EurActiv.com

EU news and policy debates across languages

03/12/2016

German industry profits from globalisation

Innovation & Industry

German industry profits from globalisation

BMW motorcycle factory. Berlin, 2009.

[Arbeitgeberverband Gesamtmetall/Flickr]

Results from a recent study reveal German industry is one of the winners in globalisation, while France and the United Kingdom lag behind. EurActiv Germany reports.

Partly due to its tight-knit global interconnection, German industry has benefited from globalisation. This is the result of a recent study conducted by the Cologne Institute for Economic Research (IW) on behalf of the Federation of German Industries (BDI).

According to the results, industrial added value in Germany grew 37% between the years 1995 and 2012.

France, on the other hand, only achieved around 3% growth in this regard and the United Kingdom only 9%. Japan even saw negative growth with -7%.

“The success of German industry is in large part due to the openness of our economy. As a strong exporting national we benefit from deeply rooted integration of German industry in international value-added chains,” BDI President Ulrich Grillo writes in the preface of the study.

Germany stands at the centre of the European industrial production network, the authors of the BDI study write.

The special role of Germany’s manufacturing industry is demonstrated by the import rate for intermediate inputs, which increased from 27.7% to 34.6% between 2000 and 2011. Out of all domestic European intermediate input imports, the German market makes up a 21% share.

So-called intermediate inputs include all goods and services that are needed for production, such as raw, auxiliary and operating materials.

>>Read: Merkel calls for ‘industry 4.0’ at German IT summit

At the same time, the study said Germany sustained losses in its share of the global industrial value chain. The Federal Republic’s share dropped from 9.2% to 6.3% between 1995 and 2012.

Meanwhile China enjoyed the largest gain, growing to a share of 24.4%. As a result, the People’s Republic even passed the United States, which ended up with a share of almost 20%.

All in all, the study indicated that the 26 so-called established industrialised states – which include the OECD states without countries in Central and Eastern Europe and excluding Turkey – lost a considerable portion of their shares in the industrial value chain and global trade. For the industrial value chain within the 50 states where the most global economic power is concentrated, the share held by the so-called established industrialised countries decreased from 83.8% to 58.7% between 1995 and 2012.

In global trade, the established industrialised states’ share of global exports between 2000 and 2012 fell from 70.4% to 55.1%.

In the mean time, the group of rising industrialised countries, to which China and Central and Eastern European states belong, was able to increase its share of global exports from 14.3% to 25.1%.

Still, the rising industrialised countries remain highly domestically oriented, as the study’s authors suggested. Their export rate in 2011 was 18.8%, while established industrialised countries boasted a rate of 35.9%.

As far as recommendations for action are concerned, the study offered “diverse approaches”. The authors indicated three things that should be secured: the value-added chain, the openness of the market and the location quality.

The authors also recommend strengthening research infrastructure, introducing unbureaucratic tax-related support for research and further opening the market to prevent isolation of the Europe. Furthermore, the authors say the European Commission should follow up its promises to strengthen the industry with concrete actions.

Background

Germany's BDI industry association called, in September 2014, for an "investment offensive" from the Federal Government, saying that strengthening business confidence should be a top priority amid the economic downturn, and hailing TTIP as an "historic opportunity".

Germany is in the midst of an economic slowdown, according to the latest data. The BDI group, Germany’s leading business lobby, dropped its growth prediction for 2014 to only 1.5%. The association’s previous estimate was 2%.

Read more here.