrier” to doing business in the EU market and 44 percent to doing business in extra-EU markets. No other barrier (paperwork, laws and regulations, lack of information on overseas markets, etc.) was considered as important.

So there you have it: globalizing companies outperform yet are also constrained for capital.

Why is this so? One reason is that the traditional source of funding for exporters, banks are not interested in the smaller end of the market and have tightened the meaning of “credit-worthiness”. We see this reluctance by banks every day, even in the market for export working capital to small businesses that have foreign purchase orders ready to go. Many local and regional banks also lack awareness of government loans guarantees that could be utilized.

Another reason why globalizing companies often feel constrained for capital is that globalizing companies need substantially more money than the domestic companies, to cover the many up-front costs associated with going global, such as creating overseas distributor networks and meeting foreign product standards. The costs of each transaction also grow in the international context: there are higher shipping, logistics, and trade compliance costs. Perhaps toughest but most necessary for companies is to secure adequate growth capital to expand production capacity to serve the global customer base and fulfill large international orders. This is especially the case if the business is a born global company.

The third reason is time. Few small business owners after all have ample time to pound the fundraising trail: they are already stretched in working to bring in new clients. We see this constraint amplify in the case of globalizing companies, as the CEO is often flying around the world to meet prospective clients. For anyone having done frequent transcontinental business travel, you are getting the picture.

6. Why do crowdfunding for globalizing companies?

At TradeUp, our purpose is to bridge the financing gap facing globalizing companies by leveraging the power of equity crowdfunding, We simply put 2 and 2 together: since crowdfunding enables companies to gain visibility across multiple types of investors globally, why not use it to capitalize high-growth companies constrained for credit: globalizing companies?

Everyone wins: companies can access critical gap capital to export and expand in international markets; savvy lenders and investors around the world access pre-screened, proven companies with superior growth prospects and pent-up demand for capital; and national economies gain through export-led economic recovery, growth and competitiveness.

7. How do I see and contact companies on TradeUp?

To browse deals on TradeUp, please see home page tradeupfund.com; to sign up and see company documents and interact with companies, please go to http://tradeup.platform.crowdvalley.com/sign-up and select as your role “investor”. Please remember, you are on an equity crowdfudning platform and need to be an accredited investor.

We accelerate investments in globalizing companies, and look to work with companies and investors around the world to together leverage one of the oldest and greatest engines of growth and prosperity, international trade.

Posted in Uncategorized | Tagged , , , , , , , | Leave a comment

How 3D Printing Will Overhaul Globalization as We Know It

Thought to open the curtain a bit on my next book – here are some pieces:

In the early 1980s, an engineer named Chuck Hull approached his boss with an idea: to build a machine that printed out objects you could hold in your hand. Focused on the company’s business of producing UV lamps, Hull’s manager shot down the idea. But eventually the two men reached a compromise: Hull would dedicate to making UV lamps by day, and craft his dream machine at nights.

Three decades later, Hull’s envisioned 3D printer broke through at the 2014 annual Computer Electronics Show in Las Vegas. Tech Republic hailed 3D printing as an industry “poised to transform nearly every sector of our lives and jumpstart the next industrial revolution.” TechCrunch reported Martha Stewart spying on 3D printers to craft her Easter wares.

Stilettos, President Obama’s bust, and even houses have already been 3D printed. 3D printing will not only change our lives, it will save many lives: 3D printers produce human organs. Another huge impact will be on global production and trade. Over the past three decades, corporations from Dell to GE and Sony became built on global supply chain, offshoring production to low-cost manufacturing hubs, and outsourcing parts, components, and even many services around the world. The shift was dramatic: the 1970s, 70 percent of global manufacturing was in the United States, Japan, and Western Europe; by 2010, this share had dropped to 47 percent, with East Asia, Mexico, and Eastern Europe claiming much of the rest.

Economist Stan Shih famously pictured global production as a “smiley curve.” At both ends of the U-shaped smile are high value-added activities: idea-creation, R&D, branding, design at one end, and distribution, marketing and sales, and service contracts at the other. In the low middle is the low value-add part of manufacturing and assembly. The point of offshoring was to shift the low value-add part to where it is most economically done, in low-wage countries proximate to ample supplies of parts and components. China became the world’s factory, typically mass-producing final products bound for U.S. consumers; South-East Asia prospered as China’s warehouse. The winners of this economy were countries with cheap labor and their eager sponsors – Western shoppers devouring computers, clothes, cars, and call center services.

3D printing is fundamentally streamlining this set-up. Parts and components are now digital designs traveling in the cloud, 3D printed right where they are assembled in final products. Slack will be shed in factories around the planet: with software guiding the printing process, 3D printing makes it possible for each item to be made differently without any retooling. 3D printer then patiently adds only as much material, razor thin layer by layer, as is needed for the product. This additive manufacturing contrasts with the old, “subtractive” production of cutting, drilling and bashing metal.

For example, a 130-employee Houston-based ClearCorrect, a maker of invisible braces, previously used milling machines to make models of customers’ teeth that were thermoformed with a thin, clear plastic to make braces. Only one model could be made before resetting the expensive machinery, which also often broke down. With 3D printing, the company ran batches of 60 to 70 models at once, taking five minutes each, as opposed to 1 model at 13 minutes with milling. The company has downsized to a 4,000 square feet facility and three people to produce models from its 11,000 square feet hub with 10 to 15 people manning milling machines.

Such savings will make products cheaper: according to GE, changes in the product design and reductions in raw material costs cut the cost of 3D printed components by up to 25 percent. Companies are taking advantage: Boeing already makes 300 different smaller aircraft parts using 3D printing, saving in the labor costs that before went into making these intricate parts, while Ford uses 3D printing to quickly produce prototype parts such as cylinder heads, intake manifolds and air vents and engine covers, shaving months off the development time for individual components. Add to that the millions saved in running global supply chains – the heartburns of international logistics, defects made in China, and just-in-time inventory management.

These efficencies overwhelm wage differences between such countries as China and the United States, incentivizing companies to locate factories in key demand centers rather than on low-cost Asian manufacturing platforms.

With 3D printing making trade weightless, hub-and-spoke regional production hubs in East Asia, Europe, and North America can replaced by fully globalized sourcing and localized manufacturing. Companies will be completely oblivious to labor costs as robotics and automation advance, and when 3D printers graduate to producing complex turn-key products. This does not only entail insourcing to the United States and end to the Asian export-driven manufacturing platform; it also means that now even complex products such as cars and airplanes can be made in developing countries where they are consumed, without the costs of customs duties, delays, and dependence on lackluster domestic suppliers. The hub for Nike’s manufacturing, China has recently 3D printed sports shoes, complete but for the laces.

3D printing is a boon to consumers, customization, delivery times, and price. Many can have their own 3D printer – desktop models already retail for less than $500. And just like when 2D printers appeared, it is not necessary to own a 3D printer to enjoy the technology. UPS is installing several Stratasys printers at its sites across the United States for consumers and businesses to submit their designs and get the printed product. An entire market of local and remote printing services is springing up in cities around the world.

McKinsey Global Institute calculates that 3D printing could generate $230-$550 billion in economic gains per year by 2025, most of them incurred by the consumer, followed by gains in manufacturing and the use of 3D printing to create tools and molds. The fringe benefits are remarkable: carbon emissions are cut as physical trade subsides. The military and car repair shops too win, just like car repair shops: both can print parts in the field rather than waiting for them to be shipped from another continent.

The impact of 3D printing is especially great for small businesses, before stifled by the high cost of 3D printers. Now, 3D printing cuts the start-up cost for small businesses to become global manufacturers – the set-up costs for production fall, the costs of shipping supplies evaporate, and inventory costs are zero.

Costs will be cut further as the market for designs of 3D printed products globalizes and suppliers of designs will compete harder against one another. Imagine suppliers installing 3D printers at customer sites for free, and then providing designs for parts and products to be printed and made on demand. Designers reach places without printers: a New York company Shapeways helps the maker movement – independent inventors, designers, and tinkerers – to quickly to turn digital designs into products that Shapeways prints and ships globally.

3D printing is accelerating innovation and experimentation: even smaller companies can now design and print a variety of rough-and-dirty prototypes at a rapid pace at low cost in-house, test them out with buyers, and go back to the drawing board to hone their product.

3D printing produces two major leaps in global production: digitizing goods, it enables production and trade of large volumes at minimal cost; allowing for constant adjustments, it makes it possible to easily perfect and individualize products. Of course, raw materials are needed. High costs for the special types of metals, plastics, composites or ceramics can overwhelm the 3D printed product’s ROI. This prospect is refuted by nanotechnology, the manipulation of extremely small materials between one nanometer and 100 nanometers (the width of human hair) so as to convert inexpensive raw materials into sturdy materials. Nanotech is a perfect younger sister to 3D printing: industry people are already envisioning a “molecular fabricator” would use tiny manipulators to position atoms and molecules to build an object as complex as a desktop computer, much like the “replicator” that in Star Trek produced everything from a cup of tea to space age guitars.

Mecca of technology and innovation, the United States has an offensive trade interest to export product designs and sophisticated manufactured goods with 3D printed parts. But 3D printing can also fuel entrepreneurship in emerging markets and connect especially Latin American and African countries better into supply chains. Imagine a small, creative firm in Rio now able to design and assemble customized goods for the massive local market – or make custom designs for a Madison Avenue shopper armed with a 3D printer. Makers of 3D printers are seizing this opportunity. For example, Gigabot has created industrial-sized cheap printer designed to work in developing countries, and enlisted StartUp Chile, a Chilean government program that empowers local tech entrepreneurs, to carry out projects on manufacturing clothing and printing using recyclable materials. It should be only a matter of time for the World Bank will back such efforts.

Few would argue with these gains. But thorny obstacles stand in the way. The main one is intellectual property of digital designs – it is not a leap for the Chinese and Indians, leading IP violators, to pirate 3D designs. Another problem is lack of industry-recognized standards for the materials, processes and testing methods for 3D printed products, a target for consumer advocates. Still another is local content rules are bound to be tightened as governments set out to protect local suppliers fearing to be sidelined by foreign heavyweights. International trade rules offer very little guidance, and trade policy is falling increasingly behind.

Posted in Uncategorized | Tagged , , , , , , | Leave a comment

Coming Apart: WTO fiasco highlights urgency for the U.S. to lead the global trading system

India’s torpedoing last week the WTO’s trade facilitation agreement, struck at the last minute between the United States and India in the December 2013 WTO Ministerial in Bali, is a death blow to the world body and adds to growing disarray in the global trading system.

Two threats are emerging. The first is disintegration of the trading system. The core of the system until the mid-1990s, the WTO is utterly dysfunctional: deals require unanimity among 160 members, making any cantankerous player like India a veto. Aligning interests has been impossible, turning all action in global trade policymaking to free trade agreements (FTAs), first kicked off by the North American Free Trade Agreement (NAFTA) in 1994. By now, 400 FTAs are in place or under negotiation. FTAs have been good cholesterol for trade, but the overlapping deals and rules also complicate life for U.S. companies doing global business. One single deal among all countries would be much preferable to the “spaghetti bowl” of FTAs, but it is but a pie in the sky. So is deeper liberalization by protectionist countries like India.

The U.S.-led talks for “mega-regional” agreements with Europe and Asia-Pacific nations, the Trans-Atlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP), are the best solution yet to these problems. They free trade and create uniform rules among countries making up two-thirds of the world economy. Incidentally, they would create a million jobs in America. Yet both hang in balance thanks to inaction on Capitol Hill to pass the Trade Promotion Authority (TPA), the key piece of legislation for approving the mega-deals, now stuck in a bitter political fight as several Democrats and Tea Party line up in opposition. TPA is key for the Obama administration to conclude TPP and TTIP talks: Europeans and Asians are unwilling to negotiate the thorniest topics before they know TPA is in place to constrain U.S. Congress to voting up or down on these deals, rather than amending freshly negotiated texts.

The second threat in world trade is the absence of common rules of the game for the 21st century global digital economy. As 3D printing, Internet of Things, and cross-border ecommerce, and other disruptive technologies expand trade in digital goods and services, intellectual property will be fair game – why couldn’t a company around the world simply replicate 3D printable products and designs Made in the USA? Another problem is data protectionism – rules on access and transport of data across borders. Europeans are imposing limits on companies’ access to consumer data, complicating U.S. businesses’ customer service and marketing; emerging markets such as Brazil and Vietnam are forcing foreign IT companies to locate servers and build data centers as a condition for market access, measure that costs companies millions in inefficiencies. A growing number of countries claim limits on access to data on the grounds of “national security” and “public safety”, familiar code words for protectionism.

Digital protectionism risks balkanizing the global virtual economy just as tariffs siloed national markets in the 19th century when countries set out to collect revenue and promote infant industries – a self-defeating approach that took well over a century to undo, and is still alive and well in countries like India. The biggest losers of digital protectionism are American small businesses and consumers leveraging their laptops, iPads and smart phones to buy and sell goods and services around the planet. Trade policymakers however lag far behind today’s trade, which requires sophisticated rules on IP, piracy, copyrights, patents and trademarks, ecommerce, data flows, virtual currencies, and dispute settlement. The mega-regionals, especially the TTIP, are a perfect venue to start this process.

Disintegration of trade policies risk disintegrating world markets. Just as after World War II, the global trading system rests in America’s hands. Three things are needed.

The first is the approval of TPA, which unshackles U.S. negotiators to finalize TPP and TTIP. Most interesting for U.S. exporters, TPP and TTIP almost de facto merge into a superdeal: the United States and EU already have bilateral FTAs with several common partners belonging in TPP – Peru, Colombia, Chile, Australia, Singapore, Canada, and Mexico to name a few. What’s more, gatekeepers to markets with two-thirds of global spending power, TPP and TTIP will be giant magnetic docking stations to outsiders; China and Brazil, aiming to revive sagging growth, are interested. Once this happens, the TTIP-TPP superdeal will cover 80 percent of world’s output and approximate a multilateral agreement – and have cutting-edge common trade rules that could never be agreed in one Big Bang at the WTO.

Second, also needed is a shift negotiation of plurilateral agreements – broad-based agreements among sub-sets of WTO members now negotiated in trade in services and in environmental goods and services, and proposed for investment and data security, and now also for trade facilitation sans India. The coalitions of the willing driving plurilaterals include the United States, EU, Japan, and many Latin American and Asian emerging markets disillusioned by India and its accomplices, Cuba, Bolivia, and Venezuela. A pivot in trade politics, China is looking to join the services plurilateral. Plurilaterals not only help American companies to export more; they enable Washington and its friends and allies to call the shots in global trade rulemaking – and isolate India, proving its policies self-defeating.

The third deal that is needed is Washington Consensus II, for the global digital economy. In the 1990s, the Washington Consensus set off a wave of deep trade and investment liberalization across the developing and post-communist world, paving the way for a tidal wave of globalization. The digital economy has no equivalent. A broad group of stakeholders and thought-leaders – governments, international organizations, companies, and think-tanks – need to come together to articulate guidelines for nations’ behavior in the global digital economy. Given its infamous connotations, the digital deal could be called “Seoul Consensus”, highlighting Korea’s leap to a leader in digitization from a rural economy just a couple of decades ago.

U.S. leadership is urgently needed to integrate the rapidly changing global trading system. It is time for Congress to step up to the plate.

Posted in Uncategorized | Tagged , , , , , , , , , , , , , , , | Leave a comment