‘I think Brexit is a mistake, but democracy gives people the chance to make mistakes.’

| April 2, 2020 | 0 Comments

Stefan Pehringer has been Austria’s ambassador to Canada since 2017. The ambassador studied law in Germany before joining the foreign ministry in 1996 and he later completed a doctoral degree in legal studies at the University of Vienna. Before being appointed ambassador to Canada, he had postings in Luxembourg, Germany, Denmark and Latvia. His office in Canada is heavily adorned with soccer jerseys and memorabilia and he explained that he’s been on the advisory board of Rapid Vienna Football Club since 2011. On the day Britain departed the EU, he sat down with Diplomat’s editor, Jennifer Campbell, to talk about his country’s economy, the future of the European Union and Brexit.

Diplomat magazine: Austria’s economy has been doing better than the Eurozone average, but it’s significantly lower than when the growth rate was 2.4 per cent in 2018. Still, what is Austria doing right?
Stefan Pehringer: We have, in certain ways, been connected very much with Germany, which is still our largest export market, but in the last 15 to 20 years, we were able to emancipate from that enormous dominance. We had it a bit easier because for us, being in the EU opened up great relations with countries and regions that we didn’t have relations with for almost half a century, until the end of the Cold War. That opened up and integrated the European Union, which helped us a lot to offset the risks to a certain to degree.

DM: And what do you think caused the slowdown? The China-U.S. trade war? Germany’s slump?
SP: Insecurity abounding. On the eve of Brexit, we still don’t really know how that will play out. A lot of people are waiting and [watching.] The U.S.-China thing, Brexit, the strong dependence of Germany on the auto market. Those are all things that are connected with question marks.
DM: Could you please describe the manufacturing sector in Austria?
SP: We are really proud to still have a pretty strong manufacturing sector, which is bigger in comparison to those of other countries. The share of manufacturing in the overall economy is 22 per cent — it’s higher when you compare it to other Western economies, where you have figures more like 8 or 10 per cent. Britain is a classic example. What helped us are two historic factors. First, as in Germany, we have a long tradition of regional craftsmanship — vocational training and craftsmanship are still very strong in Austria. You have a region where they’re particularly good at doing steel works, and another region that does wood and another that does aluminum and they have worked with these materials sometimes for centuries. Then you have educational institutions — schools, colleges and universities. Since the 1980s and ’90s, there’s an even stronger link between the educational sector and manufacturing sector.
Another thing is that back in the 1980s, a very large part of the manufacturing sector was state-owned. Those companies were close to bankruptcy at that time and you had two schools of thinking. One said ‘let’s sustain that, let’s put government money into those because we have to save jobs. That was one extreme approach. The other extreme was to simply shut down all of that. [This school of thinking said] ‘Get rid of it, they aren’t market competitive, shut them down, go into services, do something else.’
Most countries that went one way or the other don’t have a manufacturing sector anymore. That’s due, in large part, to the fact that they didn’t go for the Austrian way. At that time, there were some [Austrian] politicians who got together and said, ‘We’re not going to go either way. We won’t subsidize forever with state money those deficient industries, and, on the other hand, we won’t simply shut them down. We’ll take the good parts, bring in more private ownership.’ And all of those companies are now privately owned and in close co-operation with craftsmanship institutions.
In the mid-’80s, in a town like Linz, they had 40,000 people working for a state steel company. It was running into bankruptcy because they couldn’t compete with India, China and the Soviet Union. They laid off a lot of people, but kept the core, invested in science and [research and development] and said ‘we have to go into quality steel production.’ Today, Linz is world market leader in quality of intelligent steel.
If I take the number of people who work [in steel] there now — about 12,000 — and combine with the number of people in the supply-chain businesses, you come to the same amount of jobs that they had in the ’80s, or even more, and these are sustainable jobs. Now they’re looking into how to produce steel in an environmentally smart way. And this was all simply because we had this old tradition of craftmanship and industrial policy. You need leaders, not ideologues. The ones who says ‘just keep on subsidizing’ and the ones who say ‘shut it down’ — they’re all ideologues.

DM: Can you explain how the early subsidization worked?

’We are really proud to still have a pretty strong manufacturing sector, which is bigger in comparion to those of other countries.‘ (Photo: James Park)

’We are really proud to still have a pretty strong manufacturing sector, which is bigger in comparion to those of other countries.‘ (Photo: James Park)

SP: It was state-owned and then gradually it was privatized. Up to the mid-’80s, those companies were state-owned and the government gradually moved them to privatization. I can tell you about a myriad of policy mistakes from the ’80s, but this was good policy. We had some very forward-looking politicians and business leaders in those companies.

DM: Did Germany’s recent slump have a big effect on Austria?
SP: I don’t have any very recent figures, but as an overall observation, yes. When you have a slump in Germany, it affects us. But we are not as dependent on Germany as we used to be. We’ve broadened our exports. Exports to North America have grown considerably.
Germany is still our biggest trading partner. It’s 50 per cent, but it used to be closer to 75. Before the end of the Cold War and Austria’s accession to the EU, our dependence on Germany was more like Canada’s is with the U.S.

DM: Who else are you trading with now, besides North America?
SP: It’s a mix. Still Germany, but we have very strong trade with our neighbouring countries such as Switzerland and Italy. We are very strong with Czech Republic, Slovakia, Hungary, Slovenia, Croatia. China is a global giant, but neighbourhood still counts in business. Every year, our exports to China rival our exports to Slovenia. [Our importers] buy quality manufacturing, machinery, mechanical devices and pharmaceuticals.
DM: Which exports have slowed of late, if any?
SP: I’m not aware of any.

DM: What is the political situation in Austria with the recent coalition between the Conservatives and the Greens?

‘Before... Austria’s accession to the EU, our dependence on Germany was more like Canada’s is with the U.S.‘ (Photo: James Park)

‘Before… Austria’s accession to the EU, our dependence on Germany was more like Canada’s is with the U.S.‘ (Photo: James Park)

SP: It’s a very interesting new model. We’ve never had this combination on the federal level. We have had it on the provincial level. I think it’s a model that’s being followed with great interest in Europe and even beyond. As we have seen, all over Europe, the traditional big parties — be they the social democrats or the conservatives — have been suffering and losing elections, so this could be an interesting model. It’s not a classic centre right or left government. It’ll really be a centrist government.

DM: How do you explain coalitions to Canadians who don’t really understand the concept?
SP: Ha! Having coalitions is something Canadians are not used to and I learned that it never happens at the federal level and very rarely on the provincial level. If you look at the situation of the Canadian government as a minority, the necessity to forge compromises requires negotiation skills. If you have a formal coalition, you have that on the level of government. We are unfamiliar with the idea that one party supports government without a formal coalition.
We had a minority government once, from 1970 to 1971. The Social Democrats under chancellor Bruno Kreisky won an absolute minority. They were short a few seats. They concluded an agreement with the Freedom Party that it would tolerate them for a certain period of time, in exchange for a new electoral law, which [has been] in place since then and which provided smaller parties with better electoral chances.
The Freedom Party said, ‘We support you on no-confidence votes if you give us a new electoral law.’ The law before made it more difficult for smaller parties to enter Parliament and it gave them relatively fewer seats. Now, if you enter with 5 per cent, you get 12 or 13 seats. Before that, maybe you had to have 8 per cent to make it into Parliament and then you’d only get maybe 4 seats.
After that one year, they went back to the voters and Kreisky got a majority.

DM: Your current chancellor, Sebastian Kurz, has pledged to achieve climate neutrality by 2040. Can he and if so, how?

'We have a long tradition of regional craftsmanship — vocational training and craftsmanship are still very strong.' (Photo: James Park)

‘We have a long tradition of regional craftsmanship — vocational training and craftsmanship are still very strong.’ (Photo: James Park)

SP: That, of course, is very much at the core of the new government program. It has to be because it has to be for the Greens and also with the whole Greta Thunberg effect. The Greens are much more pushy. They have agreed to achieve neutrality by then but the question of how to do that is still to be seen because the Greens want to take bolder steps. The Greens think of a Canada-style carbon tax, which the Conservatives are very opposed to. It’s pretty much like the Canadian Conservatives who want to have more energy efficiency, new technologies. Now, [the Conservatives have] agreed that a task force be formed to come up with a solution by 2022. The next election is 2023 and they want to have that thing solved by 2022. It could be that you see a gradual move of the Conservatives toward a carbon tax. And our new minister for the environment is, of course, from the Green Party. She has said she is interested in studying international benchmark models on carbon pricing. The interest would be directed very much towards Canada. We hope that we have more intense contacts on that issue and maybe even a visit from the minister.
It’s clear that if the Conservatives take that direction, they would be very interested in knowing how that would be done in a way that doesn’t hurt business. Our businesses are already leaders in green technology. The president of the Chamber of Commerce [recently said] ‘We are already leaders there and we don’t want to see even more burdens put on our companies while other bigger countries aren’t doing anything.’ That should never be an excuse for us not doing more, but we have to keep a balance.

The new Austrian government — a coalition of Conservatives and Greens — has vowed to achieve climate neutrality by 2040, something it has done to appease the Greens, but also because of  ‘the whole Greta Thunberg effect,’ the ambassador says. (Photo: Lëa-Kim Châteauneuf)

The new Austrian government — a coalition of Conservatives and Greens — has vowed to achieve climate neutrality by 2040, something it has done to appease the Greens, but also because of ‘the whole Greta Thunberg effect,’ the ambassador says. (Photo: Lëa-Kim Châteauneuf)

DM: What effect do you expect Brexit will have on Austria?
SP: There are studies that show that the effect on Austria should be rather limited because, on the one hand, it’s sad to say, our trade relations with the U.K. have never been that strong. There will be an effect for some businesses that are established in the British market, but all in all, it should be limited.
Normally, our manufacturing is contributing to the manufacturing of another country and the Brits don’t have a lot. The contribution of an Austrian company will be one small, sophisticated piece of equipment within a bigger supply chain. It’s not helpful for an Austrian ambassador, but our companies don’t normally feel the necessity to do a lot of advertising. They are not addressing the market, but they have other businesses they work with and they have long-established relationships — some with Canadian businesses. Sometimes other colleagues represent companies in Canada. Our companies know the businesses they’re working with.

DM: What effect do you think Brexit will have on the European Union?
SP: It’s hard to say. First of all, it’s important to say it’s a sad day. It’s not a positive day seeing an important country like the U.K. leave. I personally think it’s a mistake, a colossal mistake, because the U.K. had the best of both worlds in its membership in the European Union. They had what they were always most interested in — the market access to the EU — and, on the other hand, they had tons of exceptions. They had their own currency, so they were not part of the Schengen area. They had the best of both worlds and they gave it up. I think it’s a mistake, but democracy gives people the chance to make mistakes. The British will have to define their way, where they want to go. The new relationship with the European Union will have to be forged within bilateral relations between the United Kingdom and the European Union.
There are still [several] months in this transitional period. I think having a trade agreement within those months is ambitious. I think Canada can speak to that when we think about how long the negotiation process for CETA took.
I think 11 months [total] is ambitious, but we will see. Maybe the fact that the U.K. leaving the EU has already made citizens of various member countries more aware of the advantages the EU brings: market access, [mobility] and a more unified regulatory landscape. Maybe in that regard, it’s kind of helpful. But, on the other hand, I’d still say it’s sad. But it’s their decision.

DM: But you think Brexit might have solidified the relationship between remaining member states?

Boris Johnson was the face of Brexit in the U.K. Austrian Ambassador Stefan Pehringer calls its departure from the EU 'a sad day.' (Photo: the official website for the British Embassy in Japan)

Boris Johnson was the face of Brexit in the U.K. Austrian Ambassador Stefan Pehringer calls its departure from the EU ‘a sad day.’ (Photo: the official website for the British Embassy in Japan)

SP: That’s still to be seen. I think that when you see the discussions over the next months, when [British] people are wanting to make sure their businesses still have access to that market, to grapple with that and not falling back to World Trade Organization rules, I think more people in other countries who might have flirted with the idea will be more aware of the advantages the European Union gives us. I think it’s giving more perspective on what it means to be a member of the EU. [They] might not love the EU, but see what we have in it, and what we’d lose.

DM: So you don’t see any other countries leaving the EU?
SP: No. Unlike the situation before the Brexit vote, I don’t see any serious movements by any country about leaving the European Union. We have countries and parts of populations in countries who love the European Union and others who have a more pragmatic approach. I think both of them are good.
I think the whole process and, even now, the negotiation process between the U.K. and the European Union is about making clear that membership rights only apply to members. You can’t have your cake and eat it, too. That is what it is about and that will lead to a negotiation process that I think will be demanding.
Of course, there’s overregulation red tape, and sometimes it’s outright crazy the regulations from the European level, but that kind of criticism is sometimes too predominant to me. We talk only about red tape and bureaucracy. We have that in all of our own countries. Let’s sit down and talk and see and maybe we can reduce some of it. But this criticism, which is correct, shouldn’t keep us from seeing how great this project is in political, economic, cultural and social terms. I think it wasn’t a coincidence that the European Union, back in 2012, received the Nobel Peace Prize. I was personally offended by people in the media and politics who ridiculed this prize for the EU. There is no other institution in the world that deserves the Nobel Peace Prize more than the European Union. Those who said the EU got the prize for bureaucracy and red tape didn’t understand. Yes, there is too much bureaucracy and there are lots of ridiculous things coming out of it, but we all have laws that you could call ridiculous. That doesn’t take away from the importance of the [EU], which is a world historic one.

The migration crisis in Europe is about a lack of function in border control and the fact that those in the EU don't agree on joint principles of what migration and refugee status are. Shown here are Iraqi and Syrian migrants at the Vienna railway station in 2015. (Photo: Bwag)

The migration crisis in Europe is about a lack of function in border control and the fact that those in the EU don’t agree on joint principles of what migration and refugee status are. Shown here are Iraqi and Syrian migrants at the Vienna railway station in 2015. (Photo: Bwag)

DM: How is Austria dealing with the increased numbers of migrants coming your way?
SP: We have to understand the motives of each and every person who wants to leave their own country and live in another country. Nobody takes that decision lightly and I say this, sitting in a country, Canada, that was built on immigration. On the other hand, we have to be careful with the different categories. We have migration and refugees. I think we have to be very clear with those categories. A person who is a refugee is identified to the standards of international law. And if they are, they have the right to asylum and asylum status because they are persecuted for reasons of race, religion, sexual orientation or political views. On the other hand, apart from refugees, you have migrants. Being a migrant is perfectly legitimate. Migration has largely contributed to the wealth of countries, but I think we all understand that we need a different rules framework for refugees and for migrants. A refugee has to be accepted and it is legitimate for a country to tell a migrant that ‘yes, we need you now’ or ‘maybe we don’t need you now, but in two or three years’ time, if you acquire certain skills, we may.’
The core problem in Europe with the migration crisis is two-fold. First, it’s about the lack of function in border control, but at least of the same importance is the fact that we, in Europe, still don’t agree on joint principles of what is migration and what is refugee status. We have a kind of perverted situation that many people see the asylum system as the only key to enter the EU. At the same time, they’re 95 per cent migrants. We grandiosely failed in developing the system and not even developing an approach toward having such a system. That’s what we need. As long as we don’t have this set of joint ideas, [there’s no point in] talking about distribution quotas.
I was part of the process when we started to negotiate the system of quotas and the distribution of refugees in Europe that has failed. It had to fail because how would I distribute an amount of people when the countries to which they should be distributed don’t even agree on what those people are?
The immigration and asylum issue is closely linked with foreign political questions because the amount of people that push toward Europe has to do with the developments in our neighbourhood. Europe is a neighbour to the most unstable region in the world, which is the Middle East, and the one continent on Earth that provides us with lots of opportunity and also lots of conflicts and problems. That is Africa. Europe will always have more issues with neighbours than North America, or China. There are oceans dividing [the latter from the Middle East and Africa.] The Mediterranean Sea is not an ocean.

DM: And then you have a trade agreement with a country way across the Atlantic Ocean, namely Canada.
SP: We have a trade agreement, which is working, but according to our information, it’s more European companies that are seizing it more. I think the reason — what we sometimes forget — is that Canada is a country with only 37 million people and it’s expected to play on the global level. When similarly sized countries such as Poland or Spain act on the global stage, it’s always within the European Union, which has 500 million people. That’s maybe why the trade machinery in Canada has been so focused on the U.S. and getting that new agreement.

DM: How is the trade relationship between Austria and Canada?
SP: Stable. It’s always around 1.5 billion euros or $2.15 billion. It’s more in our favour.

DM: What do we trade back and forth?
SP: Machinery big and small, pharmaceuticals, wood products and, increasingly, with CETA, food. That’s pretty much what we send each other. We do not have big natural resources. We don’t have oil or gas and we don’t buy oil from Canada.

DM: You’ve been here for almost three years. How has the relationship changed in those three years?
SP: Not much; not for the better or the worse. Austria and Canada know each other, like each other. When Austrians think about Canada, it’s hockey, the Rockies, nature. When Canadians think about Austria, they think about music, the Sound of Music, cultural things. Sometimes it’s hard to develop knowledge beyond those clichés, but on the other hand, if they’re positive clichés, why not? They are a good starting point, but to have a bit better knowledge on the part of both countries would be good. We’re both stable democracies, allies on issues of the rule of law, support for democracy; we’re both staunch human-rights defenders. That’s where Austria and Canada co-operate a lot at the UN.
Generally, we have good co-operation on the technical level, strong co-operation between universities — students and professors. We have a working holiday agreement whereby 100 Austrians can work in Canada per year and 100 Canadians in Austria. The problem always is that many more Austrians want to come to Canada than the other way around.
When it comes to the top political level, in the last three years I wasn’t helped by the fact that we had a Canadian election and two Austrian elections since I’ve been here. In Austria, we had federal elections in 2017 and 2019. During the campaigns and after an election, no one travels. I hope that now, with a new government, we will start receiving visitors. On Feb. 14, Chancellor Kurz and Prime Minister [Justin] Trudeau [sat] on a panel together in Munich at the Security Conference. [The panel was titled “Westlessness in the West: What Are We Defending?” The leaders discussed the significance of democracy, human rights and the rule of law in today’s changing world.]

DM: What is your proudest accomplishment from this posting?
SP: I wouldn’t single one [specific] one out. It is the many encounters with so many Canadians and feeling the appreciation they have for Austria and Austrians. That’s really the highlight. Also, being in this wonderful country. I always want to say that Canadians have a big treasure — they have many treasures. But the biggest treasure, and I have lived in many countries now, is how Canadians deal with each other. They’re very respectful, friendly people. It’s good to be here. It’s a country with a high quality of life and people contribute very much to this high quality of life.

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