Less than 15km from here, half way between my home town Saarlouis and Saarbrücken, stand the Völklingen Ironworks. Its smoking chimney stacks provide one of the lasting pictures from my childhood.
A large number of my relatives worked in the steel industry – those who didn’t work in the mines, anyway. Typical Saarlanders, in other words. The huge crisis in the steel industry was a topic round the dinner table in our house.
And I was able to follow the mass demonstrations in the mid 1980s. I went to school in Völklingen. Saarstahl makes steel there even today. But the famous Völklingen Ironworks closed down, before I left school.
Nowadays, concerts and performances take place on the site. It is an industrial monument, a World Cultural Heritage site, no less. The Völklingen Ironworks, which employed 17,000 people around the time I was born, is now a museum you can visit. Steel is a thing of the past there.
But is that a fitting metaphor for the steel industry in Germany as a whole?
You’ll have realised that is a rhetorical question. Over the past few years and decades, people have often said that the German steel industry was on the way out. But every time these forecasts of doom were premature.
True, changes in the economic environment and more modern production processes mean that fewer people are employed in the steel industry today.
But every job in the German steel industry has another six jobs depending on it! Some 3.5 to 4 million people work in steel-intensive sectors. That’s two out of three jobs in the manufacturing sector.
The steel industry, with its modern products, provides the wherewithal for automotive and mechanical engineering, the capital goods industry, and also for modern wind turbines, which depend on modern types of steel.
Steel is one of the pillars of our industrial sector. Steel is the present. And steel is the future. But we have to do something to ensure that this is the case.
We cannot merely sit back and content ourselves with what we have now. Because globalisation and the digital revolution pose huge challenges for Germany’s steel industry.
Steel is one sector of our economy where the current developments in global trade policy are visible in sharp relief.
We can see state-subsidised excess capacity which hits us hard, but also the EU as a whole, and indeed the United States.
We can see China, which today produces as much steel as the rest of the world put together, increasingly preventing fair competition. That’s what we call aggressive state capitalism.
And we can see the reactions of those who think ever more protectionism is the answer to these challenges, who thereby put in jeopardy the multilateral order and free trade, from which we Germans in particular benefit so much.
These are the new realities we have to deal with, the new realities we have to respond to. We will not be able to find a solution for everything right away, and certainly not on our own. But one thing is already clear: isolationism, a path some countries are beginning to take, absolutely cannot be a solution!
Here in the Saarland we know that quite well. There were times when the Saarland was cut off from the fledgling Federal Republic by customs barriers. The customs duties made many goods from the Federal Republic unaffordable. This led to a flourishing black market in the region.
And showed very clearly on a smaller scale how customs duties and trade barriers ultimately harm everyone.
This is also true, not to put too fine a point on it, of the current US punitive tariffs on steel imports. They are an unjustifiable attack on free trade. And when I see that the reason given for imposing them is “to protect national security” – which, by the way, is a rather twisted logic when you’re dealing with friends and allies – I get a real sense of foreboding. What it all really comes down to, of course, is an attempt to give local companies a competitive advantage at the expense of European firms. That is all it is.
Ladies and gentlemen, in the end, it will be US consumers and American companies dependent on supplies from here that are hardest hit by the tariffs. Maybe not immediately, but certainly in the medium and long term.
That is why in a united stance the EU has responded with countermeasures and protection measures. And let me tell you quite frankly that two years ago I would never have imagined that I would be giving a statement saying “We have responded to the latest decisions made by the US with appropriate countermeasures.” Nor that the US President would announce that Russia, China and the European Union are his country’s “foes”. But, ladies and gentlemen, these are apparently the realities we have to deal with today. And that is why, notwithstanding all the difficulties, one crucial prerequisite for meeting the challenges is that the EU stands united. At the same time, though, we are still in contact with representatives of the US Administration. We are making it clear that US tariffs go against their own interests and are calling on our colleagues there to stop their protectionist measures. What is more, ladies and gentlemen, we will not enter into any negotiations with a gun to our chest.
I was in the United States two weeks ago, and we talked about another subject that’s still up in the air: the threat of punitive tariffs on cars. Everybody knows basically that means German cars. And I again made it clear to the people I spoke to in Washington that German cars are anything but a threat to the national security of the United States. On the contrary, German cars make American roads safer. I admit, my message hasn’t yet quite got through. But this just shows the absurdity of the issue we are having to deal with: punitive tariffs are being imposed on goods made here and the justification is that they are a threat to US national security. But that is certainly not the real reason.
Ladies and gentlemen, that is why we are convinced that the correct response to steel overproduction is not countries going it alone with their own approaches, but the opposite: increased multilateralism and international cooperation.
The G20 Global Forum on Steel Excess Capacity initiated by Germany is a perfect example. The United States and China are both members. We are continuing to work together to find a compromise for reducing excess capacity.
The Forum’s Berlin Declaration under the German G20 presidency last year was a big step forwards. In the Declaration, the participating countries at least committed themselves to closer cooperation.
That this was not merely an empty promise became clear just a few weeks ago at the Forum ministerial meeting in Paris: despite the current tensions in trade, there is still consensus on reducing excess capacity.
Multilateral bodies and international formats like this, which bring together the various actors and interests, remain the key to overcoming the complex trade challenges facing the world today. Only in bodies like these can we make lasting progress, even – and I am aware that there is some impatience – if it can be wearisome and take a long time.
Another success to report is the fact that global excess capacity in steel production, which had increased greatly, has at least fallen again over the past two years. But that is not enough. I have on several occasions made it clear to my Chinese counterpart that the adjustment of just 1.3% last year is not enough, not by far. China definitely needs to do more. On that we are in agreement with the United States, in the EU and also with other countries such as Japan. This presents an opportunity, and we will continue to all pull in one direction.
Ladies and gentlemen, esteemed colleagues,
In Germany, the steel industry is a yardstick for future economic development. Challenges facing the steel sector often presage challenges for our economy as a whole.
We have one of the most open and most densely networked economies in the world. That is why we are so much affected by the rules based global economic order being cast into ever greater doubt. We are affected more and earlier than others.
Almost one in four jobs in Germany depends on exports. This is why it is of particular importance to us to defend and further develop the rules based order.
We are working here with those of our partners who share our interests and values and who are committed to multilateral trade.
There are more of them, countries and actors, that it may at times appear. But I see it in many talks with colleagues across the world, from Japan to Canada, who have and have shown a great interest in what we once described as “an alliance for multilateralism”, who have an interest in treaties and agreements being implemented, and in continued trust and reliability in international policy-making. They have an interest in an association of those who want to retain binding rules so that there can be reliance on each other in the world. This is more necessary today than ever before. They are ready to commit their political capital to enhanced international cooperation, particularly in international economic and trade policy. They are needed today more than ever before, and they have to be better organised than they were in the past, when people thought all the international agreements we had concluded were givens.
They want not only to preserve, but also to modernise the global trade order, for example as regards the role of state owned enterprises or issues concerning digital technology and the platform economy. This, too, is increasingly feeding into industrial policy.
These are all lofty aims, and some people might feel they are not affected by them. But that is not the case. We should do everything possible to deal with these questions. Because if the global trade order in and of itself is cast into doubt, then there will be more than just an economic impact on us. There will also be a political impact, because prosperity and social justice are increasingly being challenged. This touches on nothing less than the foundations of our coexistence – in Germany, but also in Europe as a whole.
Ladies and gentlemen,
Given the forces driving Europe apart – of which Brexit is but the most visible – we need a united Europe in economic policy. And the only possible answer to “America first”, “China first” or “Russia first” is “Europe united”. There is no one country in Europe big enough to rely on its own capacities in any of these conflicts. Paul Henri Spaak, a former Prime Minister of Belgium and one of the founding fathers of the EU, once said: “There are only two kinds of countries in Europe: small countries and small countries that have not yet realised that they are small.” That applies to Germany too. Even we are dependent on the answers to questions from Washington or Peking being European answers. Europe is a single market with 400 million consumers. And only united do we have the strength needed to pursue our interests internationally.
That is why only a strong, sovereign Europe has a chance as a global economic power to truly do something to counter not only protectionists but also populists – and when you look you will see that they are often one and the same. That is why we are moving forward in Europe with France, for example when it comes to further developing the eurozone, but also in shaping the digital future. And that is why it is sensible to talk to the French President about the proposals he has made for the steel industry, the border carbon adjustment mechanism, which aims to make those who import steel to Europe but don’t take climate protection measures in the country of production pay a tax. Because, esteemed colleagues, our climate policy is after all supposed to protect the climate, not the competitive advantages of those for whom climate protection is an unknown concept.
Within the WTO, too, we Europeans stand together, and that’s a good thing. We are pushing forward proposals for increased transparency and are committed to reforming the dispute settlement mechanism in order to better protect global trade against state capitalism and unilateral measures. And on this point the US is not altogether wrong. The WTO is an organisation oriented to the market economy. It does not take adequate account of the fact that there are players like China which are not really market economies but state capitalist entities. So it is right for the EU to work on ideas for reform in this area in particular with the Americans and Japanese.
Ladies and gentlemen,
The steel industry is facing challenges not only as a result of state-subsidised overproduction or attacks against free trade.
Advancing digitisation and climate change, too, are making it clear that we cannot rest on our laurels. Anyone who finds a response to these developments necessarily has a perspective, and this perspective must not be to the unilateral detriment of those who set themselves noble goals in environment and climate policy; rather, it must be a balanced mechanism which does not primarily give rise to distortions of competition where we don’t want them.
I believe there are many instances where we are heading in the right direction; although sometimes speed is lacking. The steel industry’s state-of-the-art materials , for example, are the basis for more efficient and more environmentally friendly products. Environmental protection and steel are not always irreconcilable. For instance, on average, 82% of an offshore wind farm consists of steel. In addition, steel’s environmental footprint benefits from the fact that it is highly recyclable. There is no reason, from the environmental viewpoint, for steel to eschew the limelight, ladies and gentlemen.
Everywhere, the world is changing. But this gives us – industrialists and politicians – the opportunity to keep an eye on this change, to help shape it. And, even if one sometimes gets the feeling that it’s something one shouldn’t say: I am optimistic and confident. The World Economic Forum’s latest Global Competitiveness Report says that Germany is the world’s most innovative economy.
The determining factors were the number of patent applications, the quality of research publications, customer satisfaction with German products, etc. This is all thanks to companies in Germany and their ability to innovate, and to the employees who make it possible. That is why Germany’s biggest competitive advantage is and will remain its companies, with the principle of co determination and all that goes with it. Despite all the problems, when I see how Germany is regarded internationally, especially when it comes to innovation, it gives me hope, not least for the steel industry and for Germany as a steel location. Steel does not belong in a museum. Steel is the future.