Dieter Kempf: “Protectionism harms everyone”

For Professor Dieter Kempf, the president of the Federation of German Industry (BDI), the critics of the German trade surplus overlook that Germany, as an “import European champion”, gives vital impulses for growth to the industries of the EU.

There is criticism of the German trade surplus. Is it justified and does Germany pursue a policy of cheap exports at the expense of its trading partners?

Germany’s new export record is proof of the attractiveness of our products. Germany is both export and import European champion. Our economy, with an import quota of just under 40 percent of gross domestic product, is one of the world’s most open industrial nations for imports from abroad. Allegations, as they were last heard from the US, Germany operate a policy of cheap exports at the expense of its trading partners, aiming at it. The international goods trade is based on supply and demand. International imbalances can not be eliminated at the touch of a button. Cross-border trade brings mutual benefits, protectionism harms everyone.

After Brexit: What external tasks do the companies in Germany and in the EU ask themselves?

We Europeans can not be fooled. Europe is one of the world’s strongest economies and a unique production network for mutual benefit. We enjoy the benefits of common rules and a single currency. The extent of mitigation is largely the responsibility of the UK Government. For politics in Brussels and Berlin, there can only be one motto: keeping Europe together and strengthening it. These include the common internal market with its four fundamental freedoms for labor, capital, goods and services. Europe is the foundation for prosperity and opportunity – and not least peaceful coexistence on the continent. That is why I wonder how negatively the European Union is at times viewed. Europe is by no means the problem, but Europe is helping us

“Cross-border trade brings mutual benefits, protectionism harms everyone”

What consequences would a US foreclosure policy with high import duties have on European companies?

World trade is not a zero-sum game in which one wins everything and the other loses: if we work together, everyone wins. Working together costs prosperity, jobs and opportunities for advancement – all over the world. Customs make products more expensive. Take the automotive industry example: A 35 percent fine on imports from Mexico would increase the costs for US automakers by an average of almost five percent, according to a study. Even cars manufactured in the US rely on primary products from other countries such as Mexico. Such tariffs not only make products more expensive, they also affect workers and consumers on the ground. In general, tariffs complicate the international division of labor and global value chains.

What would be the effects on the value added and supply chains of globally active companies, which have been built up and integrated in decades?

Nobody is an island. Industrial production has long ceased to be national, breaking up value chains slows down innovation and increases production costs. That costs prosperity and opportunities. The companies in the US rely on German and European engineering technology and intermediates. Currently, around 4,700 companies with German participation are active in the USA. They represent nearly 700,000 jobs in all states. Our companies invest more than $ 7 billion a year in R & D on the ground. They want to expand their commitment.

Is a circumvention strategy realistic for companies to quickly build up new value-adding capacities in markets that tend to be closed off?

No, firstly, it is only worthwhile for very few, very large countries. Second, it is extremely expensive and takes a long time. And thirdly, there is often a lack of confidence in investing capital in countries where the state unpredictably intervenes in business decisions in which the rule of law leaves much to be desired and the market economy does not work properly.

China is now pleading for open markets and free flow of investment. Is market access secured for European companies in the People’s Republic everywhere?

Xi Jinping’s speech at the World Economic Forum in Davos sparked hope in January. It would be nice if China opened up further. Now, these statements must also be followed by deeds. In China, there are still many market access barriers that do not exist in Europe. We do not know of any joint venture constraints or enforced technology transfer. We Europeans must be just as likely to acquire majority stakes in companies in China as the Chinese are with us.

Hans Gäng
14.11.2019
von Hans Gäng