Siemens CEO: America Invented Globalization—Why Give It Up?

When Joe Kaeser accompanied the German chancellor on her visit with Donald Trump in Washington last spring, he came bearing a reply to the American president’s complaint that while there were hardly any Chevrolets in Germany, Fifth Avenue in New York was teeming with Mercedes-Benzes. “We’d have to do a lot of exporting to have as many Mercedes on Fifth Avenue as iPhones in Germany,” the chief executive of Siemens, the German industrial behemoth, told Trump.

Reflecting on the remark this week during a stop in Washington, in a rare glimpse into how business leaders in Europe are assessing the Trump administration so far, Kaeser said he hadn’t intended to suggest that the U.S. president misunderstands trade balances (the United States has a $65 billion trade deficit with Germany). Rather, he was making the point that the realities of the modern global economy—wherein, say, a Mercedes parked on Fifth Avenue could have been made in Alabama with parts from China—often have multiple causes rather than a single one. Kaeser, moreover, was arguing that “unfair trade practices” shouldn’t be confused with a country’s “lack of competitiveness” in a given sector of trade.

“Unfair trade practices should be regulated because they’re unfair,” he told me. But “trying to compensate [for] a lack of competitiveness” through regulation typically hurts customers by leaving them with higher-priced or lower-quality goods and services.

In other words: If you want more Chevys in Manhattan, don’t impose a tariff on imports of German cars. Compete better with German cars.

Despite Trump’s moves to withdraw from and renegotiate free-trade agreements, despite his talk of tariffs and border walls, Kaeser maintains that the United States remains a global leader on free trade. “Factually, it is,” he said. “If you look at how many companies work with Microsoft Office in the world or [how many people] have Apple iPhones or use Facebook or look for data on Google, what else would you need to have a living example about free trade in action?” As for whether the U.S. government is still supportive of the rules and institutions that sustain free trade around the world, the businessman notes that, on the question of the Trump administration pursuing protectionist policies, “so far, nothing [has] really happened, right? Except an ongoing debate. I believe that at the end factual evidence will prevail.”

Kaeser told me he is impressed by the team Trump has assembled, including Secretary of State Rex Tillerson, Treasury Secretary Steven Mnuchin, and economic adviser Gary Cohn. “There might be some particularities to one person, but if the team around him or her is right, it makes a big difference,” he said.

He understands why the Trump administration has proposed reducing the corporate tax rate, which he agrees is “among the highest in the world” and can inhibit investment in the United States. But he adds that his business decisions in America—Siemens’s biggest market by far—are influenced less by the U.S. tax code than by the country’s large and attractive customer base. The more competitive the U.S. tax rate, the more American companies that buy Siemens products can invest, Kaeser reasoned, “and if companies invest more, there is more employment. If there’s more employment, people buy more.”

Unlike a number of German government officials, Kaeser didn’t seem especially rattled by the prospect of the American president following through on his threat to abandon the nuclear agreement with Iran, with which Siemens struck infrastructure deals following the lifting of international sanctions against the Iranians last year. (The company’s relationship with Iran long predates these agreements; when the Obama administration sought to sabotage the Iranian nuclear program with cyberattacks, for instance, it targeted Siemens computer systems.) “If the world believes that Iran doesn’t play by the rules and imposes sanctions, then we’ll follow them whether we have an opinion about it or not,” he said.

But Kaeser has pointedly criticized Trump’s travel ban. “This is a treasure for a country: to be considered the role model for peace and freedom and diversity,” he explained. And he urges the United States to stick with its long-standing openness to the wider world. America “invented globalization,” Kaeser observed. “Why would an inventor give up one of the most prestigious inventions they’ve made?”

With the dawn of the Internet of Things and the Fourth Industrial Revolution, he added, “I just wonder if you build a wall [around] every country, how the bits and bytes flying around the world would stop with that.” The more pertinent question for political and business leaders, he asserted, is “about how can we be inclusive of society—how can we avoid the societal divides between the haves and the have-nots.”

The results of the recent German election—in which Chancellor Angela Merkel’s party finished first but a new populist-nationalist party received nearly 13 percent of the vote—indicate that, despite Germany’s strong economy, “there are more unhappy people than we have been willing to admit,” Kaeser said. But one reason Germany has such low unemployment rates, particularly youth unemployment rates, is that most young Germans participate in a rigorous dual-track system for vocational education and training in which they work as apprentices at companies like Siemens and acquire job skills.

The United States may not be able to bring back all the manufacturing jobs it lost to countries such as China and Mexico, Kaeser acknowledged, especially if the manufacturers have moved factories and investment there in order to have better access to the local markets in these nations. But he thinks German-style vocational training and re-training programs could be a boon to the U.S. labor market. He’s made this case not only to Trump, who “was listening to that a lot,” but also to Trump’s daughter Ivanka, who visited a Siemens vocational-training center during a trip to Berlin in April.

Siemens, which employs nearly 60,000 people in the United States, is already experimenting with replicating such programs across the Atlantic. In Charlotte, North Carolina, for example, where Siemens has a site for manufacturing generators and turbines, the company has partnered with Central Piedmont Community College on a four-year program in which apprentices graduate with an associate’s degree in mechatronics, no student debt, and a guaranteed job at Siemens earning at least $55,000 a year.

The best way to make labor-market reforms “tangible” is to work at the community level, Kaeser advised. “If you do the motherhood-and-apple pie type of description at the White House, you look great on TV but it doesn’t really resonate with people because they say, ‘Tell me exactly what that means for me.’”