free trade and flirting with protectionism. 3 future of international trade looking at the global landscape, positive economic data are not only coming from europe. for the first time since a brief surge in growth in 2010 we are experiencing a synchronised recovery that is taking place broadly across europe, the united states, as well as in china and emerging market economies. this synchronised recovery will support international trade and vice versa. at the same time, we have witnessed public attacks on international trade and the system that supports it, which is based on the free flow of goods and capital. protectionist sentiment in developed economies is rising. promises to cut back on free trade have resounded with voters in some developed countries. while it is still unclear what – if any – protectionist policies will actually be implemented and how they will affect international trade, it is clear that leaders in government and business have not been able to persuasively defend the virtues of free trade, and that the future of international trade will depend precisely on their ability to do just that. let me brief you about this discussion and the action that has to be taken. we have to adopt a stance that is both correct and compassionate. that is : restrictions on international trade will do much more harm than good and would be a historic mistake. and we must be compassionate : even though the reasoning of those who call for protectionism is ultimately wrong, we have to recognise that there are parts of society who believe international trade is responsible for taking away their jobs. 3. 1 is free trade useful? for a long time, the usefulness of international trade has been undisputed, and international policymakers have concentrated on ever - more detailed arrangements and standards. that is no longer the case anymore : the core of the international trade system is being questioned. protectionism is back, and even mercantilism, dead for centuries, has reared its ugly head again. in this context, i am convinced that this trend is leading us down the wrong path. the social and economic issues that countries across europe and around the world are facing are not at odds with the conventional wisdom regarding international trade, and they cannot be solved by falling 2 / 5 bis central bankers'speeches back into protectionism. what globalisation statistics show is that economic integration does indeed raise aggregate wealth. worldwide exports and imports have reached roughly 60 % of global gdp1, and there has been a surge in global economic integration in recent decades. at the same time

be, the ecb stands ready to mitigate potential bottlenecks, based on the swap agreement in place with the fed. third, the lion share of german and other bis central bankers ’ speeches european banks have used the rather benign market conditions in the first part of this year and have completed an over - proportional part – or even all – of their overall 2011 funding needs in the capital market segment. and let me make a final important point here : european banks, in general, have considerably improved their capital base making them less vulnerable to financial strains. speaking about german banks, the tier 1 capital ratio currently reaches 12. 6 % on average, having improved by about three percentage points between the end of 2008 and june 2011. but let me return to the bigger picture. it has to be kept in mind that the sovereign debt crisis and, indeed, challenges we face in parts of the european banking system can ultimately only be resolved by ambitious and credible fiscal policy measures, particularly in the countries whose fiscal soundness is being questioned. conversely, it is imperative to very clearly separate monetary policy from fiscal policy. wherever the boundary between the two has become blurred, it must be redrawn as quickly as possible. conclusion ladies and gentlemen let me conclude by stressing the importance of the work done by our representative office in new york. as i see it, there are two main functions that this office serves. first, it gives us an opportunity to further explain policy decisions and economic developments in germany and the euro area on this side of the atlantic. second, and for us even more importantly, our new york office reports back to us, in particular, on monetary policy and financial stability issues as well as financial markets developments. through the financial crisis, in particular, we have seen the significance of directly exchanging information with our colleagues at the fed, with representatives of commercial banks, policy makers, think tanks and market participants. it allows us to better understand political and economic developments in the us and we are much more in a position to separate noise from significant market developments. our team here in new york is doing an excellent job identifying and communicating key developments in the us back to frankfurt. this, i suspect, would not be possible without the support of everyone present here tonight. finally, one great side - effect of having people work at our representative office is that they become even more valuable when they return home. as you know, felix thierfelder has worked at the office over the past three years,