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Wilfried Porth, member of the Board of Management at Daimler AG, cautions against the assumption that the GM bailout saved American jobs. He warns legislators not to fall into the same trap as they did protecting loss-making national airlines.
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Any industry that makes products from raw materials by the use of manual labour or machines and that is usually carried out systematically with a division of labour. In a more limited sense, manufacturing is the fabrication or assembly of components into finished products on a fairly large scale. Among the most important manufacturing industries are those that produce aircraft, automobiles, chemicals, clothing, computers, consumer electronics, electrical equipment, furniture, heavy machinery, refined petroleum products, ships, steel, and tools. See also factory; mass production.
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Mr. Philip Stephens: How optimistic are we that given the global imbalances between, say, China and the U.S., but also as we have seen recently within the European Union how easy it is going to be to keep markets open to resist protectionism? I'm going to ask each of our panelists one question, give them two or three minutes to answer that. I want the conversation to spread directly to the audience so you can be thinking of your comments and questions. I will start with Mr. Bloom. As many of you will know, Mr. Bloom is the guy who saved the U.S. auto industry last year as advisor President Obama on the auto industry first and now as advisor on U.S. manufacturing. The U.S. is producing some useful stuff about what governments should do in terms of R&S and education, investment and incentives or whatever. I think my question is: Isn't all of this motherhood apple pie or put it more bluntly, of course, governments have to say they are on the side of manufacturing but isn't a lot of it bullshit? The Hon. Ron Bloom: The manufacturing session, of course, gets a little lower and it is good. I like that. Let me answer that. I'm not going to repeat it. I'm the sophisticate so I won't do it. Three quick points on whether it is just motherhood and apple pie. I think the crisis, particularly in the U.S., did teach us something. It taught us a lot of things but at least one of the lessons that we draw from it is that there is a material difference between economic activities that are involved in sustainable wealth creation and those that are not. And while the financial sector is obviously absolutely essential in terms of taking the savings of savers and moving them to the wants of investors, the financial sector in and of itself cannot be allowed to dominated the economy. And sustainable wealth creation has to be the core purpose of the economy. And while certainly manufacturing isn't the only activity that involves sustainable wealth creation, it has historically shown itself to be an important activity that can generate sustainable wealth creations. So I think manufacturing now does have a reemergence in its overall role in the economy. Second, I think people tend to view manufacturing in a fairly narrow box. And one talks about percentage of GDP and those numbers are as statisticians report them, but, in fact, there are a whole variety of activities that we do in the U.S. and that are done in any high wage country that support manufacturing that without manufacturing would tend to migrate away from the United States. If one goes to a factory, an INTEL factory where they make computer chips, is that a manufacturing facility or is it a software facility? And how about all of the engineers who do that work who feed directly into the manufacturing process? What INTEL and a lot of other companies have learned is that, in fact, touching, having engineering being able to touch the manufacturing folks, in fact, it is quite relevant to their ability introduce cutting edge technologies. So in face, there are a whole lot of activities that are supportive of manufacturing, what you might call further up the value chain, then when they connect to manufacturing they make manufacturing work better. If you lose manufacturing over time, those activities will leave, as well. In fact, in much more significant percentage of our economy is, in fact, manufacturing reliant. The third piece is and again in the U.S., but I would argue elsewhere, a central challenge we face in the period ahead is finding meaningful work for people. We have another climate crisis in the United States. We have obviously been able to stabilize our basic economy. But as the president reports every day we are not satisfied with the unemployment rate. If you look at the people who were most affected by this unemployment crisis, it is largely people in manufacturing and related activities. So the challenge of finding meaningful work for people, I think, is a central challenge for political democracy in the period ahead and the manufacturing economy and all of the economies that surround manufacturing economy are very important for addressing that unemployment crisis, as well. For all of those reasons, while it is motherhood and it is apple pie, it is, in fact, a lot more. Mr. Phillip Stephens: Thank you very much. And two particular strong points, this point about the line between services and manufacturing being a rather blurred one I think is important. I never really know whether Microsoft is a service industry or a manufacturing industry. And also the need to produce high pay work. But, of course, the comradery of that is how you can be you competitive if your wages are that much higher. I have to turn to Mr. Porth now. Germany, as we all know, produces lots of things, has lots of real engineers. (Inaudible) has a lot of real engineers and produces a lot of fine products. My question for Mr. Porth is if we look out 20 years, will DALMER still be making cars in the European Union area or will it all be offshored? Will we be making any cars at all in Germany where it has already moved quite a bit of production, I think, outside already? And secondly, does successful companies like (Inaudible) should they expect anything from government in terms of support or should the market be allowed to work? Mr. Wilfried Porth: That is actually the disagreement with Ron. On manufacturing we agree but he helped to save two of our competitors with a bunch of incentives so we should come back a little later. Mr. Phillip Stephens: With pleasure. Mr. Wilfried Porth: The good part about the question is definitely you still think we are there in 20 years. That is what I also think and hopefully -- Mr. Phillip Stephens: It was a question, will you be there? Mr. Wilfried Porth: We will be there but there, but we will also be there producing in Germany and in Europe. I am very much convinced about that. And there are several reasons for that. The one is that as Ron mentioned, you need to have a close link between inventing and producing at the end of the day. And the one cannot be unlinked from the other. And our scent competence about the automotive technology is in Germany. That is where our core comes from and that will stay that way also for the future. The second one is, I would say, the society, the general impact on countries. When you look at Germany, for example, you have an over average part of manufacturing in our GDP which is we had the discussion, might be 23% or 25%, at least above 20%, and we look at how Germany managed the crisis we managed the crisis because of several other issues maybe better than some of the other countries. And when I go to our factories and have discussions with workers, I really could tell you that there are a lot of people that they don't believe that they will be qualified or they can be qualified to work in the financial or in the services area at all. So we will need for solid or sustainable societies, we will need also manufacturing workplaces. And that is the challenge that we can provide. For that, we would need, I would say more flexible frameworks, this is to governments and to unions and to companies to provide different framework for the future because especially the automotive industry there is a lot of new technology coming in. And when you look at the Chinese, they are leapfrogging, basically, the traditional technology. We need to be very careful we are not losing out and providing the right framework for those new technologies in European workplaces. Mr. Phillip Stephens: Thank you, but I will come back to this because I draw from the opening contributions the sense that we definitely need manufacturing and we need high end manufacturing. I think everyone would agree on that. But needing and keeping are not necessarily the same thing. And so I want to set Simon Fraser, who is the head of the business department in the U.K., works directly with (Inaudible) on what the role is on government. The British government sounds French, these days in its approach to manufacturing and almost, almost, not quite, talk as sort of national champions and the rest. Some of us grew up in the 1970s when British governments were picking industrial losers, thinking they were picking winners. And Mrs. Thatcher was supposed to cast off all of that spell of interventionism and mettling and produced an economy which is flexible with the market allowed to work. So what's changed? Where is the line between activism and interventionism, between support and protectionism? The Hon. Simon Fraser: First of all, I just want to say very quickly about services because the question is: Can we live on services alone, I think it is worth that services are and will remain extremely important in our economies. And in the British economy, for example, there are 25 million jobs and it is 75 percent of the economy. Let's not do down services. (Inaudible) Having said that, your introduction to me was uncharacteristically simplistic. You yourself said that things have changed and things have changed since the days of Mrs. Thatcher. There are two huge things that have changed. The first is the emergence of new manufacturing powers in the world, the global supply change value change which has created new competition in manufacturing and has changed the scene. The second more recently has been the recognition certainly in Britain that we probably were over exposed to the predominance of the financial sector in our economy. There is some sort of balance there. That's the context in which the government has sought to make some active choices, if you like, about the future of manufacturing in Britain through what its calling its new industry, new jobs policy. There are two aspects to that. The first is, indeed, to try and identify areas of economic activities that we believe will be those in which we can compete with advantage in the future and to support them. And we've chosen actually four specific areas: (Inaudible) Digital economy and advanced manufacturing. And what we've done in those four areas, we looked at how you can create generally through policy a favorable and business environment for activity, for example, for the tax regime, through Payton policy, through support, for example. Secondly and this is a bit (Inaudible) in the Financial Times, one I've written leading articles on this this week. Secondly, we have created this thing called strategic investment fund which is a billion pounds, which allows us to invest in support of certain project in those areas. If you like to address market failures where the private sectors won't invest in and try to generate and stimulate activity. That I don't think is picking winners. It is about making intelligent choices. That is a legitimate role for government. Before you get too excited about it, that billion pounds represents about 5 percent of the budget in my department and (Inaudible) of the government as a whole. So it is not as if there has been a whole shift in interventionism. More importantly, the second part of that policy is a bigger thing, it is a more strategic thing. It is about aligning other areas of government policy behind this objective. I'm talking about here scientific research, higher education, employment workplace skills, public procurement, a range of policies across government, a line behind that vision of how the economy should perform in the future, particularly in advanced manufacturing and related areas. That's what it is. I call it active government, not big government and not picking winners. Mr. Phillip Stephens: I have to ignore the (Inaudible) and direct you to (Inaudible) but the future with low carbon life sciences, digital technologies that advance engineering and of course the high end engineering that we already get from Germany from (Inaudible). There's a transatlantic dimension to this, as well, which one of the things that occurred to me was should we still all be trying to do the same thing. (Inaudible) is something that springs to mind. There's a certain amount of angst and friction from time to time in the Transatlantic relationship. Should both sides of the Atlantic try to do the same things or should we on this side be picking winners in low carbon technology and leave the aerospace to the United States? I think we have lots of interesting contributions and thoughts to start off with. So I better throw it open and take any points people want to make from the floor. This gentleman here. Audience: There was an analysis not long ago of the Chinese consumer goods manufacturing sector which suggested that the Chinese hang onto about 15 cents on the dollar, the rest in terms of technology, (Inaudible) marketing in rich countries went to the West. My question is to what extent should we be saying to those low wage economies they are welcome to it? Mr. Phillip Stephens: A very good point. I would like to take two or three before going back. This gentleman in the back here and over there. Audience: I'm from Business Europe. We work a lot industrial policies and even also with the support of (Inaudible) and thank you very much for that. The question is what should be the new integrated industrial policy at the UN level and we can imagine, of course, we will say RND and say education and investment, but what does it mean in concrete? I had the pleasure to attend the lecture at noon on the Transatlantic relationship and the business relation and we are always talking about the same values that we share. But when I look at the economies, also in industries, there are some differences. The way the venture capital, is accepted in the U.S. and organized compared to the EU. The way we accept or not new technologies and referring the GMOs and technologies, all of that kind of discussions that prevents us in Europe to go at the highest level of manufacturing because it is all on manufacturing and also the way we look at climate policies and, let's say, the burden we put on industry in order to fulfill the goals, this is not the same. I sometimes have the impression that we regulate a lot in Europe. But in the U.S., we put, let's say, strength on technology. Technology for us and then we see afterwards how it evolves. Here we start in Europe to regulate. I would like to have from the panelists their comments on that. Mr. Phillip Stephens: Thank you. Audience: I'm from the Center for European Reform. You are involved in a sector that is most acutely exposed to global competition. Simon talked about the big change brought about by new manufacturing powers coming up. Not all of the new manufacturing powers play almost that exactly the same roles that we would like them to play with. Do you see a risk of rising protectionism? So far, I think we have been doing quite well. But if unemployment stays high, the discussion about currency misalignments becomes more heated. Some people wonder how we can protect our European social model when we are in competition with counties that have very different ideas about social standards, and (Inaudible) standards, industrial subsidies and so forth. Do you see a rise in protestism and if you do, what would you like the solution to be? Mr. Phillip Stephens: Three strong questions, comments there. Shouldn't we leave the Chinese to it. For example, if you take your mobile phone out the case it will be made in China, but most of the value in the phone is probably accruing to a Western company. Should we have, indeed, a European industrial policy and how can we get in Europe the balance between regulation and technology and innovation? Can we really resist protectionism? Robert, I think I would like to put it to you first. We will start in the reverse order on the protectionist question because when Europeans go to Washington, in particularly when they go to the Hill, they come away pretty nervous about protectionism, not directed against Europe but against China. And there is this sense that with the argument over China's exchange rate policy that there's a bubble, something waiting to burst there. What is your view on that? The Hon. Ron Bloom: Two things. Preliminary, I work on the other end of Pennsylvania Avenue. So I won't comment on The Hill. And I don't do foreign policy. But it is obvious that the politics of this issue are very tricky. What I see in terms of our responsibility is to create the best ground for rational business actors who are interested in making things in America to make things in America. Obviously, there is a very complicated set of political dynamics that emerge between countries that have different approaches. Again, that is kind of not my department. I have enjoyed that back and forth over the course of the conference. What I think on the pure domestic side what we can do is we can have the very best infrastructure and I use the phrase infrastructure very broadly. We can have the best infrastructure so that high value ad and manufacturing can occur in the U.S. And I think we do have unique and special strengths that let us do that. Over time politics is obviously exceedingly relevant to that. From my perspective, if we can present that fertile ground for business to operate, I'm confident we will have a manufacturing sector. Mr. Phillip Stephens: Is the infrastructure enough, too? Aren't there American companies coming to you saying, look, we can be doing this, but these opportunities are being lost to us because others are dumping products like this on our market? If you want manufacturing to flourish, you can't really presumably ignore the trade or exchange rate policies of others. The Hon. Ron Bloom: I'm not ignoring them at all. I'm just pointing out that we have had discussion about exchange rate and currency matters. My colleague at the treasury department has talked about it. I'm not going to say anything different than what he said. Obviously, the global trading system is critical for manufacturers, particularly so, but that said, there are still a whole series of tangible actions that the government can take in terms of preparing that fertile ground that make it on a level playing field circumstance more likely that business activity will take place in the U.S. It is not a fully sufficient condition but it is a necessary condition. But I think what is different in the U.S. today than if we had this conversation four or five years ago, I do think there is a greater recognition that attention to those issues is critical. And so whether it is investing in R&D, whether it is making sure our venture capital system capital is healthy, whether it is promoting innovation, all of things we are actively about, those are prerequisites. They are not fully sufficient, but those are prerequisites to making it work. Mr. Phillip Stephens: Mr. Porth, should we have an industrial policy and are we over-regulated? How should we be shifting towards more innovation and more technological support for technology? Mr. Wilfried Porth: I think you should be aware of one thing. There is a lot of products that are out there that (Inaudible). Just talking about rising will not address the whole issue. As the automotive issue we have different situations. If there is a country where there is no automotive industry it just depends on the volume in the market you can create and then is it economically viable to create this over there. China, for example, will be the only manufacturing automotive industry, you need to be there just to cope with the additional cost it will have in logistically bringing vehicles into the country. But there is also hidden protectionism in Europe. When you look to France, for example, they have somehow put the border of few to regulations just ahead of the mainstream French producer products. And so there are very different things out there. I think we need to address a lot of them in order to get open fair trade throughout the world. And that's a long way to get there. Nevertheless, I think when you want to be a major market player, you need to be local, too, irrespective if you are forced to (Inaudible) you should be local just in order to be a good corporate citizen and to create more potential industry in this market. I'm very much in favor of being local anyhow. Coming to the regulation question, yes I fully agree the Europeans, especially the Germans, also, we tend to overregulate things and we are rather talking about risks before we see the opportunities. And so I think we should really be more open especially on new technologies and this is biotechnologies and new technologies in the automotive sector. We need to be much more active because there are other societies in countries in this world which are very active. If we don't do that we will lose out. Mr. Phillip Stephens: Do you think we should, as a manufacturer, do you think we should have European objectives? I say that because someone was telling me earlier today, the Commission has this plan for Europe 2020 which hopefully will be rather more successful than the Lisbon process which was supposed to make us the world's most competitive area by 2010. The summit meeting that just ended, the original commission proposals had also some European wide benchmarks and targets for R&D spending and whatever. They were all crossed out during in advanced of the summit. Do you think Europe, per se, or the European union, should be setting benchmarks, targets, whatever for European industry? The Hon. Simon Fraser: If it helps provide regulations, if it helps to open the labor market and really make this labor market more flexible and help and support the companies to come up with the new technologies then those targets should be implemented. But I think it will be very difficult in Europe to find one common target because the countries are a very different styling point and it would be very difficult to get an agreement on that. Mr. Phillip Stephens: If you could answer the question, should we care about the Chinese? Feel free to come back on any of the other points, too. The Hon. Simon Fraser: First of all, of course, this is about global production trends and the different bits of that production and the design of the production should be done where it is most effective to do it. I was last week in Cambridge visiting a very successful British design company. They do no fabrication in the U.K. All of the fabrication is done in Taiwan, Korea and the U.S. What they do is design. They have to be so competitive and so rapid to keep up with the market. That's fine. That's what they want to do. Don't do what you don't do best. But you need a good idea and that comes to (Inaudible) point because if you are going to rely on the design end of manufacturing you've got to have good protection of your property. If you haven't got that, then that sort of system breaks down very rapidly. In terms of trade policy, I think there are some very important issues about the subjects that they are addressing in international trade policy where we need to be moving onto an agenda that encompasses these things rather than agricultural tariffs and traditional manufacturing tariffs in the way that (Inaudible) still continues to do. So there's a big agenda out there. I wanted to come back on the Europe point, a link to that really, because I do think it is a big challenge to the European Union. Whether or not we have collective benchmarks or targets, that's one thing. But behind that, there is a very important issue for Europe about how we are going to approach manufacturing on our continent. There is, I believe, a tendency in Europe to construct policy which is actually protective of incumbent producers. And we tend to be rather protective of what we have rather than looking to what we want for the future. If that's true and maybe it will be contested, if it is true, it is not a recipe for success. I do think that this new commission and the member states should be thinking about areas such as digital, areas of innovation in the economy, making sure that we are aligning the 2020 policies behind them and making sure that when we come to the discussion on the European budget next year for the 2013 period and beyond that we are looking to support those areas of activity, possibly through research budgets. Mr. Phillip Stephens: If you look at the EU budget, for example, it makes it pretty hard that Europe cares about manufacturing. About 40 percent of the EU budget goes on agriculture which accounts for about 5 percent of Europe's population and about 3 percent of GDP. How can one talk about the European Union being sort of serious when you have such a great distortion? (Inaudible) The Hon. Simon Fraser: First thing you learn when you are a British official coming to Brussels is never answer a question about (Inaudible) But, of course, an interesting point is made that at least gradually, we need to adjust the community budget to reflect the productivity areas for the future of the European economy. And that will certainly be an argument the British government and others will be making in the discussion on the next financial sector. Mr. Phillip Stephens: Ron, you wanted to come back. The Hon. Ron Bloom: I wanted to slightly disagree with Simon, perhaps not from a government policy. This may or may not have any direct influence on government policy, but I think if one looks at how manufacturing firms actually operate, there are certainly many cases where you can invent something in one place and make it far away. And in those cases where one can separate the creation of the intellectual property from the actual creation of the product, then those two will separate. Since intellectual property can move very quickly over the internet and transportation costs are low one would expect the making to go someplace else. There are many cases where that is true. But there are many cases where it is not true. As to whether we should be indifferent to low wage countries making things that are separable, the answer is probably yes. But there are (Inaudible) economies. There are ecosystems that develop that have their own life and sit aside from government. If you look at how private actors behave, once the manufacturing of a good is located somewhere else, the logic of moving the intellectual property gains and it doesn't go the other way. I think there is a value in asking ourselves in some of these sectors whether, in fact, that full separation exists or whether you wake up with first the easily separable leaving and a lot of things trailing on behind. I don't make that as a plea for having low wage work. I think that is exactly the wrong conclusion. In the west, we pay people well. That is, I think, our proudest accomplishment that we can give people a middle class standard of living. I don't think we should be indifferent to the interconnectedness that actual firms have as they operate. Mr. Phillip Stephens: I presume you're talking about autonomy. How does a company or a government or a policymakers interfere if a company says "look, we are producing this intellectual property. We derive a lot of money from it. It makes economic sense to have all of this stuff made elsewhere." How does the government or policymakers sort of interfere? The Hon. Ron Bloom: I don't think a government does. I think that in the end the economics will determine. The question is from the perspective of government policy whether it is providing support for research or whether it is providing as (Inaudible) said more support for real engineers and less support for financial engineers. Those are things that government can do. So the more resource we bring to it, the more logical it will be from the pure invention furthered on down on the value change to take place where we are. Mr. Phillip Stephens: Gentleman, here and then right at the back. Audience: I'm Jim with the German Marshall Fund in Washington. Assuming that manufacturing is important, what metrics do you use? Wilfried talked about the connection between manufacturing and R&D. Some would draw a connection between manufacturing and national security. In my home state of Pennsylvania in the U.S. as Senator Casey knows better than I there are areas of vast economic wasteland and with crime costs and social costs. How do you equate that? Is the answer 10 percent of western economy should be manufacturing or 15 percent? How do you take these externalities into account? What metrics do you use in establishing targets? Mr. Phillip Stephens: I will just take two more and then come back. Audience: Thank you. (Inaudible) To go back to the European standards and policies and changes of the understanding what's good and what's bad for the economy. You have accumulated a key (Inaudible). You have different areas in which you harmonize EU's policies such as competition policies, such as the freedoms and everything. They are geared to a certain, very often maybe outdated understanding of what's good and what's bad. Maybe that is primarily a question for Simon Fraser. And then you make European economies conform to that which maybe has completely gone out the window in the meantime. And there are different criteria of what should be done while you're making European economies legally at least as far as the legal framework is concerned conform to something that doesn't work. Mr. Phillip Stephens: Okay. And then right at the back. Audience: (Inaudible) It is unfair to characterize this but I will because it will be perocotive. It seemed to me your initial statement was to paraphrase it, if we build it, they will come. In other words, if we create the environment we think manufacturing will stay in America or possibly return to America. You've later talked a little bit more about the growing understanding we have that a lot of development and innovation takes place off of the manufacturing process and if you lose the manufacturing process, these other activities get done in some other country and then the manufacturing can't get done or even the intellectual development doesn't get done in the U.S. Doesn't that speak to or argue for a more proactive, dare I say, industrial policy in the United States? You laugh because I would laugh, too. We had this fight in the U.S. and it is a rebotent word. Your administration has never used this word for good political reasons. And yet we do know that we experienced what the agriculture industry or life sciences industry, we can do industrial policy very well. Doesn't it call for a more proactive structuring of the environment to make sure that we produce more of what we consume? Mr. Phillip Stephens: I will start with Simon Fraser this time. Pick the ones you want to answer and then I will come to Mr. Porth. The Hon. Simon Fraser: On the question of metrics, I don't think you said metrics. Some of the questioning suggests maybe a slightly more interventionist approach. That is the case. I think what it is about from government policy point of view is trying to make a judgment of where you think future opportunities lie and then create the best possible environment for the market for operating your industry to develop in those areas. That doesn't mean you're setting targets, necessarily, but you are trying to give some strategic support to develop under certain areas of activity. I think that is a better way of thinking about it. In that context, I actually agree what Ron said when he was disagreeing with me. There is a very important issue here about the maintenance of capacities and capabilities and skill levels in your economy and the risk of a critical loss of skills at a certain point in your national supply chain, for example, at which point you had it and it is very difficult for them to get back to it. You have to think about that in taking that strategic view and I think that is something our government is beginning to think more serious about because in some areas the supply chain actually gets quite thin for some critical industries. Just on the Europe point, I don't actually think that the European key is out of date. But, of course, what you're saying is, you can put some legislation and regulation in place for environment and then the environment changes rapidly, which in a way comes back to Phillip's point about some people's view of the (Inaudible) policy that policies have to adapt with time. I think recently there been some debate in the context of efforts of governments are making to support the economies coming out of the crisis and there's been attempt on the part of the government to be a little bit more (Inaudible) which has put some of these rules and regulations under pressure. My own view on that is we need to get them back. We should bring them back because they are actually in the case of state aids very important, healthy disciplines that we shouldn't lose within a single market. Mr. Phillip Stephens: Mr. Porth, (Inaudible) We just heard two views which have been really about government's role to fight this sort of ecosystem, if you like, in which industries and sectors can flourish, but not much more. As a business leader, should governments be doing anymore or is that fine by you as it were? Mr. Wilfried Porth: Sometimes they should do much less than they do. On the metrics, I would say we need to look into what skills do people have and what qualifications an education systems do we have? For that reason, I still believe we need a balanced manufacturing services and other things in an economy. If you don't have that, you will have a lot of social problems that might be created out of that because you will have a lot of people who will be excluded from the labor market in your society. I think we need to take care of that. It might be very different for different countries because of aging and because of some immigrate or migrating countries other than the U.S. who still has a growing population whereas Germany and other countries, Japan, are (Inaudible) populations. So different solutions for different countries always looking at what are the skills and the qualifications you have available on the labor market. On regulations I just want to say it would be very good if you will do something different. In my opinion, we have done wrong with cell phones, for example. Last year we found out that we have unified (Inaudible) info for cell phones. In the past with every new cell phone, we had to buy a new charger. We cannot do the same with electric vehicles. Now we are facing the beginning of this new technology we need to we are in the phase and the governments need to sit down and we need to define the standards. If we don't define the standards, we will have huge problems later on to get those areas together. In those areas, I think, we would need more support than just setting the standards but not only for Europe, but for all of the world. We still have an emissions regulations. We have three different cycles to fulfill. We have the Japanese, the European and the American cycle which additional costs in each cycle, and as long as we have those unnecessary burdens on top, we are wasting money instead of putting money into the right channels? Mr. Phillip Stephens: Should it be on the standards? Should it be cooperative or competitive? Should it be like there are standards for video or blue ray? Should European governments be sitting down with the U.S. and say let's agree on some common standards or should European manufacturing, Europe is setting standards in which the Chinese adopt in which Americans are then obliged to accept? >>: I think you have some standards which technology-wise competition is necessary to get the best solution, but I wouldn't see the peak technology in the (Inaudible). Let's find those worldwide standards on the easy things. Mr. Phillip Stephens: What's wrong with industrial policy? The Hon. Ron Bloom: Let me try to respond to that. I live in Pittsburgh so I get the Pennsylvania story. And I want to respond to Bruce's question. Yesterday my colleague from the state department got in a lot of trouble for saying that we are transactional in America so I'm going to follow her right down the same rabbit hole. It is a uniquely American way of seeing a problem. Everyone when I got the job asked me whether I was going to issue a manufacturing plant and Capital P. We're not going to have a manufacturing plant in America Capital P. And we're not going to have an industrial policy. We're going to have a bunch of stuff that we do. That's what we do in America. We have problems. We face problems. And we try to solve problems. I don't know if that is smart or dumb in the state department world. But in my world, I think that's the half we have. What we're going to do, I think, we really do have a very different environment than we had five years ago. And so we are going to invent this question of how we have a manufacturing policy over time. We're not going to go in a back room and do it. We will be confronting with a bunch of situations and we're going to analyze them and deal with them and you will look back ten years from now, and say, oh, that was their policy. That is in general how we face problems in America. So on the question of the automobile industry, we took a series of interventions which I'm delighted to argue whether we should or shouldn't have. We're moving forward in the advanced vehicle area and we are taking a series of actions in trying to move that industry forward in a way that meets the odd mix of American combination of government and private and local, etc. And I think that is, in fact, what we're going to do. We're not going to have simple metrics. We're not going to set a GDP target. My friend Jeff does. I'm delighted that he aspires to that. The federal government isn't. We will have a bunch of small things that we do to express this new found commitment to believing that making things should be a more significant part of our economy. You will be able to tell what it is by looking back at it, it will follow what I do, not what I say. And I think in some ways that was the problem with the industrial policy debate is someone wanted to go in a room and figure it out. I just don't think the manufacturing policy and this is candidly my challenge, I think we have to do things for America and American idiom. It would be a unique and different way than it would be in Europe or China. But we are coming to a bunch of small M, small P's and I think they together constitute a new appreciation for the sector. Mr. Phillip Stephens: Isn't, though, the auto industry just one of those areas where you see government support merging into protectionism. Not just in the U.S. the deals that the German government was offering to keep (Inaudible). He said he was absolutely livid about (Inaudible) we're operating in the marketplace and no one else is. But how do you stop? If you have as you call it so well a bunch of stuff that we're going to do policy without a sort of framework which says this is what you can do and what you can't do, how do you avoid, you know, the European government saying we need this car plant, the U.S. saying we need our car companies? The Hon. Ron Bloom: I think we have a framework. I commend you on the document. I spent a lot of time (Inaudible) but we do have a framework. The American framework says and this is the way we approach most problems. We intervene in those areas where we are persuaded the market is failing and we intervene as little as we can to allow the private market to take over and then we try to exit because we don't believe in the long run that we have the capacity to second guess and be better than the private market. General Motors, when the Obama Administration took office, General Motors was on the verge of collapse. The collapse of General Motors would have meant the loss of somewhere people can debate it, a million jobs, 2 million jobs, and maybe would have been the Lehman Brothers of the manufacturing economy. Maybe not, but maybe yes. So we made an intervention. The intervention we made, while dramatic, was, in fact the smallest intervention that we convinced ourselves could be made in order to save the company. We wound up with a lot of ownership of the company largely because the options were debt and equity and putting a lot of debt back on this company made no sense. We then very consciously pulled back, put a private sector board of directors in and we're not running the company. My responsibility is to monitor the company, to make sure that the company is attending to its obligations, but not to tell them what cars to make or even where to focus their effort. We said we will sell our stake as soon as it is practical. Most people don't understand that and most people assume that since we bought General Motors, why don't we tell them to keep this factory open or why don't we tell them to make electric cars because President Obama thinks electric cars are part of the future? We have two very different arrangements. We do have a relationship with the car business. We regulate it. The EPA sets mileage standards. The DOT sets safety standards. We have a lot of stuff that we do. The administration made a very conscious decision that General Motors is not an instrumentality of the United State automobile policy. This was a tactical intervention that was required by an extraordinary circumstance and we are going to pull it back as far as we can as quickly as we can. That is the way we will do these sorts of things. I think it is kind of unique, but I think it is sort of the way it works. To my good friend Sergio, he is happy what we did because he got Chrysler. >>: We need to be a little bit careful when you talk about how much jobs can be saved by saving General Motors because your assumption would be the underlying assumption is that all the debate produced by (Inaudible) would have been substituted by imports and that's not the case. There would have been other manufacturers in the U.S. who would have supported in chapter 11 or whatever situation and would have taken over parts of this production. It would have been substituted, I would say 80 to 90 percent of American jobs and American manufacturing. We need to be a little bit careful that we are not falling to the same trap as a lot of governments have fallen into when it came to airlines. Every country wanted to have its own airline. Up to the moment, where it is basically impossible to run successful airlines all over the world because there are so many subsidies and incentives. I think when we talk about OPAL and I admit the same, the German government has come from the wrong assumption here in my opinion, we should be careful. We should let the economy or the market to do what the market has to do. Mr. Phillip Stephens: I need to open to another round of questions. I have the lady here and in the back and here. Audience: I wanted to open up the question of the trade imbalances that was floating yesterday and in the previous weeks on the whole Greek situation, some of the countries, notably France, says because Germany is such a lead exporter, it actually creates a problem within the Euro zone and the Euro countries and I wanted to hear about the view on that especially on the view in this economic governance that is being envisioned by the EU. Mr. Phillip Stephens: This gentleman here. Audience: This would be encouraged. I think I will actually. Because there's another overlay on this and this is the globalized economy, which creates supply chains which, in fact, take apart industrial manufacturing centers. There's been examples in Germany, the south of Belgium, there's the Great Lakes area where I come from. And car companies, for example, with all due respect to (Inaudible) that don't follow the marketplace, you have built, in fact, all of the German . . . car companies have built plants in southern regions of the United States where there is no organized labor and where they get immense tax subsidies. That's fine. I'm not saying that it is the wrong thing to do. The way that manufacturing is now being organized, it makes it very difficult for politicians to understand exactly how to maintain where I come from in Michigan and trying desperately to maintain their industrial base and it is partially because of competition among states but it is partially because of the networked world that it is able for companies to go down to Alabama and build cars. And I think that it is going to be many-- I'm not arguing for industrial policy at all. I think it is going to be many more times difficult to maintain a harmony between politicians and industry. (Inaudible) is moving one of its manufacturing and sending it out to Alabama again. I think it is going to be many times harder to do this now, not because of anybody's bad will, I'm not saying, but simply because the opportunities are much greater, the speed of communication is much greater. And so to maintain-- our goal is to maintain the industrial stock of our country which is a very good goal. But to maintain it it is going to be very, very difficult with this deconstruction of the industrial world. Mr. Phillip Stephens: In the back there. Audience: Yes, my name is Dan Price from Washington. I have a question for Mr. Bloom and one from Mr. Porth. The President has said in connection with rebalancing the global economy that the United States should no longer be the consumer of last resort. We need as a country to save more and consume less. At the same time, we have this manufacturing initiative. And at the same time, we have this stated policy of doubling exports within the next five years. How are we going to accomplish all of those without a vigorous and ambitious trade and investment liberalization agenda? Mr. Porth has recognized (Inaudible) that it depends on trade liberalization. I'm wondering, Mr. Bloom, where you think the United States is going on with that? Mr. Phillip Stephens: Just here and one on the back and over there and we will come back. Audience: (Inaudible) I'm from Japan. I have a comment and a question to Mr. Bloom. (Inaudible)The interesting case in the Toyota recall issues, (Inaudible)I think I'm discussing with my Japanese friend in Tokyo. Some business people are nervous. (Inaudible)Manufacturer in the United States are nicer than Japan's government. It makes sense if the Japanese government announced it is trying Toyota, is that reasonable? I don't think so. That doesn't make sense. I think as a (Inaudible). My comment and my question is, I'm puzzled the President Obama's State of Union speech trying to double exporting in five years. What context can you make this in the industry or the manufacturing (Inaudible)? Mr. Phillip Stephens: We will take it. It is a bunch of stuff we are going to do policy. The gentleman, he's the president. He can say whatever he wants. Audience: (Inaudible) I'm a member of the European Parliament. Mr. Porth, you mentioned the Chinese attempt to leapfrog in some of the manufacturing sectors. Someone recently commented that the Chinese were asleep during the first industrial revolution. We are waking up on the second and are trying to lead the third, which is the energy efficiency and resource efficiency revolution. I just wonder because very little has been said so far about this industrial revolutionary change with regard to energy and resource efficiency. How much do you feel really under pressure to get much better in that respect to really be able to still be out there 20 years from now? Mr. Phillip Stephens: We have ten minutes left so I will go back and give everyone on the panel a chance to answer those things. Simon Fraser kindly mentioned the editorials in my newspaper which I don't write because I write about simple things like geopolitics. I don't write about these complicated questions. I spotted a couple of economists in the room. I just wonder, is there anyone here who thinks that government activism equals government interference? Are there any Thatcherites left at all in the room or are we all now are post crash believers in the benign role government in spending taxpayer's money to help manufacturing? Is there anyone? Do you want to say why? Audience: I'm Randy and I'm in the United States and I actually work in the private sector. Maybe I'm old fashioned but when I heard somebody talking about the latest student loan takeover by the U.S. federal government as part of a way to finance healthcare, somebody said you better take away the yellow pages from these guys because they will take over everything they can find. The government doesn't make efficient decisions, the marketplace does and the role of government is not to take over industries or sectors in our economies. Mr. Phillip Stephens: I have to go back and do it in reverse order. What I would like is we had some very interesting questions and comments. I would like the panel to pick the ones that they would like to address but also give us, before we go away, the two points that we should take away from this discussion. What are the two most important things that everyone should take away? So, Simon. The Hon. Simon Fraser: I am in the fortunate position that most of the questions were not addressed to me. I just want to make one observation. It is quite interesting how when you talk about manufacturing you end up talking about the automotive industry. It is terribly (Inaudible). It is very symbolic. It is politically very sensitive. We haven't really bottomed out about, what is old industry? What is new industry? The automotive industry is actually struggling and is about modern automotive industry should be about innovation. We just, for example, just got this new electric car that we are producing in the north of England. We shouldn't get bogged down in the discussion about old industry and old industry terms is what I'm saying. There haven't been much conversation here today about advanced manufacturing, in the future, how we are going to support them? Therefore, one of my takeaway points would be something that I raised in the beginning. If you talk about the role of government, it is much wider than this rather simple thing about intervention and provisional financial support. It is more about how you align your policies so within your country, you have the right skills, the right expertise, the right research, the right brain power, combined with the right infrastructure, the right access to finance in order to create the environment in which we will be able to compete. That does involve governments making choices. You have to make some choices in order to have those policies. My second point is the adverse side of that. I don't want it to be thought that what we're doing in this area is taking lots of taxpayers' money and trying to second guess the private sector. That's not the case. What we are trying to do is address the question of market failures in some areas, another issue we haven't talked about. For example, there is a shortage in the moment of venture capital for start up, innovative, high tech companies in Britain and elsewhere. Or if there is not a shortage of capital there is a shortage of risk appetite in the private sector. In some areas if we are going to help centralize some technologies it is probably worth the government taking a risk or underwriting financing elsewhere in order to try to stimulate that. That is far, I think, than trying to substitute the role of the market or be interventionists. Audience: (Inaudible) The Hon. Simon Fraser: The government steps in to see if it can create movement in the private sector in certain areas where it believes it is market failure. Mr. Phillip Stephens: Wilfried, is the auto industry old hat? Shouldn't we be talking about biotechnology and advanced industry or whatever? Mr. Wilfried Porth: There is a lot of new technology in automotive, too. It is not about if we or Volkswagen are still there in 20 years with those technologies. The question is, is Europe still there? When you compare the incentives the Chinese are giving to electric vehicles, battery technology invention, research, this is a factor of 10, 20, 30, in comparison to what Europe is doing. This is what we need to address. Just in keeping this here, we are an international company. We can move not only our (Inaudible) but our companies all around the world. (Inaudible) And also with this new technology. I would like to come quickly back to the question about why are we in Alabama and not in Detroit and Michigan, when we started our search for locations it was not only one compiled of southern states of the U.S. It was also welcome by the central government that not all automotive industries should be concentrated in Detroit because this could create big problems if only one industry in one industry. So it was basically welcome that we go south and, yes, we have received a lot of incentives, not only we, but the automotive industry to go that way. Two points for takeaway, we really need to focus on new technologies because I believe manufacturing is an essential part of economy and it is essential for a stable society in the future. Mr. Phillip Stephens: We have two or three questions directed to you. The Hon. Ron Bloom: Since I'm the last one to talk I don't have to answer them. But I will anyway. A couple of takeaways and a couple of responses. I think I kind of reject this old industry, new industry. And again I don't want to focus on the car business so much and it is iconic and people think it is all we are talking about. But the car industry does buy more semiconductors than any other industry in the world. There are tremendous advances going on in materials. Right now, they're talking about putting them in airplanes. In ten years, they will be putting them in cars, NANO technology, all of these things are about making things. I think you really have to be careful to draw this rigid distinction between old industries and new industries. What is coming is the infusion of technology into all kinds of making things. And that's really what the future is about. And that affects all of manufacturing. And that's where to the extent the United States remains good at technology and good at innovation. That's what we're going to be good at. Second to the gentleman from Michigan. I agree the global supply chain has torn many of these things apart, but I don't see the world and everyone wants to debate whether the world is flattening or rounding. It is doing both at the same time. If we put a price on carbon, transportation costs go up. If transportation costs going up, moving things that are big with a high ratio of rate to value is going to be less logical. So these things will move until all kinds of different directions at once. The role of government is not to figure all of that out, but to try to ask to what we can bring to the party. And what we can bring to the party is we can bring an infrastructure. We can bring an infrastructure of people, of highly educated people. We can move goods. We can move energy. We can move information and we can move people quickly. And we can have skilled people. And we can have open capital markets. And we can have innovation. We can have knowledge. There are the things that governments can be very good at. There are fundamental market failures. Private actors cannot capture the externalities from creating those kinds of goods so they will under invest in them. So government has an absolutely critical role. While I certainly wouldn't say that if you build it they will come is enough. If we build those things, we will be a lot further down the road than we are today. In terms of the question about doubling exports, obviously it is an ambitious goal. I think what it is and Ambassador talked this morning about our trade policies so I'll leave that to him, but I think the president has been clear that we did over consume and we did under produce. I think the export policy is entirely consistent with that. We want to make things. And by the way, that can be making movies, too. But we want to make things. And we want to be paid to make those things from other parts of the world. And I think that is a critical part of the rebalancing. I will leave all of the working it out with others to the diplomats. From the perspective of those who make things in the U.S. I think if we can do that better and we can provide private actors with the fertile soil, we will be a better partner in the world economy. Mr. Phillip Stephens: What I take away from this is with the strong exception we all seem to be industrial activists now or believe a bunch of stuff that has to be done. More seriously, I thought that was a really interesting discussion, great contribution from the floor, great presentations from our panel. I would everyone to say thank you very much.