Addressing Protectionism a Key Priority of G20, German Ambassador Says

As the two top exporting nations in the world, Germany and China have a shared interest in pushing for greater openness and removing barriers to global trade.

Michael Clauss, the German ambassador to China, made the observation in an interview with Caixin.

"Protectionism is on the rise worldwide," Clauss said. "The Organization for Economic Co-operation and Development recently warned that measures to reduce trade barriers are declining, while protectionism is becoming increasingly prominent."

Clauss said that China can set an example in terms of pushing for greater openness through reforms at home. "Over the past year, I have heard frequent complaints from German enterprises about the rise of protectionism in China. It is becoming increasingly difficult for them to gain market access," he said.

"Many foreign companies, especially automobile manufacturers, are forced to establish joint ventures in China," he said. "Meanwhile, coerced transfer of technology is clearly against the rules of the World Trade Organization."

Another focus of this year's G20 summit is pushing for structural reforms, and China and Germany have a common stance on this, Clauss said.

"Both sides believe that we should promote economic growth via reforms instead of borrowing," he said. "Debt problems are becoming more and more serious across the world."

Germany will continue to push for further liberalization to spur global growth when it will host the 2017 G20 summit in Hamburg and focus more on issues such as climate change and the migration crisis, he added.

Following are excerpts of Caixin's interview with Clauss.

Caixin: In February, you wrote in a commentary published on Caixin that this G20 summit is taking place at a time when the global economy is going through a rough patch. What are the key challenges that global leaders need to tackle?

Michael Clauss: The key issue to be discussed at this G20 summit is how to inject new energy and vigor into the world economy. This is a very appropriate topic, as the global economy is indeed in a condition far from ideal. Recently, the International Monetary Fund has once again made a downward revision of its forecast for global growth.

At present, geopolitical conflicts, terrorism and "Brexit," among others, are major risks affecting growth. In particular, protectionism is on the rise in many countries. Therefore, China has set a very good core agenda for the G20 summit this year.

What are some of the topics that are of particularly interest to Germany from the agenda put forward by China?

As the host country, China has confirmed several large topics related to global growth. Three of them are especially important.

The first is addressing protectionism. China and Germany are the world's top two exporting countries, so we have a shared interest on this issue. Of course, it also fits into the interests of all countries. Protectionism is on the rise worldwide. The Organization for Economic Co-operation and Development recently warned that measures to reduce trade barriers are declining, while protectionism is becoming increasingly prominent.

China has complained about so-called trade protectionist measures taken by the European Union and the United States. However, from our perspective, these are legitimate measures taken in response to dumping. The problem is overcapacity in China's iron and steel sectors, which has led to these items being sold abroad below market price.

We also have different views on protectionism. Market access is our main concern.

Many sectors of the Chinese market, including services and the financial sector, are not open to foreign enterprises. Many foreign companies, especially automobile manufacturers, are forced to establish joint ventures in China. Meanwhile, the forced transfer of technology is clearly against the rules of the World Trade Organization.

Over the past year, I have heard frequent complaints from German enterprises about the rise of protectionism in China. It is becoming increasingly difficult for them to gain market access.

The second concern is structural reform. We support China's efforts to highlight this issue at the G20. This is related to reinforcing the market-driven economic model, as well as enhancing the openness. Many countries face these problems. None of the G20 member states have done enough in terms of structural reform.

China and Germany have a shared stance on this issue. Both sides believe that we should promote economic growth via reforms instead of by borrowing. Debt problems are becoming more and more serious across the world.

The third is innovation. To achieve high levels of growth, we need to enhance innovation. The digital economy will be the most important factor in promoting growth in future. Policies such as "Industry 4.0" in Germany and "Made in China 2025" are both focusing on this. In order to really push forward the development of emerging digital industries, data must be allowed to flow freely and securely across borders.

In recent years, China has placed an ever-greater emphasis on playing a more-proactive role on the world stage, and some believe the G20 is one of the core mechanisms through which China can play a greater role. How do you see China's participation in global governance?

As the host country, China has shouldered certain responsibilities and has made positive contributions by setting the agenda. However, the G20 is not the government of the world. Member states have differences on many issues. Nevertheless, the G20 is indeed a very large and significant platform because it represents 80 percent of the world economy.

Some experts say that China needs to maintain a delicate balance when coordinating the G20 agenda. On one hand, it needs to protect the interests of developing countries. On the other hand, China needs to avoid being seen as challenging the international system of the developed world. What is your take on this?

I think there will be a balance. We must pay attention to the concerns of developing countries, which is why the G20 will invite developing countries to participate. I think Germany will also continue this practice. Continuous global polarization between the rich and the poor is not in our interest. It not only fuels extremism and terrorism, it is also one of the causes of the global migrant crisis.

Germany will serve as the chair of the G20 summit next year. What issues raised at the Hangzhou Summit will Berlin continue to focus on?

Clauss: Basically, the main focus identified by China — how to inject new energy into the world economy — will also be the key agenda item during Germany's term as chair of the G20 summit because these problems will not disappear or change anytime soon.

I think the next G20 summit, hosted by Germany, will also emphasize sustainable growth, climate change, and of course, the global refugee crisis. Many refugees that have arrived in Europe from the Middle East, Africa, Afghanistan and elsewhere want to come to Germany.

We have heard many critical voices commenting on the effectiveness of the G20. Some believe that the G20 still functions as a crisis-response mechanism, focusing too much on short-term fiscal and monetary policies, although the impact of its coordinated policies are declining. How can the G20 transform itself into a long-term governing mechanism?

As a problem-solving mechanism, the importance of the G20 will continue to increase. Discussions of important global issues need to leverage this particular organization that represents 80 percent of the global economy. The world economy is still facing severe challenges. Coming out of the worst phase of the 2008 financial crisis does not mean that the global economy has entered a stable period. At the same time, we need to remember that communiqués of the G20 are not (legally) binding.

Contact editor Poornima Weerasekara (poornima@caixin.com)