B20 Summit Unity in Numbers

The international business community is a lot more united than governments these days when it comes to getting the global economy back on track. Handelsblatt spoke with the organizers of this week's "B20" summit of executives in Berlin.
BCG Germany chief Carsten Kratz (pictured left) and Jürgen Heraeus of Heraeus Holding (pictured right) interviewed via Skype by Handelsblatt journalists, photographed in Frankfurt.

Scheduling an interview with these two busy men isn't easy. Jürgen Heraeus is head of the supervisory board of technology conglomerate Heraeus Holding. Carsten Kratz is the German chief of consultancy BCG. On the side, the two executives have gotten together to organize a massive global business business conference in Berlin this week.

At the so-called B20 summit on Tuesday and Wednesday, executives from around the globe will discuss issues ranging from free trade to climate change to migration. The meeting comes ahead of the G20 summit of leading global economies in Hamburg in July. German Chancellor Angela Merkel, who is also chairing the G20 summit this year, will formally accept a set of recommendations to be handed down by the business leaders at the end of the summit on Wednesday.

The executives' key concern to be conveyed to Ms. Merkel: Avoid protectionism at all costs. Mr. Heraeus and Mr. Kratz sat down with Handelsblatt to discuss the goals of the B20 conference, the threat to free trade coming from the United States, the prospects of the world economy, and how they justify Germany’s export surplus in the global business community.

 

Handelsblatt: German Chancellor Angela Merkel originally wanted to use the G20 to set new impulses for the global economy. But since Donald Trump became US president, it’s become more about avoiding a trade war. Has Germany’s G20 presidency become a burden?

Mr. Heraeus: It’s an opportunity! The G20 has proven that it’s a crucial forum for international cooperation. It’s surely not gotten easier, the world is in disarray, partially thanks to Brexit, the problems in Turkey and some announcements from Washington. But I’m convinced that the German G20 presidency will move international policy in the right direction.

But isn’t a lot going in the wrong direction? The United States doesn’t even want to commit to free trade.

Mr. Heraeus: Of course it’s a setback that protectionist movements are back. We all thought we had overcome protectionism. And it’s disappointing that it’s the US government that is standing in the way of a commitment to free trade. But I keep hoping Mr. Trump will come around. Free and rule-based trade is in the United States’ best interest too.

Mr. Kratz: And we have to distinguish between governments and business. Especially in politically-difficult times, the B20 forum is more important than ever, and an opportunity. From Japan to Europe and America, we all share common positions on free trade, coordinated measures against cybercrime, better global networking and the necessary expansion of digital infrastructure. That will be the B20’s message.

There’s agreement among businesses that globalization means great advantages for the majority of people.

So there’s unity within the B20 group?

Mr. Heraeus: Yes, and we’re proud of that. More than 700 companies and associations are involved. We’ve taken consensus decisions on everything, without leaving out contentious issues. There’s agreement among businesses that globalization means great advantages for the majority of people.

Do you think this common business position – shared also by American companies – can prevent Mr. Trump from realizing his protectionist ideas?

Mr. Heraeus: I’m optimistic. If American customers have to pay higher prices for goods because of higher import duties, they won’t like that at all. And if US firms wanting to invest abroad are hindered in doing so, they’ll voice their disapproval. That’s why I’m convinced that things aren’t as bad as they seem right now.

Mr. Kratz: The consequences of protectionist policies vary from industry to industry. But the bottom line is we all benefit from free trade – not least of all the United States.

Many people in the G20 member states would disagree. Why does globalization cause so much fear?

Mr. Kratz: Of course globalization and digitalization worry people. ‘What does that mean for me and my job?’ they ask. As businesses, we have to counter that. We have to include people and point out the advantages: Creative tasks are becoming more important, more diverse jobs are cropping up. For Germany, free trade guarantees our prosperity as an export-heavy country.

Nevertheless, distrust runs high. Or how do you explain the planned protests against the G20 summit in Hamburg this July?

Mr. Heraeus: I caution globalization skeptics against wholesale rejection of all the opportunities that intensified international cooperation offers. They’re often guided by vague fears. Look at the trans-Atlantic free-trade agreement (TTIP): Suddenly German breweries were worried that it would mean the end of beer purity laws. This shows that people fear the loss of their culture. Governments have to react to that, seek a dialogue with people and explain. It’s not enough to just promise supposed benefits ahead of elections.

Isn’t this also part of the business community’s responsibility? Many people have the feeling that executives benefit disproportionately from globalization, while Joe Sixpack doesn’t.

Mr. Kratz: That’s why more than 700 firms are involved in the B20. But you’re right, we have to get better at easing people’s worries. The past 30 years have been a great success. Ask any factory manager in Germany, he’ll tell you that employment has gone up by 20, 30 or 40 percent, but that output has increased fivefold. That increased productivity ensures our comfortable position in international competition. That was only possible because we evolved. If we preserve that kind of openness we can be confident that the next 30 years will be good too.

Mr. Heraeus: That’s true, but we have to work for that too. That’s why the B20 group is asking G20 leaders to adapt their educational systems to be better prepared for the digital revolution. People have to join in that development. Governments need to invest in education and training.

China is assuming a position as the global defender of free trade. Do you take that new role seriously or is is just hot air?

Mr. Heraeus: I’m not sure if everything Chinese President Xi Jinping said at the World Economic Forum in Davos will be realized. Nevertheless I was very happy about his speech. Ten years ago it would have been unthinkable that a Chinese president said something like that. We keep reminding our Chinese colleagues at the B20 group of Mr. Xi’s words. Now China has to put its money where its mouth is. Of course, the rules aren’t the same for everyone in China today. That’s just one more reason why we all have to work together for open markets and fair rules.

Climate protection will remain at the top of the agenda. The Americans alone won’t be able to topple that.

Trade isn’t the only area of conflict at the moment, climate protection is too. Is the B20 group divided on this issue too?

Mr. Kratz: Divided? We agree that the Paris climate accord should be realized. That’s a call on governments that all B20 representatives agree on, no matter if they’re from Asia, Europe or America. That’s considerable.

So far, the US administration has refused to make such a commitment.

Mr. Heraeus: All other countries besides the United States are in favor. I’m sure that climate protection will remain at the top of the agenda. The Americans alone won’t be able to topple that.

What’s your assessment of the global economy?

Mr. Kratz: There’s a lot of signs that the global economy will go up. China keeps growing at six to eight percent. India is doing well. The European Union is recovering. Russia is too. The United States is already strong. There’s no reason for pessimism.

Mr. Heraeus: I agree. But I’m worried about monetary policy. Cheap money alone won’t bring sustainable growth. What’s important is structural changes, and we have to do more in that area. We have to prepare the ground for sustainable and inclusive growth. Everybody should have the opportunity to benefit from the upsides of globalization.

The G20 member states also have their hands full with the refugee crisis and migration. Does business concern itself with these topics too?

Mr. Heraeus: Yes, German Chancellor Angela Merkel has scheduled an Africa summit for early June. At that summit the G20 leaders want to agree on so-called compacts with African governments. That is meant to improve investment conditions and channel more private investment into Africa. It also includes improved rule of law and a more vigorous fight against corruption. The German government has realized that there’s a need to give African governments a chance to create jobs, support small and mid-sized businesses and to ensure funding. We at the B20 support that.

What can the business community do?

Mr. Heraeus: We have to get involved and invest to create long-term stable economic condition. Otherwise we won’t be able to get a handle on migration pressures. That includes supporting small suppliers in our supply chains, helping them to live up to the expectations of the global economy.

Isn’t the Africa summit just window dressing to calm down people in the face of the refugee crisis?

Mr. Heraeus: Not at all. More support for Africa is appropriate. Industrialized nations have a responsibility. Part of the truth is that rich countries affect the markets in Africa considerably. Those countries would benefit from industrialized nations cutting their agricultural subsidies, for example.

Mr. Kratz: That’s why the G20 compact with Africa is an important issue for the B20 group. We also have to make sure that Africa isn’t falling behind on digital infrastructure. Governments should invest more in education and support on-the-job training.

Germany is being criticized for its export surplus by other G20 members, not least the United States. Do you get the same kind of reproach within the business community?

Mr. Kratz: You have to acknowledge that our success is partly due to global competitiveness. Of course, the weak euro can help, but the other countries in the euro zone benefit from that too. Productivity and innovation are key. That’s why that criticism is inappropriate.

Mr. Heraeus: The flipside of export surpluses is high capital drainage. Germany would be well advised to invest in infrastructure, research and education. But in general these topics are more often discussed in politics. Our B20 partners don’t criticize us for our surpluses. Some of them instead ask us how we do it, and want to learn from us.

 

Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage. To contact the authors: [email protected], [email protected]