Speech by Federal Chancellor Angela Merkel at the G20 dialogue forum with business associations (B20) in Berlin on 3 May 2017
Representatives of business associations,
Ladies and gentlemen,
The G20 has a special responsibility in global economic affairs. After all, it makes up two-thirds of the world’s population, three-quarters of its trade and more than four-fifths of its Gross Domestic Product. So when we agree on particular stances or approaches within the framework of the G20, it is highly relevant, you could even say of the utmost relevance, for global economic development.
The financial crisis, which began in 2007 as a property crisis and subsequently mushroomed into a global economic crisis, showed all too clearly that no country in the world is in a position to halt the domino effect of negative developments like this single-handedly, and no country by itself can effectively prevent such a crisis from recurring. This insight helped the G20 to become established as a global cooperation platform. Since then, we have also been meeting at the level of Heads of State and Government. Up to that point, the G20 only included the finance ministers. The G20 is an informal body. It does not enact legislation or adopt regulations. Nonetheless, the G20 may prove to be a trailblazer in finding responses to the major challenges of our times.
The first steps we took involved learning lessons from the international financial crisis. For example, the G20 has agreed that, in future, losses in the financial market will not be compensated by taxpayers. Banks now have much more equity capital available. The concept of “too big to fail” is no longer an issue. And there is a G20 roadmap to improve the monitoring and regulation of shadow banking. This is a topic I consider very important, since regulating banks is not, on its own, sufficient, because it immediately leads to evasive action into the shadow banking system. The goal was – and we now know how hard it is to achieve; the finance ministers are still working on it – to create a level playing field, i.e. comparable, globally applicable regulations, and to introduce regulations for every financial centre, every financial player and every product on the financial market. We have made good progress on this. That, of course, doesn’t mean we can prevent crises completely, but the risk that a crisis on that scale will recur has been reduced.
We are also calling for transparent, fair and reliable taxation systems. That involves implementing measures which curb attempts to reduce taxes through base erosion and profit shifting, among other things. The transparency initiative adopted by the finance ministers within the context of the G20 is already resulting in considerable change throughout the world.
Over the years we have consistently expanded the G20 agenda. Basically, our motivation was that after overcoming the acute crisis, we wanted to become more open towards what has recently often been referred to as inclusive growth. That is why the issues of climate change, poverty, health, displacement and migration, and development have appeared on the agenda alongside the traditional economic and financial topics. These are issues that concern many people. These are issues that are playing a huge role in all societies against the backdrop of advancing globalisation.
It is a fact that the world is becoming increasingly interconnected. That means, for example, that we know more about one another, and we are cooperating more with one another. What one country does or doesn’t do can sometimes have a very rapid impact on other countries. This also and particularly applies to economic development. That is why it is so important to regularly take account of global indicators in economic and growth forecasts; they include conflicts, migration, epidemics, financial market developments and economic policy decisions in very different countries. All this involves unpredictability and uncertainties. That raises the interesting question of how to respond.
The very existence of the G20 really means that isolation and protectionism are a dead-end rather than a way forward. That is why I say that anyone who tries to evade international competition may hope to gain an advantage in the short term, but in the medium and longer term their own capacity for innovation will be weakened. For new ideas and developments are most likely to thrive in an atmosphere of freedom and openness. That is, at least, the view of the German Presidency.
With this in mind, we are working within the context of Germany’s G20 Presidency to jointly create a global regulatory framework in order to tap the potential offered by globalisation and reduce the risks it presents. To achieve this, we need strategic decisions that will ideally provide medium and long-term guidance for all stakeholders. That is why we have chosen the motto “Shaping an Interconnected World”. An interconnected world should not be shaped haphazardly but needs to be designed to build resilience, improve sustainability and assume responsibility. Prosperity through openness – that is what we are both willing and able to share with our partners in the world, with industrialised countries and developing nations alike. People’s well-being is, of course, always at the heart of what we want to achieve. And what we are doing in the area of the economy and financial markets is not an end in itself but focuses on the interests of our citizens.
Yet simply stating our intentions is not, of course, enough. Our words have to be followed up with action. It is vital that we engage in dialogue on this issue within our societies. I therefore want to thank you for having gathered since yesterday to discuss what guidelines you want to propose to us. As economic players, of course, you are aware what obstacles can get in the way of trade and investment. You maintain international contacts. That makes you partners of a policy designed to shape globalisation. Yet, looking at the entire G20 format, it goes beyond questions of economic policy.
We have established other dialogue forums in addition to the dialogue with business associations. I have already spoken to representatives from the field of science. There is an alliance of the national academies of science of all the G20 countries. Last week, women’s issues were on the agenda; incidentally, business issues also played a prominent role there. One of the discussion topics was e-skills, i.e. the digital skills of young girls, and specifically starting out in business. It therefore seems that you have forged a connection with the women’s forum, which I very much welcome.
You came together yesterday and have gathered again today. Your session will be followed by meetings of the unions, the non-governmental organisations and the young people. We have placed great value on a broad-based civil-society process in order to examine various perspectives, but also to emphasise that the G20 is not some kind of elitist political event, but makes use of knowledge and skills from various areas of society. Ties are not only formed at political level, but also among business associations, women’s associations, unions and other groups. Mr Heraeus, I offer you and the many others who have assisted you my sincere thanks for your dedication. I am quite sure that we will benefit from the insights you have gleaned. We will try to incorporate these findings into our communiqué and our activities.
Now, you are aware that we have 20 different countries with 20 political systems, in some cases very different, with 20 very divergent levels of development, but everything has to be agreed on unanimously. That is not an easy task. The so called sherpa process – as you can imagine – poses a considerable challenge. It is almost easier to herd cats than to keep the people here together. But I can also say that there is a high level of common will because ultimately all players know that shaping globalisation is possible. I am very glad that you from B20, as business representatives, have clearly expressed your support for open markets and a multilateral trade system.
Again and again we encounter issues which we thought had already been decided, but where year after year we have to struggle to regain the previous year’s level. Of course, certain vanities are also cultivated. In the G20 we work together as a troika. Our predecessor is China. We enjoyed wonderful cooperation with China, and we continue to work well with China today. Argentina will take over from us. When you have devoted passion and energy to formulating statements on climate protection or on trade in the past year, you don’t, of course, want to abandon them if in the next year different ones are to be composed, which means that keeping what has been attained is sometimes an achievement in itself. I don’t want to go into any more detail now.
Be that as it may, I am grateful for your support of open markets and a multilateral trade system. However, it has to be said, particularly with regard to a multilateral trade system – the WTO also takes part in the G20 meetings – that although the G20 format came into existence as the result of a crisis, we have seen an increase in protectionist measures in recent years. These are not necessarily tariff-based barriers, they can also be non-tariff barriers. Mr Azevêdo, Director General of the World Trade Organization, knows a thing or two about inventions that, when it boils down to it, are nothing more than trade barriers.
With regard to globalisation, we are now increasingly having to wrestle with the issue that while it’s all well and good that global prosperity overall is growing, the question remains who is actually benefiting from this growing prosperity. That brings the topic of inclusive growth onto the agenda. It means that we also need to be more effective in integrating economically weaker countries into the international division of labour. We need to find incentives to boost economic activity in the countries and regions in which it is not yet so well developed. In this area particularly, the international organisations, the World Trade Organization, the International Monetary Fund, the World Bank and the International Labour Organization are very helpful in submitting proposals to us based on their own perspective. I have met with the heads of these international organisations regularly each year since 2007 – then it was still the G8 Presidency, which we held for the first time that year. We can safely say that the cooperation between these international organisations, including the OECD – which I forgot to mention just now – has intensified considerably, and that these institutions also provide important input for our work in the G20.
We can see the impact that better integration into the global economy can have when we look at the Millennium Development Goal from 2000 of halving extreme poverty rates by 2015. On average, this goal has been achieved. That is above all due to the economic upswing in Asia. The deadline for the Millennium Development Goals has passed. Now we have the 2030 Agenda, which takes a different approach that I approve of: it focuses on every country, regardless of whether they are industrialised countries, developing nations or emerging economies. The goal is economic development and sustainability. In addition, we have the multilateral Paris Climate Agreement, which sets down a binding process to maintain an upper limit for global warming of two degrees, ideally 1.5 degrees. In my view, both agreements represent a major achievement for global politics. But now the time is coming where we have to implement these obligations. To do this, we need business, too, to do its part.
Ladies and gentlemen, I am grateful that you are embracing this responsibility. The title of your dialogue forum: “Resilience, Responsibility, Responsiveness – Towards a Future-oriented, Sustainable World Economy” shows that these are the very issues you are focusing on. Enterprises are well positioned to assume responsibility and to be guided by the principles of sustainability and inclusive growth. I think it is perfectly legitimate, I would even say helpful, to highlight this – regardless of whether we are talking about issues of climate protection and resource efficiency, fair supply chains or investment in countries that are in particularly urgent need of it.
As we have seen that with some Millennium Development Goals, where they have been achieved, this success has been chiefly due to the very dynamic development that Asia has experienced, in contrast to Africa, we have committed ourselves to making the Partnership for Africa a top priority of our Presidency. We want to strengthen economic cooperation with our neighbouring continent. Now the task is basically to find a way of moving away from providing traditional development assistance to generating real economic momentum. These two areas have always been treated quite separately in the past. On the one hand we have traditional development assistance, which has not necessarily led to a self-sustaining upswing. On the other hand we also understand, when we see the African Union’s Agenda 2063 that we need to think much more in development categories.
In this area, we can also learn from the emerging economies. For example, I am following with keen interest China’s approach towards the Asian Development Bank, for example, as China, itself coming from great poverty, has gone through a development process and knows what is important. For instance, transnational infrastructure projects are often crucial to improving mobility also within a country. Countries in Africa need to have better access to ports. Electricity is another vital factor, of course. When we look at the level of electrification in many African states 50 or 60 years after independence, we realise that the first thing we need to do is not to talk about building up medium-sized enterprises but to discuss the conditions that need to be met before businesses are even able to settle there.
Having said that – the environment minister is here – today it is possible to skip entire development phases that we as industrialised countries passed through – with regard to energy supply, for example – because the sun in Africa is much more readily available than it is here and because solar energy has become much cheaper than we could have envisaged ten or fifteen years ago. We need to ensure that countries do not again go through all development stages, but instead take advantage of new opportunities from the start.
Skipping development stages is also possible as a result of the spread of digital technology. It is interesting to note that many young people in Africa first encounter electricity via the solar cell of their smartphone. That is also how they know how other people in the world live. It gives them totally new perspectives on the world. That is another reason why the issue of digital technology needs to feature on the G20 agenda. Under Germany’s Presidency we have had a meeting of Digital Affairs Ministers for the first time. I believe this has been the right response. In the forum on women’s issues, too, we discussed in great depth the subject of women’s access to digital technology, which, like the major topic of access to education, is of crucial importance.
Ladies and gentlemen, that is why we have decided – and this goes for many federal ministries; it also plays a central role in the finance ministers process with Wolfgang Schäuble – to develop a Compact with Africa. The emphasis is on Compact, and, of course, Africa, but the preposition is also important. It is “with”, not “for”. That reflects the shift of focus. We want to cooperate with African countries and have already selected an initial group. We intend to discuss development projects with these countries, which will also take on ownership, responsibility for these projects, and we will then help them to set down the framework conditions, including loans and other tools, that they need to be able to implement the projects. So it won’t be an ex-cathedra approach – we tell you what’s good for you – but a joint task. I believe this is the right approach.
Of course, we need to ensure that in industrial development we also take into consideration sustainability factors, i.e. resource efficiency and climate protection. In this context, renewable energies are crucial in their competition with fossil fuels. The G20 states have considerable responsibility, given that they emit approximately three-quarters of global greenhouse gases. That is why it is important that we have a forum through which we can organise a regulated transition to a lower-carbon economy and learn from one another. We are not the only ones who are talking about this. Last weekend I visited Saudi Arabia and the United Arab Emirates. There, stakeholders are well aware that they need to go down a path that will allow the economy to prosper even in times when fossil fuels will no longer play a central role.
Ladies and gentlemen, investment in the sphere of energy policy and resource protection will pave the way for a low-carbon era. We have to show – and this was the problem in developing a global climate agreement – that resource efficiency, reduction of greenhouse gases and economic development are not mutually exclusive. The poorer countries, the developing nations, understandably also want to have the chance of development. It is therefore only right that the highly developed industrialised countries do their part to make new technologies marketable. In this context, the Renewable Energy Sources Act surcharge, which isn’t very popular with some German businesses, ultimately also contributes to the development of many other countries, enabling them to benefit from new technologies.
Ladies and gentlemen, I could go on to list many other aspects of our G20 Presidency. I would like to say a few words on the subject of business and health, which Mr Heraeus mentioned. Recommendations on the subject of health will be forthcoming. We very deliberately included the topic of health on the agenda. Without health, development is inconceivable. With this in mind, we have also put the fight against antimicrobial resistance and neglected tropical diseases on our agenda. Our approach to tackling pandemics is something else I consider particularly important.
We will be holding a meeting of the G20 health ministers for the first time. The health ministers will consider the question of what we have learned from the Ebola crisis. Together with the World Bank and the World Health Organization, they will conduct an initial, theoretical pandemic exercise. We have talked about this in detail, because an epidemic that can spread so quickly from one place in the world can also affect the entire global economy. We need to have clear plans on how to respond. We need to have specific insurance or other solutions in place for countries at risk so that they do not immediately descend into chaos. A great deal for the whole world hinges on what happens if I concede that a pandemic could develop in my country, but first and foremost a lot, of course, is at stake for the country affected. If the country is afraid that if it admits to the problem, it could slide down into economic chaos for the next five to ten years, it will remain silent. That is why we need to develop safety nets so that countries are willing to notify the World Health Organization of any cases and we can respond quickly before any further damage is caused. So that is another of our topics.
Thank you very much for coming here. Thank you very much for the work you have done for us. I would like to say to you on behalf of Mr Röller, our sherpa, and the entire sherpa staff, as well as in my own name, that we will do everything we can to incorporate as much as possible of what you say to us and what we then deem to be right – I don’t think there are too many disparities – into our agenda. Thank you once again to all those who have contributed, and thank you for coming to Berlin. You have helped us to effectively shape the G20 process in Germany for the summit in Hamburg. Thank you very much.