EUnited debates Europe's volatile trading environment

2 December 2009 The Square, Brussels, Belgium

With volatility on the menu, the EUnited's latest dinner debate was always going to be an unpredictable affair and so it proved. Marc Solvi painted a stark picture and called for flagship visionary projects, while Marcel Genet pointed to China and its "tremendous opportunities". In support, Peter Klein acknowledged a shift in power at the trade negotiating table but felt that the multilateral trade systems had withstood a severe stress test. Timo Kiiha described how the EIB was supporting business but could give little hope to SMEs, at the moment. Certainly they would have to innovate to survive and that took the debate to greener issues. Charles Crosthwaite-Eyre warned that everyone's strategies (suppliers and customers) would have to be revised as a result of climate change while Philippe Lamberts simply said that civilisation would have to change - due to global warming - and that Europe would have to innovate (to develop new clean technology) soon... or it would be too late. 

Opening the debate, outgoing EUnited Chairman Dieter Klingelnberg insisted that this was no time for business as usual. He argued that it was a time for innovation and new business models and invited the speakers to show the way. First up to the podium was Marc Solvi of Paul Wurth SA. He expressed concern about the future of Europe's engineering projects being controlled from outside of the continent - he wanted Europe to emphasise its superior performance, its innovatory capability and its capacity for sustainable R&D. Although Europe had weaknesses (high wages and costs, a high level of regulations, a shortage of qualified manpower, etc.) he stressed its sense of tradition, its ability to solve technical problems, an ingrained culture and individual responsibility within the workforce. Although Solvi painted a somewhat bleak picture, he also called for the EU's economy to be stimulated so that Europe could emulate the BRICs[1]. He wanted consumption per capita to be increased in order to stimulate the need for new technology. He did not want Europe to rely solely on service industries - there had to be flagship visionary projects in Europe.

Following Solvi, Laplace Conseil's Marcel Genet focused on steel, explaining that production in the OECD area in 2009 would be 35% below that of 2008. In comparison, China would be increasing production by approximately 15% in 2009 and 2010. He reasoned that China would take 20 years to reach the level of OECD countries - and that 20 billion tons of steel would be required in that time. Describing the "prospects" as tremendous, although not universally understood, Genet argued that China would probably succeed (due to sufficient raw materials, technical solutions) in its ambitious plans. Turning to Europe, Genet saw a mixed picture with some countries (Germany, Italy...) having a healthy engineering outlook (greater than 25% increase in apparent steel usage) and others doing less well (France, UK...).

The next speaker, the European Commission's Peter Klein looked at the financial crisis from a trade perspective - he reasoned that it had led to a shift in power (e.g. from G7/G8 to G20) and to a more assertive attitude from, especially, the BRICs. As for multilateral trade, this had resisted a serious stress test - as protectionism had not reared its head - and it had been shown to be the way to achieve a quick recovery from the crisis. Regarding bilateral agreements, the EU had followed its principles - to improve market access for EU countries (to build a strong industrial base in Europe).  Turning to the EU's wish to reinforce the knowledge economy, Klein saw a growing need to protect intellectual property and that dialogue was continuing in China. Describing intellectual property theft there as "endemic", Klein said that Chinese companies were now beginning to recognise the problem, so that in future there would be both internal and external pressure.  

Next, the European Investment Bank's Timo Kiiha acknowledged that, due to the economic crisis, access to finance remained a problem. He stated that the European Investment Bank (EIB) was trying to mitigate the effects of the financial crisis and that it would be lending 30% more in 2009 than in 2008 (a figure of 70 billion euros). He described three growth categories within the EIB:

• R&D/innovation: corporate loans and those to companies showcasing new innovative technology - if their credit worthiness met the bank's requirements
• Investments supporting the environment: projects promoting energy efficiency in order to meet the 2010 target of 20% greenhouse gas savings - i.e. new technologies with long-term viability
• "Assisted areas": loans to the new EU member states and to the candidate countries, with the goal of enhancing regional employment in those areas - if the projects were sound investments.

From the audience, R U Robots Limited's Geoff Pegman wanted to know where, in the current economic climate, SMEs could go for finance. Kiiha explained that for SMEs, the EIB worked through intermediaries and that - he agreed - there was a "gap between supply and demand". He noted that the EIB was working to finance that gap: risks might be taken with partner banks, but there was work to be done. Kiiha added that some EU member states had national funding agencies but he acknowledged that this was not sufficient.

The two final speakers focused on green issues. Eyre Consulting's Charles Crosthwaite-Eyre forecast that all of EUnited's members' clients (and the members themselves) would have to modify their strategies due to climate change. Insisting that action was urgent[2], he said this meant the death of the traditional utility company. Eyre foresaw them having to reinvent themselves into energy service companies that met customers' energy needs within a carbon budget. Looking at EU legislation, he focused on opportunities in the engineering sector due to the need to: a) generate renewable energy[3], and b) make technology transfers from OECD counties to developing countries in order to reduce emissions[4]. Looking ahead to Copenhagen, Crosthwaite-Eyre felt there could be a weak outcome - with the US preferring a non-binding treaty, the EU wanting a legally-binding outcome with carbon caps and with the developing countries wanting a combination: a Kyoto style arrangement (that was proving effective for them) together with a legally binding approach for OECD countries.

The final speaker, MEP Philippe Lamberts went straight to the point - it was a matter of "life or death". There was going to be a change in civilisation and everyone had to learn to live within the physical constraints of the planet. Lamberts saw the need for a new reality; less consumption linked to more use of renewable resources... there was no other choice and innovation was the key. Furthermore, he was concerned about Europe in particular; even before the change in the US presidency, there had been four times as much "green" investment in the US as in Europe. Lamberts therefore wanted European investors to support innovation, if they did not, then other countries (especially China) would. He argued that China was "obsessed with stability of the regime" - and was concerned about a) social inequalities and b) the environmental time bomb. Lamberts forecast that China would build and buy technology and that the US would be aggressive; he therefore gave the EU a period of 5-10 years to re-establish Europe as a leading player. After that it would be too late.    

© John Chapman (Writers' Ink)

Additional photographs and information can be found on the EUnited website

www.eu-nited.net

 

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[1] The developing economies of Brazil, Russia, India and China.

[2] Eyre said that after allowing for growth, the global economy's carbon productivity would have to increase by 5% to 7% annually.

[3] Eyre stated that the EU was committed to 20% renewables by 2020.

[4] Eyre noted that the International Energy Agency had forecasted $500bn additional investment each year to avoid catastrophic global warming.

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