Remarks by DG Azevêdo

Thank you Professor Kempf, President of the BDI,
Chancellor Merkel,
Ministers,
Excellencies,
Ladies and gentlemen,

Good morning. It is an honour to be with you today to celebrate this Day of German Industry.

At the outset I want to thank Chancellor Merkel for her leadership in supporting trade and the trading system – not just for the good of Germany, but for the promotion of global peace and prosperity.

In addition, let me say a word of thanks to the BDI for its work to champion free and fair trade, based on global trade rules. We have worked closely together in recent years – for example through the WTO's Trade Dialogues initiative and through the B20. So thank you once again for that support and partnership.

Today, German industry is a brand. And it has the kind of reputation that any brand would envy. It is respected, admired and sought-after around the world.

Last year I had the opportunity to see for myself why this is the case.

I visited a factory just outside Berlin, which makes state-of-the-art jet engines.

It was truly impressive. I saw how engineers were applying the latest technologies to their work. I saw how they were training apprentices to continue building German industry into the next generation. And I saw how German industry operates in the modern world – in a way that is deeply integrated with the global economy. 

To produce one engine this facility uses parts from 900 suppliers, from small and large companies – both here in Germany and around the world.

This story is repeated in plants and factories throughout the country.

Each year Germany exports a remarkable 18,000 dollars of goods per citizen.

Almost one in three German jobs are export-related.

But even with such clear benefits, I think we still have a perception gap. People don’t always connect their jobs, or lower prices on the shelves, with being open to trade. Industry has to be vocal in spreading that message.

All the evidence before us proves how the health of global trade and the maintenance of stable, open markets are absolutely fundamental for the economy, here in Germany and everywhere else.

So this is my message to you today: let's work together to strengthen the trading system so that it can continue to serve Germany – and serve us all – for many years to come.

I think this is the best response to the current challenges that we see all around us.

As you all know, tensions have been escalating rapidly in recent months between major trading partners.

New tariffs announced so far this year cover hundreds of billions of dollars of trade. Further measures have been proposed. And at present there is no end in sight.

Now, some might say: let’s keep this in perspective. The measures announced this year – while very significant – affect less than 2.5% of global trade. Moreover, we are still enjoying the best run of strong and sustained trade growth since the financial crisis.

Of course this is all true – but, at the same time, the warning lights are flashing.

A continued escalation of tensions would pose an increased threat to stability, to jobs and to the kind of growth that we are enjoying today.

There is a lag between the moment when a trade restrictive measure is introduced and when its full impact is felt on the ground.

Nevertheless, we may already be seeing some early effects.

Indicators show that businesses are holding off on making job-creating investments. Export orders are declining.

Our economists have been assessing a variety of possible scenarios to develop this picture. The scenario of a full, global trade war, with a breakdown in international trade cooperation, would have very dramatic effects. It would knock around 17% off global trade growth, and 1.9% off GDP growth.

There would be no winners from such a scenario. Every region would be affected. For the EU the hit to GDP could be around 1.7%.

Clearly we cannot let this happen.

There is a responsibility on the whole international community to help ease tensions, in the interests of all of our citizens.

We need to see more dialogue – both bilaterally and through the WTO.

And, in fact, this situation is putting a new focus on the multilateral trading system as a place where the solution may be found.

At the root of the current tensions is the argument that the trading system is allowing distortive trade practices to go unchecked. Therefore, the argument goes, the system needs to change to be more responsive to such measures.

I don’t think that anyone believes this can be done through a technical discussion. The current crisis is political. It requires a political solution.

This is why a high-level conversation about 'WTO reform' or 'modernisation' is beginning to emerge. It is seen as a way to deal with some of the big trade problems that some members have identified. 

A variety of initiatives and meetings are being prepared, including by the EU – and with Germany also playing a key role.

A range of priorities have been suggested by WTO members. These include:

• resolving disputes and reaching agreements more rapidly and effectively,
• addressing a variety of trade distorting practices,
• advancing the trade and development debate, and
• improving notifications and transparency.

These are all important issues. Precisely which issues are taken forward is for members to determine. But clearly this reform debate is gathering significant momentum.

It was at the top of the agenda when I met with G20 trade ministers in Argentina two weeks ago. They committed to work on ways of improving the WTO to ensure that it can meet current and future challenges. And they recommended that leaders address these issues at the G20 summit in Buenos Aires in November.

The summit will be a key moment.

In addition to the immediate economic threats of a trade war, we need to acknowledge the serious systemic threat of a continued escalation in tensions. This would have consequences for the long term.

It took many decades of painstaking work from governments around the world to build the trading system that we have today.

Many, including Germany and the EU, currently put a lot of focus on pursuing their trade interests bilaterally and regionally – and I welcome this – it all contributes to freer trade. But we should remember that all such activity is underpinned by the WTO system.

We all rely on the WTO.

It plays a crucial role in maintaining stability and predictability in global trade and in the global economy. It helps to lower prices. It helps to create jobs and growth.

Without the system we would face a future of uncertainty, lower growth and diminished opportunities everywhere.

Yet today we are in a situation where basic rules and principles of the WTO are being questioned, and where the continued functioning of the Appellate Body is at risk.

If we truly value cooperation in global trade then we must step up our efforts to resolve these issues. And we must stand up for the system.

After the fall of the Berlin Wall in 1989, I think that economists, academics, business people and politicians concluded that the argument had been won. They no longer thought it necessary to raise their voices for trade and for an open and better integrated global economy.

Making the case for trade and the trading system seemed almost like making the case for breathing. It was self-evident. And, as a result, people began to forget its value. They simply took the benefits for granted. 

Of course the trading system is not perfect – but it represents the best efforts of governments around the world, working together for 70 years.

The system can be better – and it must be better. But it is nonetheless vital.

So while we work to improve it, and ensure that it is more responsive to evolving economic needs, we must also preserve what we have.

I count on your support to that end.

Germany and German industry are valuable champions of trade and the trading system. So I urge you to make your voices heard louder than ever.

Working together, we can meet the challenges of today and build a trading system which will continue to serve our economies and communities for generations to come.

Thank you.