Dinner Speech to be held at the American Club of Hamburg

Dear Mr. Zeller,
dear members and friends of the American Club,

I thank you for your invitation and this opportunity to speak to you today.

To come to the first point right away: Please excuse me for not bringing any political news. It’s early days now that the elections are over but not done with yet.

For now we must wait and see how the new Federal Government will be made up. But one thing is for sure: In the relations between Germany and the United States, nothing will change, because the friendship between our two countries, the Transatlantic Bridge, is one of the cornerstones of our societies.

Of course friendship also means listening to each other. Nevertheless, in the past few months we have often asked ourselves whether attentive listening must take the form it has done with the NSA. That is something we shall have to talk about another time.

Ladies and gentlemen,
there are four political fields I would like to speak about today:

1. The opportunities and differences involved in the free trade agreement;
2. The global economic network and the balance between industrial production and the service sector;
3. What it is that makes our economy strong, and
4. The role of the metropolitan regions in meeting global challenges.

To come to the first point: I do think a great deal of negotiations concerning a free trade agreement between the EU and the United States. Our economies are so closely interwóven that we should seek to remove the obstacles to trade, and customs duties, in the interests of our enterprises.

The United States is an important trading partner for Germany outside the EU. And conversely, we are the most important trading partner of the US in Europe. The diménsions are impressive: last year, the EU and the USA exchanged goods to a value of about 800 billion euros, that is
2 point 2 billion euros per day.

On average, the USA charges customs duties of three to four percent on these goods. A free trade agreement would mainly relieve the major international groups, but it would also help smaller companies that operate internationally and exchange intermediate products between their affiliates.

In a free trade agreement certain EU standards must continue to be met. This applies, for instance, to product safety, consumer and environmental protection, and the rules of competition as well. No way will we lower our standards there.

Of course we would be interested, like the USA, in exporting more of our compétitive industrial goods and upstream and downstream services to the States within a free trade zone. For our small and medium-sized enterprises, especially, we hope to facilitate participation in international trade, just as we regard it as a great success that we have a well-functioning industry of manufacturing an asset some of our European friends envy. And that takes me to my second point: the balance between industrial production and the service sector.

A number of European governments and economists are now looking towards Germany and praising the industrial strength that has helped us come through the financial and banking crisis with comparatively little damage since 2007 and deal with its consequences for the real economy.

Many of them would like to see re-industrialization; the southern European governments, especially, are working to achieve a revival of their industry which they hope will bring stability to their economic systems in the long term.

It is a fact that Germany has maintained the share of industry in the overall value added over the past 15 years and has recently even increased its productivity. In 2011 the share of industry in the gross domestic product was about 23 percent. In other EU states the proportion is smaller: in Italy it has fallen to 16 percent, in Spain to 13 percent, in France and the United Kingdom to only ten percent.

However, hourly productivity in industry has increased by 105 percent over the past 20 years.

This goes to show that the excellence of German industry results from the increase in productivity. That is what has reduced the unit labor costs. It is because of this, and not only because of their innovative power important as it is , that German companies are so successful internationally.

Since the Wright Brothers’ first double-decker glider in 1899, the aviation industry for instance has evolved into one of the global economy’s drivers of growth and the world’s continents have never been closer together.

Today, Hamburg is the centre of Germany’s civil aviation industry and next to Toulouse is the most important in Europe. On a global scale, Hamburg meaning the metropolitan region and its North German neighbours ranks number three in the civil aviation industry.

The aviation industry is, however, also a pioneer of innovative materials and processes, giving it a key role in Germany’s future as a high-tech location.

Mind you, the success of our location as a centre of aviation is due to global players: Airbus has enjoyed great successes with the development of its aircraft family, Lufthansa Technik is a world leader in maintenance, repair and overhaul, and the Hamburg Airport located close to the inner city has an unbeatable advantage of site.

In addition we talk about several hundred small and medium-sized suppliers small and medium-sized Mittelstand” companies which offer over 90 percent of the jobs in Germany. Not forgetting the
teaching and research organisations associated with today’s aviation industry.

But if we take a closer look we find that Germany’s strength lies both in industrial production and in services, and that in many cases there is a direct connection between the two.

According to the Federal Office of Statistics, Germany’s exports of services were 7.6 percent higher in 2010 than in the previous year and as much as 87.1 percent above the figure for 2000.

That is in line with the global trend: according to the World Trade Organisation, worldwide exports of commercial services increased by an average of eight percent to 3 point 67 trillion US dollars a year between 2005 and 2010. With 230 billion US dollars the German economy is now the world’s second-largest exporter of commercial services after the United States, with 515 billion US dollars.

So the tertiary sector is a locomotive of growth, too, and in future it will play an even bigger role in industrial production as well. Because industrial enterprises have long been selling upstream and downstream services to accompany their products. Take, for example, contract engineering by a German automobile manufacturer that carries out a large proportion of the technical development work for an American company. Or a medium-sized company in Hamburg that is the international market leader in machinery for tobacco processing and the production of filters and cigarettes.

Development, planning, consultancy, assembly, maintenance and repairs: the reason why many German companies sell their products today is that besides supplying the products’ physical function at the time of delivery they accompany their use all along the value added chain and throughout their service life.

In other words: the combination of industrial products with innovative, knowledge-based services along the value added chain is a fundamental topic of the future that will have a decisive effect on the success of companies in the transition of industries based on work to industries based on knowledge.

Ladies and Gentlemen,
that brings me to the third point and the question of what it is that makes our economy strong.

We tend to forget that the economic success we enjoy today has deep roots that reach back many decades. The introduction of Bismarck’s social insurance system was an important achievement. It’s true that our social systems are facing major challenges caused by demographic change. But to this day pension, health, unemployment and nursing care insurance are extremely important for social justice.

In the years of the crisis, the social partnership between trade unions and employers did much to ensure that we came through this difficult time fairly well. The extension of compensation for short-time working from six to 18 months at the end of 2008, which I strongly advocated in my capacity as the Federal Minister for Labor and Social Affairs in agreement with employers and trade unions, enabled German companies to get on their feet again at once when the crisis was over. Because they hadn’t laid off their trained staff and were able to act immediately in order to meet the increasing demand again from 2010.

In the face of cyclical ups and downs and in the agitation of day-to-day politics we tend to forget that a society united by solidarity is a fundamental requirement for the long-term, sustainable success of an economy. To my mind, Obama’s policy is setting the right course in this respect, since the United States is beginning to realize that the constitutional notion of the pursuit of happiness” cannot be achieved without solidarity and equality of opportunity. In his inaugural address at the beginning of his second term of office on January 21st this year, he said, quote: while these truths may be self-evident, they have never been self-executing.”

Personal initiative, effort, and the will to take a stand and, if necessary, accept risks: these are important principles. It is these principles that create what Americans call a land of opportunities”. The foundation for it is a society based on solidarity, which ensures its citizens at least a minimum of protection against social risks. Because only then can risks be accepted at all.

Obama put it this way: every citizen deserves a basic measure of security and dignity.” And he continued: Our country cannot succeed when a shrinking few do very well and a growing many barely make it”.

Ladies and Gentlemen,
the government must ensure that anyone who makes an effort can accomplish something in our society and find happiness. The government must create equality of opportunity, especially for its young citizens. And that means access to education without discrimination at school, in vocational training or at university.

Germany’s dual vocational training system is a successful model and is currently being copied by many countries around the world. Because not only Germany has a shortage of qualified employees: the USA, too, is complaining that it needs about 600,000 more trained workers.

In his State of the Union” speech in February this year President Obama said, quote: Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills they need to get those jobs? And how do we make sure that hard work leads to a decent living?”

German companies that produce goods in the United States have found their own answer. Volkswagen, for example, at its American plant in Chattanooga. Just two weeks ago, and with great response in the media, it celebrated its first journeymen” qualified craftsmen who had passed their exams as mechatronic technicians according to the German model. Even Bill Haslam, the governor of Tennessee, praised the training program as exémplary.

The combination of theory and practice, of vocational school and training on the shop floor”, and the high level of practical qualification that results from it, is at least as valuable as an academic education. For the more complex industrial products become, the more important it is to impart skills to the employees who design, construct, maintain and repair these products.

And in doing so, we must not exclusively rely on the best performers in their age groups we need them all and we must not leave anyone behind. To achieve this, we have started successfully a Jugendberufsagentur”, an agency that aims at bringing young people into gainful employment by all means, almost, coaxing them and, if necessary, pushing them.

Ladies and Gentlemen,
That takes me to the fourth and last political field I would like to discuss, namely the role of the metropolitan regions in meeting global challenges.

Benjamin Barber, Professor of Civil Society at the University of Maryland, is about to publish his book If Mayors Ruled The World”. In this book he advocates a greater influence of the cities in solving global problems. In his opinion it is the mayors who react directly to these challenges and seek really practical solutions to the challenging issues of the future.

There is a lot to be said for this hypothesis. In this country, over 85 percent of the population lives and works in cities. The residents of the metropolitan regions consume the most energy in the form of electric power, oil, gas, and motor fuels like gásoline and diesel and cause a further rise in carbon emissions. That means we play a key role in dealing with climate change and have greater responsibility for implementing the energy turnaround.

Ladies and Gentlemen,
The Energy Turnaround, spelt with capital letters: not merely a domestic affair in Germany, let alone Hamburg, even though Germany does try to be avant-garde on this field. And Hamburg does its best as well, even though a referendum has messed up things a bit recently.  

From innovative concepts for the reduction of inner-city traffic, and reducing its emissions, to the thermal insulation of the building stock, to onshore power supply for the increasing number of cruise liners that berth here, we pursue many approaches at the same time.

Even more than that, the Hamburg metropolitan area is a centre and motor for the energy turnaround in Germany away from fossil fuels and nuclear energy and toward environmentally compátible, sustainable power generation.
This transition involves the expansion of renewable energies, particularly the construction and repowering of wind turbines. Within Hamburg’s Klima Campus, meteorólogists and oceanógraphers, atmosphere researchers and ecologists work closely with members of other scientific disciplines.

Many questions have yet to be answered in this connection, however, especially technical questions like these:

• How can energy be stored?
• How can electricity be stored efficiently and inexpensively?
• How can conversion losses be prevented?
• How can the energy that is generated on land and preferably offshore be delivered to the grids? And how can we ensure that the grids national and international will be able to deal with the naturally fluctuating input?

Questions that can be answered and will be answered if engineering skills and clear-sighted governing merge to break new ground. And in the long run, this can only happen on an international level all over Europe and, of course, in the land of Thomas Alva Edison.

Different to Edison’s time at Menlo Park, New Jersey, most economic and scientific activity takes place in our cities. Cities are where networks form, knowledge accumulates and new solutions are tried out. It is there that the technological developments come about that we need for meeting global challenges.

At the same time our own city, that currently has a population of more than 1.7 million, is still growing; and that’s the way we want it. Because without immigration we shall not be able to solve our demographic problems. Since the 1990s alone, the number of residents has increased by about 200,000. By the end of the coming decade we expect Hamburg to have a population of 1.9 million or more a growing and welcoming metropolis.

Hamburg is currently the economic area with the best prospects in Germany. I would not risk such a statement if we were only dependent on the port. In fact we have a very significant mix of industries. Hamburg has a solid economic basis with manufacturing industry, trade, services, the media, and healthy small and medium-sized companies with numerous players on the international markets and, of course, the port. All these sectors are anchors of stability and real value-added.

Hamburg is one of Germany’s leading industrial cities and the seat of numerous major enterprises. Our manufacturing industry is state-of-the-art and internationally compétitive, with clusters that include aircraft construction, the maritime industry, mechanical and electrical engineering, medical technology, biotechnology and food production; it also has steelworks and aluminum and copper mills.

But the basis of prosperity and employment is and remains efficient manufacturing industries with compétitive products. As a locomotive of innovation and progress, industry also provides the technological know-how Hamburg needs in order to assert itself in the competition between the states and regions within Germany.

For the social and economical transitions we are facing, Hamburg is well set up.

Thank you.

Es gilt das gesprochene Wort.