Many people are apparently unaware of the dimensions of German foreign trade: before the corona crisis, exports accounted for 47 percent of German gross domestic product and imports for 42 percent. The shares were thus more than ten percentage points above the values of the other G7 countries. A good twelve million jobs in Germany depend directly or indirectly on foreign trade.
And it was above all exports that recently contributed to a rapid recovery in many sectors. Politically, however, this economic sector is clearly underexposed in view of its importance. Because the challenges of our foreign trade relations will not decrease after the crisis.
The implementation of a whole series of free trade agreements that have been negotiated for years is also on the agenda, as is the establishment of new relationships with partner countries that will play a greater role in German foreign trade after the crisis than before.
It is still unclear how Germany will position itself in relation to China and the USA, and there is largely no response to the expansion efforts of state-controlled economies in emerging and developing countries. The conditions for foreign investments and foreign trade in the German economy have changed significantly in recent months. A strategy for reacting to this politically would have to be developed quickly.
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It is surprising that none of the published electoral programs give the topic appropriate importance – on the contrary: Regarding foreign trade – responsible for around half of our prosperity – there are no innovative proposals that would show that the parties have recognized the dimension of the challenge. If the topic comes up at all, then mostly with well-known keywords or new regulatory ideas.
The four pillars of future politics
We need nothing more urgently than the certainty that our export economy can continue to make its contribution to German prosperity in the future. This will only succeed if we reposition ourselves in foreign trade policy and not only take into account the distortions caused by the corona crisis, but also new geopolitical developments and tensions. That should be the focus of the economic policy competition before the general election.
A future-oriented new foreign trade policy should be based on four pillars. First: The Federal Government’s foreign trade self-image must adapt to the changed realities. Germany must therefore develop new ambitions in its foreign trade policy. In the future, projects that have a high economic benefit for Germany or a positive international impact should be funded and secured.
A stronger focus on important sectors in strategically important markets is required. The German economic interest must replace the concept of the origin of goods as a criterion for export credit insurance.
Second: Representation of interests by “Team Germany”. For the export economy, there is now an imbalance compared to the political and financial support that Asian competitors in particular enjoy. Integrated foreign trade marketing through advertising, networking and political support is therefore necessary, which is coordinated between all relevant federal departments, authorities, associations and other actors.
A new Minister of State for Foreign Trade
A prerequisite for this is likely to be a uniform, cross-departmental strategy by the federal government. In order to make coordination easier, we propose pooling all relevant responsibilities in a ministry for foreign trade or with a new state minister for foreign trade.
The federal government should also dovetail development cooperation and foreign trade promotion and use development cooperation funds to secure and promote German foreign investments where projects promise a high level of developmental benefit.
If used intelligently, development aid could be the key to making projects commercially viable and thus promoting global prosperity. Medium-sized companies have great strengths. However, our companies can only survive in international competition, especially with foreign state-owned corporations, if the federal government supports them in a targeted manner in using networks, closing financing gaps, overcoming hurdles and creating competitive equality.
Third: new regulatory framework conditions. Germany now has the opportunity to play an important role in international competition towards the goal of climate neutrality and the corresponding transformation of the global economy. Positive employment effects for the German economy are not in contradiction to global climate protection, but can be its logical consequence.
Incentives for climate-friendly exports
The prerequisite, however, is to strengthen the chances of German companies in this future market. To this end, it is necessary to further develop the instruments for promoting foreign trade with additional incentives for climate-friendly exports and imports. This includes in particular tailor-made financing and security solutions for relevant future industries and favorable conditions in the promotion of foreign trade.
Germany should campaign in the European Union and the Organization for Economic Cooperation and Development for a groundbreaking framework to promote foreign trade that enables appropriate incentives. The tariffs on goods produced with a low level of CO2 must be lowered to the level of the import tariffs on goods produced with a high level of CO2.
In order to push through higher CO2 prices internally, Germany should campaign for a climate club that includes the EU and at least its free trade partners and the USA.
Further strengthen multilateralism
Fourth: If Germany becomes more aware of its own interests again, then we can only achieve the goals derived from this as an active partner in the European community of values and interests. At the same time, Germany must continue to promote multilateralism where bilateral agreements fall short, for example in the protection of intellectual property or in climate policy.
Extraterritorial encroachments on Germany’s sovereignty should be resolutely opposed. This requires the further development of appropriate instruments such as Instex. In order to avoid collateral damage from a more robust European trade policy, for example through foreign countermeasures such as tariffs, European compensation mechanisms should be provided for.
Pending free trade agreements should be quickly concluded and put into effect. The next federal government must address the reorganization of foreign trade policy under new framework conditions. So that we can ensure prosperity after the crisis and contribute to solving key global challenges from a position of strength.
The authors: Gabriel Felbermayr is President of the Kiel Institute for the World Economy.
Stefan Liebing is an entrepreneur and chairman of the German-African Business Association.
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