© MULTIVAC

26.03.2019

"IN WORLD TRADE, EVERYONE IS PLAYING THEIR OWN GAME"

Protectionism is endangering the export industry of mechanical engineering. Hans-Joachim Boekstegers, CEO of packaging specialist MULTIVAC from Wolfertschwenden, knows how companies can adapt to growing uncertainty.

By Eike Radszuhn and Holger Wuchold

Mr. Boekstegers, protectionism is growing all over the world. With more than 5,600 staff and 80 subsidiaries, MULTIVAC is represented on every continent. How is this development affecting you?

There is undoubtedly protectionism, and it did not start with Trump. Machinery is subject to high import duties in Brazil and India, for example. Politics can change markets quickly. For MULTIVAC, with an export quota of more than 80 percent, that means compensating for declines in one country with growth in another. One example: Since the EU placed sanctions on Russia, we have sold more packaging machinery to Australia and New Zealand – because the Russians are now buying more of their meat from there.

What concrete steps can medium-sized companies take to adapt to growing uncertainty in world trade?

Hans-Joachim Boekstegers © MULTIVACMULTIVAC’s answer to this question has been to expand our structure, from seven subsidiaries originally to around 80 sales and service locations today. At the same time, we have expanded our product portfolio and now buy and sell partner products, increasingly including packaging material. This broad-based approach enables us to finance our expensive infrastructure and manage our risk.

But is that an option for companies that are smaller than MULTIVAC?

It is generally also possible to use this approach on a smaller scale if you first select individual markets in which you think you can develop.

Economists often claim that German industry’s high export surplus encourages other countries to adopt isolationist policies. What do you think about that?

I cannot entirely deny that extreme surpluses have a negative effect on world trade in the long term. But trade is a question of options. We do have this strong base of medium-sized companies whose products are in demand all over the world. Germany remains an excellent production location in terms of efficiency and reliability. If we at MULTIVAC produce in other countries, it is usually more expensive.

US President Donald Trump in particular is constantly threatening Germany with customs barriers. Does that have an impact on your business in America?

Our business there has been going well for many years, with and without Trump. Even if there were import duties in the USA, it would be an advantage rather than a disadvantage for us. MULTIVAC already has a production facility in the USA that is running very well, producing 60 percent of the machinery sold in the USA largely on site.

Could you imagine moving more of your production from Germany to the USA in order to avoid the barriers?

Not moving but, if there were high tariffs on machinery one day, we would expand our capacity in the USA. On the other hand, the Americans’ plan to bring jobs to their country is a little unrealistic.

Why?

MULTIVAC is located in Kansas City, in the heart of the Midwest. We have major trouble finding qualified staff there.

Outside the USA, is there any good news for advocates of free trade?

The EU has just signed a trade deal with Japan – that will have a positive impact. Business in South Korea has also become easier now that the agreement with Europe is fully in force. In other markets like China, however, we will have no alternative but to establish production facilities locally in the long term. China will never allow key technologies to only enter the country as imports.

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Medium-sized companies complain primarily about non-tariff barriers, such as differing standards. How do you see this?

We do not have to look to other continents to find non-tariff barriers. Even in France, we often have to have our machinery inspected a second time by national approval companies. This requires a lot of effort and sometimes makes it difficult to enter new markets. It is seen everywhere, be it China, the USA, or the EU. Everyone is playing their own game; every economy wants to get itself into a good position. All legal means are allowed.

Germany and Europe have opponents of free trade, too. Tens of thousands took to the streets to protest against TTIP.

In the case of TTIP, not enough people understood the key issues. That meant that anyone with a concern could take the lead and organize protests that often had no rational justification. If policymakers want to move forward, for example in a trade deal with the USA, they need to limit themselves to topics such as industrial tariffs and perhaps technical regulations. I think "TTIP light" is still feasible, but TTIP in its original form probably not.

To finish, let’s look to the future. Do we need to get used to tough times in world trade in the long term?

Although his style is undoubtedly contentious, I believe that someone like Trump ultimately knows what makes economic sense. He is a good salesman and uses his position, but he will also have an idea of the countries with whom he wants to collaborate long-term. Ultimately, Trump largely serves his base in the USA. I can understand that to some extent.

Further information

“Thank you, free trade” campaign   |   VDMA European Office   |   VDMA Capital Office   |   MULTIVAC

© VDMA
Contact
Eike Radszuhn, VDMA European Office.
Holger Wuchold, VDMA Capital Office.