“Where you find people, you find markets too”
Dr. Volker Treier, Head of Foreign Trade at the DIHK on the subjects of Brexit, Africa and internationalisation Interview: Hans Gäng/ Luca Marie Wodtke
In 2018 German exports hit a record high for the fifth year in a row. What can we expect in 2019?
A diverse range of interrelationships with international markets ensures that our exports remain stable. None of our country markets are larger than 10 percent of the overall market. That is a reflection of how broadly based and risk-diversified our companies are in global division of labour terms. To that extent it’s almost a matter of course that exports are increasing from year to year and that we only ever experience setbacks when exceptional events like a global financial market crisis occur. But the question is how are the global economy and global trade set to perform. The answer is that both have been disappointing recently when measured against high but not unfounded expectations. Trade disputes have also had an impact on Germany. Our 3% export growth in 2018 has slowed considerably compared to the long-standing average of 5 percent per annum. We will experience even weaker growth in the current year. The DIHK’s economic survey forecasts the weakest growth since 2012. Even when based on optimistic scenarios, we expect export growth of just 2 percent. That is poor.
Given the trade policy challenges that companies are faced with, how should they react?
It is a delicate situation over which companies themselves have no control. They can only come up with scenarios of how things could turn out. That not only applies to Brexit but also to the USA and China. That means companies need to deal with issues that definitely can cause uncertainty, yet which can also result in a realistic reassessment of opportunities and risks. One should then gear up accordingly, even if – as in the case of Brexit precautions – unnecessary costs may need to be accepted and absorbed. That’s what the more than 12 percent of German companies, which don’t regard the UK as part of the international value chain anymore and have stated that they have already put tangible contingency relocation plans in place, are already doing. Besides, that won’t change just because the withdrawal date is now being postponed. The whole issue doesn’t provide companies with a greater degree of planning reliability, but only extends the current uncertainty.
Brexit: the delayed withdrawal date only increases companies’ uncertainty
Chambers of Foreign Trade attend HANNOVER MESSE in large numbers. Why?
We believe that the set of geopolitical circumstances and the alleged flattening off of the globalisation process in particular must not be used as an excuse for companies to stick their heads in the sand. We want to encourage and motivate companies to diversify their sales, develop new strategies, refocus on markets that they previously disregarded. Digitisation is changing business and entire companies radically. This process is providing entirely new perspectives in particular industries and for exports as well. Many countries around the world are also reacting by negotiating free trade agreements. This is also providing new opportunities, which our network will be reporting on at the show.
And why is Africa such an important issue this year?
Of course, migration pressures and the Chinese presence in Africa are a general or rather political reason for analysing the continent more closely from an economic standpoint. But taking a more thorough look at certain markets in Africa is a business necessity. To this end we have invested in the appropriate infrastructure and extended our network of Chambers of Foreign Trade in Africa. We want to provide companies with more analysis support and – like everywhere else around the world – access to local networks. One way or another, Africa is one of the markets of the future. Its population is set to double by 2050. Where you find people, you find markets too. Another objective: using our presence in Africa we want to help governments and administrations create frameworks for investment and training in particular – an important prerequisite if German companies are to be persuaded to commit to Africa.
One way or another, Africa is one of the markets of the future. Its population is set to double by 2050. Where you find people, you find markets too
But there are major public reservations about investing in certain countries…
Yes, we in Germany now frequently take a very morally informed view of foreign markets. Let’s be honest – as far as Africa is concerned, compassion and sympathy are the sentiments most frequently expressed. But when we talk about Iran, Saudi Arabia, China, Russia and many other markets, we keep on being asked about compliance with social and environmental standards or about the human rights situation not just in local companies but also at suppliers and partners along the entire value chain. The bar has to some extent been set very high for medium-sized companies. Those entrepreneurs in particular, who are personally very familiar with these markets, often don’t want to take these risks any more. Yet medium-sized companies in particular are not doing anything morally reprehensible in these markets, like for instance taking a very pragmatic and committed approach to championing training for their employees and qualifications for their partners at their locations. It is important that we are able to use a global platform like HANNOVER MESSE to maintain an open dialogue on these issues with the German economy’s partners around the world.
Medium-sized businesses take a pragmatic and committed approach to championing training for their employees worldwide.