Prior to the “Hamburg Summit: China meets Europe” and after the election of Donald Trump as U.S. president, concerns about tougher world trade conditions are emerging in Hamburg’s economy. In an interview with Hamburg News, Hans-Jörg Schmidt-Trenz, Managing Director of the Chamber of Commerce, discusses the repercussions of Brexit, next week’s high-profile China conference and key issues in 2017.
Hamburg News: It now almost six months since the Brexit vote. Have any repercussions emerged for commerce in Hamburg? Where do the opportunities lie?
Schmidt-Trenz: So far, the repercussions of Brexit for commerce in Hamburg have been limited. They will be noticeable during the coming years. According to a survey of our members that do business with Britain, around half expect reduced foreign trade with the country. Also, one-third of the firms interviewed, expect decreased investments in Britain. Pleasantly, only 3 per cent of companies expect lower employment and investments here in Hamburg. More trade restrictions, for instance, customs duties, especially are viewed as the greatest risk. And many companies are wary of political and legal insecurity.
Brexit could have advantages for Hamburg. Many companies with European headquarters in London are now looking for new locations in the single market. Chinese and Japanese firms, already located in the Hanseatic city, or shipping companies from Greece and Asia may yet eye Hamburg as the seat of their European headquarters. Hamburg is already holding intense, Hanseatic-style talks with these companies – discreetly and without arousing too much attention. If Hamburg seeks to win over Asian companies, that is certainly the right way.
Hamburg News: The consequences of the U.S. presidential election on world trade are not yet foreseeable. What other developments are impacting Hamburg’s economy at present and are likely to do so next year?
Schmidt-Trenz: The difficult economic situation in Russia, marked by western sanctions, the rouble’s loss, reduced income from lower commodity prices and the lack of structural reform are certainly problematic for our location. This very difficult, conflicting situation led to a 70 per cent drop in Hamburg’s exports to Russia in 2015. Container handling with Russia dropped by one-third. That dealt a severe blow to Hamburg as a foreign trade location and improvement is not yet expected. Companies in Hamburg are taking things as they come and are trying to keep their branches in the huge Russian market open for as long as sustainable.
Generally speaking, increasing protectionism across the globe is a great concern. More than one-third of all German internationally operating firms have to deal with new obstacles every year such as import taxes, customs duties, additional security requirements or a lack of local market transparency. Subsidies for domestic companies give them an edge over foreign firms. Even small changes to certification requirements can negatively impact transnational business by Hamburg-based firms.
Then there is more animosity towards globalisation and especially here in Germany. Globalisation cannot be stopped. But a free trade agreement on a global level can remove trade barriers, simplify the movement of goods and make regulations and guidelines more transparent. A free trade agreement would allow us to attach sensible rules, based on our western environmental and social standards, to market liberalization. We achieved that with the CETA agreement between Canada and the EU. I really do hope that it can be implemented soon.
Hamburg News: Let’s talk about trade with China (just before the summit in November). How is trade with China developing? What should commerce in the north expect?
Schmidt-Trenz: The Chinese economy has gone from boom to the “new normal” meaning the era of two-digit growth rates is over. Yet the Middle Kingdom still has a solid growth path to show with 7 per cent growth rates. However, many companies have to rethink their business models in reference to China. It has long since ceased being the world’s extended workbench with low wages and a sales market for products that are not of a high technological standard. China is overhauling its economic infrastructure and emphasising qualitative instead of quantitative growth and developing the Chinese domestic market.
Hamburg News: What implications will that have for Hamburg?
Schmidt-Trenz: Innovation is the key word in the Chinese economy. That offers Hamburg-based firms, in the renewable energy, health, logistics and export sectors, investment and co-operation opportunities. In a few years, China may no longer be the right partner for firms in Hamburg that have produced goods cheaply in China or exported products there that were not high standard. The Chinese economy is undergoing wide-sweeping transformation. German and European firms should keep an eye on the reforms. That’s part of the motivation for the “Hamburg Summit: China meets Europe” from November 23-24, 2016 in our Chamber of Commerce. High-ranking speakers like China’s most powerful woman Liu Yandong, Deputy Prime Minister, Jyrki Katainen, the president of the European Commission, Gerhard Schroder, former German chancellor and Joschka Fischer, former deputy chancellor, will give a good picture of the current and future Chinese economy and the potential for European companies there.
Hamburg News: Trade 4.0, Internet of Things and digitalisation are the overriding issues at present. How is commerce in Hamburg placed – are there new surveys, data and findings?
Schmidt-Trenz: Over 90 per cent of firms in Hamburg say digitalisation is crucial to the development of their businesses and work processes, according to the latest survey by our Chamber of Commerce. Happily large parts of Hamburg’s entrepreneurship see digitalisation as a chance; for instance, increased sales could have a positive effect on employment. By setting up a Hamburg-based centre of competence, Mid-Sized sector 4.0, our Chamber of Commerce will meet our members’ greater demands for information from December and will get implementation projects off the ground.
Hamburg News: Are there other important trends and developments that we may have lost sight of by focusing on digitalisation?
Schmidt-Trenz: Hamburg has 19 state and state-accredited universities, several non-university research centres and other centres of applied research. Thus, it is well placed in many forward-looking fields. However, plenty remains to be done to exploit commercial potential. Technology parks linked to DESY in Lurup and Bahrenfeld and that have been under discussion for a long time already, the Energie-Campus and the Laser Zentrum Nord in Bergedorf and associations with the Hamburg University of Technology (TUHH) must be tackled at long last. Applied research must be strengthened as well. The senate’s existing strategy towards the Fraunhofer Gesellschaft could be expanded so that at least one independent Fraunofer Institute has been set up in Hamburg by 2020.
Hamburg News: What has gone particularly well in 2016 and what will be the main focus of your plans in 2017?
*Schmidt-Trenz: * Our campaign “Ran ans Mitglied” (Go for the member) has been going very well so far. Our staff will probably visit some 5,000-members this year. And some of our communication channels are new as well. We are more active in social media e.g. Facebook and Twitter. On the other hand, we are also publishing a quarterly newspaper targeting SMDs, which is proving popular. Next year, we will also approach our members and those in honorary positions to react faster to the latest trends and issues. Naturally, the next plenary election in January and February will influence our focal points in future. But we will certainly push ahead with digitalisation more intensely – both in our chambers and in terms of members’ efforts towards digital transformation and introducing new business models.
Interview by: Karolin Köcher
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