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The grand coalition resolved its dispute over the supply chain law with a lazy compromise.

The law is a toothless tiger and requires little more than lip service from German companies to adequate standards in terms of human rights and environmental standards.

This is not just a moral failure, but could in the long term damage the German economy and its most important brand core, the reputation of its products “Made in Germany”.

The compromise is therefore likely to do the German economy a disservice in the long term.

A few years ago, politics and business decided on a compromise on supply chains, which included a voluntary commitment by all German companies to uphold human rights and environmental protection in their activities - but without the desired result: A survey showed that only one in five companies did this voluntarily Commitment fulfilled.

There were also critical methodological shortcomings and business associations were not sufficiently involved in the process.

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Rather than admitting failure, business associations have continued to try to prevent an effective supply chain law.

Some of their arguments are justified, while others are wrong.

It is wrong to argue that a mandatory supply chain law would be too expensive for companies, making them less competitive in global markets.

From an ethical perspective, this argument is not justifiable because it implies that the violation of human rights and environmental standards can only be justified if they protect economic interests.

“Made in Germany” also stands for sustainability

However, this cannot be defended from an economic perspective either.

There is hardly a country whose companies are so competitive and successful.

Despite the rise of China and Asian low-wage countries, most German companies have been able to maintain or even expand their market share in the world markets over the past two decades.

This competitiveness is not based on cheap products and low costs, but on the reputation “Made in Germany

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, which stands for high quality, reliability and sustainability.

Precisely this reputation is protected by a well thought-out supply chain law because it signals the high standards and quality of the products to consumers and partner companies.

This is precisely why there are a number of German companies - such as BMW and Ritter Sport - that have consciously spoken out in favor of a tough supply chain law.

A supply chain law is like a certificate that distinguishes German companies from other competitors and can be an important advantage in global competition.

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The argument of the business associations that a supply chain law would force German companies to withdraw from certain countries is perfidious.

It can neither be a valid ethical nor a valid economic argument that a country and its population are better off if German companies tolerate human rights violations there or even make them possible through their activities.

However, the business associations also have two valid arguments.

For small businesses, it is indeed difficult to carry out a review of their own supply chains.

Even if there is the will, many cannot logistically manage it.

But politics can help here, for example by offering certification processes in the affected countries through the Chambers of Commerce Abroad (AHK) or other public institutions that take on this work for small companies.

In addition, the critics are right that a supply chain law should be implemented not only on a German, but also on a European level.

Indeed, this must be the aim of the federal government.

At the same time, the lack of a European or global dimension can never be a justification for misconduct or for tolerating human rights violations by German companies.

Lack of liability rules undermine the law

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The decision that German companies will not be subject to civil liability when human rights abuses or other abuse occurs in their supply chains means that the new law will be a toothless tiger.

Even threats of a temporary exclusion from public tenders should not be a sufficient incentive for many to review or change their supply chains more thoroughly.

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The compromise on the supply chain law is a missed opportunity.

Once again it shows what many critics have accused Germany of for decades: a mercantilism in which German foreign trade policy primarily serves the narrow and short-term economic interests of German companies, and in which Germany refuses to accept international responsibility and is willing to divulge its values .

The tragedy is that a more determined supply chain law would not only have protected important values, but would also have served Germany's long-term economic interests.

Because the greatest strengths of the German economy are not cheap products, but high quality and high standards.

To maintain this requires a high degree of trust in German companies and German politics.

This trust is jeopardized by the lazy compromise.

The author is President of the German Institute for Economic Research (DIW Berlin)