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UPS chief warns against protectionism

By HARRY R. WEBER
updated 2:23 p.m. ET Feb. 26, 2009

ATLANTA - The head of global shipping giant UPS warned Thursday against buying into the argument that global trade siphons away U.S. jobs, the same day the government reported the number of people continuing to receive unemployment benefits topped 5.1 million.

Chief Executive Officer Scott Davis' speech before the U.S. Chamber of Commerce comes against the backdrop of a "Buy American" clause added by Congress to the $787 billion economic stimulus package signed by President Barack Obama last week.

That provision is "not too protectionist but the perception went out there was very protectionist," Davis said during a question-and-answer session after his speech. "We have to lead by example. If we go out and send those kind of signals, it is concerning."

While Obama has worked to reassure other countries that his aim is to increase trade, free-trade advocates remain concerned.

It has become a hot-button issue for the world's largest package delivery company, UPS Inc. The company, which recorded $51.5 billion in 2008 revenue, carries 2 percent of the world's gross domestic product and has relied over the last year on international growth to offset declines at home.

Davis said there is a growing perception, especially in the U.S., that globalization and free trade are taking away U.S. jobs. But he argued that global trade creates American jobs, and he used his company as an example.

"Each time we add 40 new international packages in the U.S. — in other words, 40 packages imported or exported by our customers — we create another new U.S. job somewhere in our system," Davis said. "Last year we grew the international portion of our business by more than 10 percent, creating thousands of new job opportunities at UPS for U.S. citizens."

Total U.S. jobs at UPS have remained fairly steady over the last few years, though there likely would have been some net job losses domestically if not for strong international growth, the company said.

Davis said free trade is not an enemy to U.S. manufacturers, even though other countries such as China can produce at much lower costs because of low wages.

"The U.S. retained its title last year as the world's leading manufacturer, representing one-quarter of the global manufacturing output," Davis said. "That percentage has been stable for some time. The U.S. also retained its title as the world's largest exporter, with exports of goods and services reaching $1.8 trillion."

Global trade also improves relations between nations, Davis said.

"When people are busy creating opportunity together, they are much less likely to shoot at each other," he said.

On Thursday, there was more grim economic news released by the government.

The number of people receiving unemployment insurance for more than one week increased more than expected to 5.1 million, a record using data going back to 1967. One year ago, 2.8 million people received unemployment insurance for more than a week, showing how quickly the economy has deteriorated.

Davis said with many Americans suffering financially and U.S. markets in turmoil, there is always a danger of people pushing for protectionism.

"We, the proponents of free trade, have tended to talk from the head," Davis said. "The anti-trade forces talk from the heart about lost jobs, lost homes, lost hope. In the court of public opinion, the heart wins."

He encouraged free-trade advocates to do a better job getting out their message.

After his speech, Davis addressed questions about the economy, the stimulus bill and the financial problems faced by the U.S. Postal Service.

Davis said there could be a moderate recovery in the economy in the second half of the year, but he cautioned that 2009 will be challenging.

Davis said his general feeling is that the stimulus bill will help. But, he added, "If somebody said you have $800 billion to stimulate the economy, I might have spent it differently." He didn't elaborate.

Davis was asked about the recent talk of the U.S. Postal Service possibly cutting a day of service because of its financial problems. He said that while the Postal Service has some real challenges, it has been doing a better job running itself like a business.

He suggested it was unlikely his company would get into the business of delivering first-class mail.

"That would be a real challenge for our company to accept," Davis said, noting that UPS charges based on cost of service while the Postal Service will deliver a letter requiring one stamp anywhere in the country.

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