German exports: The risk of trade wars has not decreased

The Corona crisis will not bring about the end of globalization that has often been invoked.

But it has contributed to the fact that the rules of the game of international trade have changed again.

National health protection, for example, was added as a motive for exerting political influence on the supply chains and reinforced the previously growing protectionism.

This presents German exporters and importers with new hurdles.

They rightly expect politicians to find answers and secure the framework for free trade.

The business associations make this clear in their demands for the Bundestag election.

The parties, however, pay worryingly little attention to foreign trade in their election manifestos.

In this country every fourth job depends on exports, in the export industry it is even every second.

The share of exports in gross domestic product was 47 percent before the pandemic.

Foreign trade policy is most likely to make it onto the agenda these days when it comes to climate protection.

Incentives for climate-friendly imports and exports can certainly be an effective tool in the fight against global warming, but other challenges must not be forgotten.

Clear positioning in relation to China

After the Trump era, trade disputes are no longer so publicly carried out via Twitter. However, the danger they pose has not diminished. Exporters are watching the rise in extraterritorial sanctions with concern. This is no longer only used by the USA. China, too, is constantly equipping its toolbox with new instruments to enforce its geopolitical interests. Germany must agree on a common position with the EU and, in turn, find effective means to protect German companies from becoming the plaything of foreign policy ambitions.

Vigilance is also required in view of the Chinese expansion efforts in Asia and Africa. In many African countries, China has been one of the most active investors for years. With its growing middle class, the continent has great potential for growth. It would be fatal if Germany simply left the market to Chinese state-owned companies. But for private investors to be able to survive in the competition here, better interlinking with German development aid is needed - for example in the development of transport and communication infrastructure.

The young Pan-African Free Trade Area (AfCFTA) is trying to get the region more involved in international trade.

These efforts need to be strengthened.

Germany should also bring its own trade policy projects back into focus.

The free trade agreement concluded by the EU with the South American Mercosur states and the CETA agreement with Canada must finally be ratified, and ongoing negotiations with Australia and Indonesia, for example, need to be accelerated.

Bundling responsibilities politically

In order to also help German companies to become active in difficult markets, there is a tried and tested instrument in the form of export credit insurance, which protects companies from payment defaults. However, last year only 1.4 percent of all German exports were covered by the so-called Hermes cover. Access should therefore be further facilitated for small and medium-sized enterprises. Instead of assuming for the guarantee that the goods are predominantly of German origin, priority should be given to the added value generated in this country.

The list of tasks is long. In order to cope with them, it would be more effective to bundle responsibilities politically. A new ministry is not needed for this, as the commercial economist Gabriel Felbermayr demands. A foreign trade representative could also draw new attention to foreign trade. This would have to advocate framework conditions that do justice to the post-corona reality.

When it comes to supply chain problems, companies are of course initially required to position themselves more broadly with their suppliers. But for the development of new procurement markets, regulatory hurdles would also have to be lowered instead of building new ones as with the Supply Chain Act. A sure instinct is also required in climate protection. It must not become a gateway for protectionism. After all, it is free trade that secures the foundations of German prosperity.