Handelsblatt Exclusive

The Digital Evangelist

MLOVE Campus: US Secretary of Commerce in Hamburg
U.S. Commerce Secretary Penny Pritzker and Cisco's head of German operations Oliver Tuszik spoke to Handelsblatt about the challenges of digitalization.
  • Why it matters

    Why it matters

    Both Germany and the United States need to scale up their digital infrastructure if their companies are going to stay competitive, the U.S. commerce secretary warned.

  • Facts

    Facts

    • The U.S. Commerce Secretary Pritzker led a delegation of some 400 U.S. businesses in Germany this week for the Hannover Messe, the world’s largest industrial trade fair.
    • The United States and Germany trade about $3 billion worth of goods and services per day.
    • The United States and Europe have about 50 million small and medium-sized businesses between them. Just 260,000 engage in trans-Atlantic trade.
  • Audio

    Audio

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It was just last year that the operators of Hamburg’s port authority would use 200 square meters of paper maps to plan for the arrival of thousands of ships entering Europe’s second-largest commercial port each day.

Now, they’ve finally developed a state-of-the-art digital map of the area, updated three times a day with the depths of the waters, to help them assure that the mega vessels entering their jurisdiction don’t run aground. Better late than never for Germany’s largest port to enter the digital era.

The U.S. commerce secretary, Penny Pritzker, who was touring the port, saw an opening.

“I’m certain there were a lot of middle-aged experts who had to adapt and learn to use the new technologies,” quipped Ms. Pritzker, who had her own go on the map during a visit to the northern German port city. “The fact that it’s intuitive makes it less intimidating.”

Ms. Pritzker was in no mood for small talk as she toured the facility. She challenged her hosts to explain exactly what Germany planned to do to upgrade its creaky Internet infrastructure – a struggle she said both sides of the Atlantic are facing as many manufacturers are only just starting to take advantage of digitalization.

“The potential is enormous, but it all rests on the backbone. None of us have sufficient backbone for what’s coming,” Ms. Pritzker told her hosts, encouraging Europe to loosen regulations on telecommunications companies.

Ms. Pritzker wasn’t the only one who recognized that Germany has a problem.

“We are far behind the rest of the world,” acknowledged Oliver Tuszik, head of the German operations of U.S. tech conglomerate Cisco, which is working with the Hamburg port to bring more of its operations online. “It will take a lot of time to get it done.”

That fact is shown in the numbers: Average fixed broadband speeds in Germany were at 45 megabit per second in 2014 – well below the OECD average of 77.4 Mbit/s. The United States is also behind the curve, with average speeds of 66.6 Mbit/s.

“The potential is enormous, but it all rests on the backbone. None of us have sufficient backbone for what’s coming.”

Penny Pritzker, U.S. Commerce Secretary

Pastora Velero, a senior Cisco government advisor, said she reckons Germany needs to invest about €100 billion in its broadband infrastructure over the next 10 years. So far it has a commitment of about €20 billion from Deutsche Telekom.

Ms. Pritzker said that’s not nearly enough – either the government needs to make it worth the private sector’s while to invest more, or it has to fill the gap itself. “Something’s got to give,” she said.

The German government is aware of the challenge, even if many businesses here complain it’s been slow to respond. The country’s vice chancellor, Sigmar Gabriel, in an interview with Handelsblatt earlier this week acknowledged that Europe’s largest economy needs to set more ambitious goals when it comes to speeding access to broadband Internet.

“Our goal must be to have the world’s best digital infrastructure, complete with gigabit networks, by 2025 at the latest,” Mr. Gabriel told Handelsblatt.

It’s a struggle where Hamburg is probably at the forefront among German cities. Authorities here have been praised for bringing together startups, universities and larger companies like Cisco to help make the city and its port more efficient.

While the U.S. commerce secretary at times seemed to question Germany’s overall commitment to building up its digital infrastructure, she came away impressed with the German port city.

MLOVE Campus: US Secretary of Commerce in Hamburg
Secretary Pritzker checking out the latest digital gadgets at the start-up hub MLove at Hamburg’s port. Source: MLOVE

 

“There’s a lesson to be taken from what’s happened here at the port of Hamburg,” Ms. Pritzker said in an interview following talks with Hamburg’s port authority leaders.

“We all looked at the digitized map table. It was designed in collaboration with all the stakeholders,” she added. “That will help make digitalization less of a frightening concept and more of an enabler of those who are skilled workers.”

Ms. Pritzker said the trans-Atlantic free-trade pact known as TTIP may also be able to help. She pointed to a series of smaller digital startups that have worked with Hamburg’s port to bring more of its operations online – startups that might be able to help U.S. ports too.

“For those smaller businesses to develop innovations not only here in Germany, but imagine those innovations being given more easy access to markets in the United States. That’s good for Europe, that’s good for the United States, that’s good for innovation. That’s the promise and opportunity of TTIP,” she said.

There is enormous potential: Ms. Pritzker likes to point out that, of some 50 million small and medium-sized businesses in Europe and the United States, just 260,000 engage in trans-Atlantic trade. “Imagine if we just doubled that,” she said.

Ms. Pritzker’s comments came towards the end of a week-long visit to Germany together with U.S. President Barack Obama, who on Sunday and Monday attended the world’s largest industrial fair, the Hannover Messe, to push for greater business cooperation and progress on the stalled trans-Atlantic free trade pact between the United States and 28-nation European Union.

ARCHIV - Das Containerschiff «CSCL Globe» (vorne) der Reederei China Shipping Group liegt am 12.01.2015 am Containerterminal Eurogate in Hamburg und wird für das Verladen vorbereitet. Im Hintergrund liegt das Containerschiff «Cap San Antonio" der Reederei Hamburg-Süd am Containerterminal Burchardkai. Foto: Christian Charisius/dpa (zu dpa "Exporte nach China um elf Prozent gestiegen" am 06.03.2016) +++(c) dpa - Bildfunk+++
The port of Hamburg, Europe’s second-largest. Source: DPA

 

It hasn’t been an easy ride. A majority of Germany’s public is opposed to the trans-Atlantic TTIP pact, and nearly 100,000 turned out to protest the free-trade deal in Hanover on Saturday.

The U.S. commerce secretary also hasn’t shied away from some of the hot-button topics that have divided Europe and the United States in recent months. In addition to making the case for TTIP, she spent much of the trip prodding Europe to allow U.S. multinational companies better access to Internet data, something Germany in particular has resisted out of privacy concerns.

The trip “was an opportunity to further TTIP, to further the understanding of TTIP but also to talk about the digital single market and … the importance of getting the E.U.-U.S. Privacy Shield finally approved in Europe,” she said, warning that about $260 billion in digital trans-Atlantic trade was at stake.

 

Christopher Cermak is an editor with Handelsblatt Global Edition in Berlin, who covers financial markets and the economy. To contact the author: cermak@handelsblatt.com

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