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Connecting the Global Economy through Trade and Transportation

Tuesday, May 15, 2018

Operating a modern logistics system across geopolitical borders drawn hundreds of years ago can sometimes be like fitting a square peg into a round hole—it’s impossible to cross a single border, sometimes even just between counties in the U.S., without encountering a new set of trade priorities.

That was the theme that Rich McArdle, managing director of global operations policy at UPS, discussed as part of Volpe’s Transportation and the Economy speaker series.

In Georgia, where UPS is headquartered, the county borders represent a microcosm of worldwide freight logistics challenges. There are 159 counties in Georgia—more than any other state east of the Mississippi. When the borders were drawn, the idea was that every citizen should be within a day’s buggy ride of their county seat, McArdle said.

Rich McArdle speaks at Volpe.“With the notable exception of metro Atlanta, what they're trying to accomplish in Georgia is to build a 21st century economy on an 18th century political map, and it’s not alone,” McArdle said. “When you take a snapshot of the 48 contiguous states, we have over 3,000 counties and 20,000 municipalities. And if you go even a bit further and you take a look at the global map, you get 200 nations and territories in the world, most with their own government subdivisions. This is our chess board.”

From Fragments to Free Trade

Trade deals are one way to make the global chess board look more like an open field, where goods move fluidly without roadblocks such as regulations and tariffs.

Two ambitious trade and investment negotiations are in the works: the Transatlantic Trade Investment Partnership, between the U.S. and Europe, and the Trans-Pacific Partnership, between the U.S., Australia, and countries in eastern Asia and South America. 

“When you look at the Trans-Pacific Partnership, the Peterson Institute for International Economics in Washington has identified that by 2025, it could be valued at $223 billion a year,” McArdle said. “The U.S. portion of that is about $77 billion. That’s driven off of exports. We’re talking about real money, real value. These agreements will allow us to imagine that shipping to Germany can be as easy as shipping to Georgia.”

Efficiency Across All Geographies

More than half of the world’s population now lives in urban areas and megaregions. These geographic conglomerations of large and small cities will play a major role for trade and logistics priorities going forward, McArdle said. But no matter where trade is taking place, trade stalls when transportation and logistics systems are inefficient.

“Many countries across the globe don’t take advantage of electronic information to move ahead of when the shipments get there,” McArdle said. “Pre-clearance can take place, automated screening can take place, but some countries still wait until the goods land and then they go through a manual process. It just adds more time and delay in the supply chain.”

Keeping the U.S. Up to Speed

In the U.S., UPS reduces emissions and saves time with proprietary GPS-based technology to provide drivers with better routes. But without infrastructure upkeep, there is a limit to how much technology can improve logistics. Delays alone cost UPS $105 million every year, and nationwide the economy could lose up to $3 trillion from problems with infrastructure.

“These are serious problems,” McArdle said. “They’ve been decades in the making and they will take billions of dollars to overcome. We know that. Part of my message here today is that UPS wants to work with you and others to do exactly that.”

Concept image of a globe depicting a global network, with connecting lines between nations.