Remarks at Berlin Economic Forum, 10.03.2017

Ladies and Gentlemen,

Distinguished guests of this year’s Berlin Economic Forum,

Welcome to Berlin. You might encounter some difficulties to leave by plane – I almost didn’t make it here today. But you could see the strike of the ground crew at the Berlin airport as a chance to stay a little longer in this beautiful city.

We don’t know yet, what deal will end the strike. But the parties involved will keep in mind this advice:

“Always look for the fool in the deal. If you don’t find one, it’s you” — this little nugget of wisdom from the owner of the Dallas Mavericks Mark Cuban sums up the world view of President Donald Trump. Eat or be eaten. Never win-win, always winner takes all.

Trump’s world of deals is a zero-sum game.

A Challenge to the World

The new U.S. President has kicked off his tenure with a challenge to the world. He announced: “from this moment on, it’s going to be America First”.[1]

America First challenges China. Trump has singled out China as enemy number one. As a candidate he had claimed “We can’t continue to allow China to rape our country”, he has promised to bring back the jobs China allegedly “stole” and he keeps calling the country a “currency manipulator”.
America First also challenges Europe. Trump believes the EU was created for the sole purpose of beating the U.S. at trade. When he says that more countries will exit the union, it sounds more like a threat than a prediction. Why? Well, let me tell you: it’s Trumponomics 101. Currently, he’s up against the world’s largest single market. Obviously, he would much rather deal with Ireland and its 5 million people than with the 450 million people represented by the EU Commission.
And, America First challenges Germany. Trump’s top trade advisor Peter Navarro has accused Germany of exploiting the Dollar and its European partners with a “grossly undervalued” Euro.[2] We do profit from the financial crisis. That’s a very unpopular truth. But we still can’t dictate ECB exchange-rate policy. That’s still up to Draghi and the board. But the Trump administration doesn’t stop at public shaming. The U.S. President has repeatedly threatened German businesses. One example: Trump threatened to impose a 35 percent tariff on every car BMW would import to the United States.

America First heralds a brutal U.S. chauvinism. I call it: economic unilateralism.

The Danger of Trade Wars

If you leave the path of multilateral agreements that generate mutually beneficial deals. If you go for a policy of protectionism instead. You risk descent into “tit-for-tat”. The U.S. President has given us a preview of that world in his books:

What happens when Donald Trump feels that he’s been screwed over? He says: “I strike back, doing the same thing to them only ten times worse”.[3]

A government document outlining new U.S. trade policy reads:

“It’s time for a more aggressive approach.” In a departure from previous policy, the Trump administration says it will ignore WTO rulings if it feels the decisions infringe on U.S. sovereignty.[4] But what’s keeping other countries from doing the same? Trade experts fear a chain reaction that ultimately unhinges our rule-based system. And just like that things spiral out of control.

Roberto Azevedo, head of the WTO, has warned Trump of trade wars.[5] The effects, especially for an export-oriented country like Germany, would be devastating.

So, after less than two months in office:

Donald Trump has increased international insecurity.

His rash style, his mad-man-approach to politics are dangerous especially when mixed with vital national interests. While Trump is taking verbal shots at China, his Chief strategist Steve Bannon is sure the United States will go to war with China in the South China Sea within the next ten years. They don’t call them trade wars for nothing.

It’s a slippery slope from trade war to real war.

Free Trade Must Be Fair

So, what’s the antidote to trade wars?

I’m originally from Bremen. In that hanseatic city we’ve long known the benefits of trade. We’ve known globalization before there was even capitalism. And we also know:

Only fair trade is free trade.

That might sound familiar to those of you who have listened to Donald Trump speak to Congress last week. He said: “I believe strongly in free trade but it also has to be FAIR TRADE.”[6] Though when Trump says “fair”, he means “America first”. To him, it’s only fair, if America wins. In a zero-sum game that means: someone has got to lose. Who?

Developing and emerging countries are the losers in Trump’s economic unilateralism.

They cannot face up to the United States by themselves. Just look at what’s happened to Mexico.

To be fair, though, trade was unfair even before Trump. We see a continuing stalemate at the WTO. Trade agreements like TTIP and CETA were never fair. And finally: our very own consumer habits have made matters worse.

Take the example of the fishing industry: if the Europeans fish up the coast of Senegal, no wonder the Senegalese are forced to leave their homes. It’s a simple matter of survival.
Or take the subsidies for European agricultural exports to Africa. Cheap European chicken is destroying the local agribusiness. Tomatoes from Ghana can’t compete with the cheap vegetables the Europeans dump on the African market. As a result, hunger is spreading.[7]

We must assume our own responsibility in upholding free and fair trade.

Otherwise, the prospects for developing countries will go from bad to worse.

So how do we work toward making trade both free and fair?

The answer is good global governance.

Good Global Governance

We need global rules to shape globalization – socially and ecologically.

Fight Global Tax Havens

Today’s global inequality is unprecedented. And it can be expressed in a single number: eight. That’s how many billionaires own as much as the poorer half of the world’s population. Eight men. That’s it. A world like that will never be fair – or secure.

For more equality, we must shut down global tax havens.

The tax haven for Messi, Ronaldo and Özil in Panama,
the tax haven for Apple in Ireland, for VW in Belgium and for BASF in Malta,
and the tax havens here in Germany for the assets and inheritance of our very own oligarchs – the so-called „familiy businesses“.

We need internationally-binding rules against tax evasion.

Counter Deregulation

Trump may have promised to drain the swamp. But thanks to him:

The swamp reigns supreme.

Or as the magazine The New Yorker has put it: Trump went from “Drain the swamp” to “Government Sachs”.[8] He stocked his cabinet with Wall Street billionaires and millionaires.[9] Together, they are rolling-back the safe-guards put in place by the Obama administration in response to the financial crisis:

They impede the work of the Consumer Financial Protection Bureau, which seeks to protect the interests of ordinary Americans and investors,
reduce the requirements for capital reserves of big banks,
and gut the 2010 Dodd-Frank Act against Wall Street excesses.

The American roll-back could trigger a deregulatory race to the bottom. The consequence? Another financial crisis looming on the horizon. That mustn’t happen. We must push back before it’s too late.

It’s time to re-regulate neoliberal globalization.

Divest from Fossil Fuels and Invest in Clean Energy

The G20 members subsidize fossil fuels with 444 billion Dollars each year. These are “subsidies for the rich” (former Mexican President Felipe Caldéron).[10] They have to stop.

Ecology equals justice.

The Paris Agreement has pointed out a huge deficit when it comes to investing in green finance, in environmentally friendly infrastructure and energy supply. If we want to achieve our climate goals, we have to change course.

For decarbonization we have to phase out fossil subsidies.

We will not succeed in decreasing environmentally harmful, fossil subsidies if we don’t do our homework here in Germany. Fossil subsidies add up to over 50 billion € annually – according to our the Federal Environmental Protection Agency (UBA).

Three examples:

Germany’s Fuel Taxation System leads to 8 billion € subsidies annually for Diesel vehicle drivers. As long as this system works, e-mobility will have no chance on the market. And Germany’s car industry is trailing Japanese, Chinese and US car manufactures. We are ten years behind.
In times, when China invests billions in renewable energies und cuts 100 coal fired power plants, Chancellor Merkels pays 1.6 billion € to Vattenfall and RWE to hold on to the 20 oldest coal power plants. But I am sure, that within two years, there will be a broad consensus for phasing out coal-mining and –burning. The phase out consensus for nuclear will be the pattern.
Fuel taxation excludes fuel for non-energetic use. Germany’s taxpayers have to pay fuel tax for every kilometer they drive and every kilowatt hour they use. But the government subsides the chemical industry with more than a billion € annually. At the same time, the price for oil and gas was more than halved. And we passed a chance for cutting subsidies.

We need divestment from fossil fuels and massive green investments.

Against the Lone Wolf Myth

We’ve got our plates full. Now we get to work. Donald Trump likes to propagate the lone wolf myth. As he put it at the Republican National Convention last year: “I alone can fix it”.[11] But that’s not true. Not in business, and certainly not in the world. Entrepreneurs need partners. And:

Nations need partners.

In the past, we’ve counted on strong transatlantic relations to set global rules. However, Trump might not guarantee a multilateral world order. So:

It’s time we forge alliances that will help reign in globalization.

These days, that leads to strange bedfellows. We find ourselves fighting for a rule-based free market alongside… China. Ironic, isn’t it?

As the largest creditor of the United States, China has a massive interest in regulating the financial market. Recently, China has also been fighting coal more zealously that Germany. While the Grand Coalition has invested 1.6 billion Euro in keeping the oldest twenty coal plants running. China has just put a stop to 100 coal plants. However, when it comes to combatting global inequality, China is no partner. China’s income inequality is among the world’s worst.[12] Chinese elites have been implicated in offshore tax havens. As a result, coverage of the Panama leaks was limited in China.[13] All the while, the country has tightened its grip around civil society. Like I said, strange bedfellows indeed.