Don't Let The Trade Doors Swing Back Now

Northern Telecom Ltd.'s remarkable success in cracking global markets for telecommunications equipment provides a timely reminder of the benefits of free trade to a world threatening a retreat to protectionism. In Canada, Northern Telecom's home, the U.S.-Canada Free Trade Agreement is becoming extremely unpopular. In the U.S., pressure is building this presidential election year to ditch efforts to throw open U.S.-Mexican trade borders. Overseas, the General Agreement on Tariffs & Trade are stalled, and many service industries still remain protected. Northern Telecom has built its success by quickly jumping into telecommunications markets as soon as they open. In 1984, with the breakup of the American Telephone & Telegraph Co. monopoly, it became a major supplier of digital switches to the Baby Bells. Today, Northern Telecom is the second-largest supplier of telecommunications equipment in the U.S. market, with $4.3 billion in U.S. sales last year.

Northern Telecom's success in the U.S. has brought enormous benefits to both countries. If the company had not been able to compete in the U.S. market, it is doubtful it would even be around today, providing employment to 22,000 Canadians and about 22,000 Americans as well. Because of Northern Telecom's fierce competition with AT&T, U.S. phone companies now pay the world's lowest prices for central office switches, the guts of the phone system.

In the 1990s, Northern Telecom is growing by jumping into newly opened overseas markets in Europe and Asia, where deregulation and privatization are just beginning to open the door a crack for foreign corporations. It bought the British telecom company stc and has recently taken a stake in France's Matra. In Japan, Northern Telecom is the leading foreign supplier of phone equipment.

Continued protectionism may serve the interests of local suppliers, but it imposes a heavy burden on corporations and consumers. In Europe, for example, phone companies pay far more for central office switches than their U.S. and Canadian counterparts. That's why the remaining barriers to free competition in telecommunications need to be eliminated. That's why open markets, in the end, work for everyone.

Before it's here, it's on the Bloomberg Terminal.