Europaforum Luzern [Europe Forum Lucerne] CEO Dr. Hariolf Kottmann, Clariant The significance of open markets for international companies. Openness and change as a basis for economic success in the age of globalization. Lucerne, November 11, 2014
Ladies and gentlemen, I would like to take this opportunity to present my contribution in the form of five theses which I will boil down to the essentials given the time allowed. I. My first thesis is: open markets are essential for international companies and there is no alternative to them in a globalized world. This is evident in the simple example of the labor market: our company, Clariant, has 850 employees in Switzerland, of which only 250 have a Swiss passport. Why is that? The answer is simple: due to global competition and our quality standards, we do not select our employees by nationality, but exclusively by qualification. In addition, many of our own employees are only in Switzerland for a limited time, where they apply their expertise and develop their skills. If this were curtailed, it would be a small catastrophe not only for us, but all Swiss companies who operate internationally and their local suppliers. Such a scenario Page 2 of 10
would cause tremendous damage to the country of Switzerland with its high cost-level and standard of living. This brings me to my second thesis and the keyword globalization : the world has fundamentally changed with the demise of the East-West conflict, the digital revolution and the rise of Asia. We are exposed to limitless competition, whose speed we cannot control and whose scope and ferocity we are unable to resist as individual nation states. Let me give you an example of what I mean by speed, scope and ferocity of globalization from the education and training market: China is investing in education and training like no other country in the world and produces highly-qualified people each year who are also needed internationally. More than 440,000 highly-trained engineers graduate from the universities in China. 440,000 engineers not in ten years or five years. Within a single year! That is 36,000 newly-trained engineers per month or 1,200 per day! Page 3 of 10
This brings me to my third thesis: adaptability and openness to new ideas are necessary for survival in an economy. Once again, Switzerland is a good example of this. The developments of the past 200 years show that the competition from other countries has always forced Switzerland to face change and in doing so, be better than the rest. Conversely, it can be said that creating barriers leads to isolation, and isolation has a negative effect on the prosperity of each and every citizen. That is why my fourth thesis is: the free exchange of goods and services, people and expertise creates an economic benefit, not only in Switzerland but also internationally. Why is that? Because this allows for more value creation! An example from the chemical industry: in the past, dyes were produced for the textile industry in countries such as Germany or Switzerland, for example. Today, this business is no longer profitable; textiles have mostly been produced in Asia for a long time now and it makes little sense to produce the coloring required in this Page 4 of 10
country. The textile business has been commoditized, the value creation decreased. At the same time, other business models have been created in this country, specifically those that require higher qualifications and better technologies and thus achieve added value. This specialization towards increased added value is especially essential for Switzerland as a small country without a domestic mass market. This is connected to my fifth thesis: freedom leads to prosperity. But freedom requires binding framework conditions worldwide. If we look at the current national debt and financial crisis, it is clear that too much freedom of movement in the banking system has led to a profound loss of confidence in all population groups and to a dangerous monetary policy. This has also done long-term damage to the idea of a free market economy. I believe it is right to regulate markets and improve production conditions step by step worldwide so that exploitation and profit maximization at the expense of the general public can be prevented. Page 5 of 10
On the topic of migration, we need a clear policy framework at the international level because people cannot be integrated into a society in any desired number or speed. This must be considered at the supranational level, without discriminating against people based on origin or nationality. II. Ladies and gentlemen, Please allow me to briefly expand on my theses from a practitioner s view. Clariant is part of a global competition. Our competitors come from both America and Europe as well as Asia. This means that we need a high level of flexibility and adaptability for our investment decisions. We also have to deal with intercultural issues that originate thousands of miles away from us. As a result, the following aspects are especially important to Clariant: Page 6 of 10
The development of market size and growth potential The demand situation in relation to our portfolio Access to raw materials and energy The political environment The supply of qualified employees. As stated, open markets are an opportunity if they are used in a controlled manner. But openness and transparency are a two-way street. We must always assume that trends shift to Asia and back to Europe again. This applies equally to markets, to products and to people. Ladies and gentlemen, The points I have mentioned also show that the question regarding the importance of open markets cannot be reduced to the question of removing trade barriers; in the end, it all comes down to individual people. Nevertheless, the removal of trade barriers is good in principle because it reduces the complexity of investment decisions and increases the opportunities for economic growth. Page 7 of 10
It would be ideal if this occurred within a global framework in terms of the WTO. Due to political hurdles, however, regional solutions are equally important. The TTIP free trade agreement between Europe and the USA is a recent example. As you know, it has major implications for Swiss companies. Therefore, and for other reasons, the EU- Switzerland relationship is currently a particular focus of our considerations. III. Ladies and gentlemen, What is true for companies also applies to this country: Switzerland is unable to cope with the challenges of the global economy alone. It requires close cooperation with the EU in particular, such as the agreement on the free movement of persons, which allows companies that need skilled workers to recruit from other European countries. Even though Switzerland is not a formal full member of the EU, it is located in the heart of Europe. All our Page 8 of 10
neighboring countries are full EU members. And the regulations from Brussels, with regard to financial markets for example, have long been of great significance for the Swiss banks. In addition to the geopolitical argument, we should always have the immense importance of the EU with its 28 Member States and 500 million inhabitants in mind when we talk about the EU and Europe. Openness to change in the sense of breaking down trade barriers and greater freedom to move people does not just apply in terms of Europe. In a global world, these two attributes must become the trademarks of a future-oriented Switzerland. This means no flooding the borders, no running after a political one day wonder or becoming dependent on third parties. It simply means acknowledging the changes in a globalized world and their consequences. The talk of the global village means nothing more than that we have all moved closer together in the age of globalization and others need us more than ever before: as a trading partner, as an employer, as a country that provides prosperity and security. At the same time, it also means that Switzerland needs others more than Page 9 of 10
ever and to the same extent so it can secure its prosperity in the future. The 8 million Swiss citizens have repeatedly demonstrated in the past that they are able to master the difficult balancing act between preserving what is proven and trying something new. This is the openness a company like Clariant as well as the overall Swiss economy needs, to ensure that Switzerland remains an attractive business location and to safeguard our longterm prosperity through better value creation. Ladies and gentlemen, thank you for your attention and I look forward to the discussion. Page 10 of 10