Daily Management Review

Berlin and Beijing set out to defend free trade principles


02/23/2017


China has become the largest trade partner of Germany for the first time in history. At the end of 2016 the Asian country unseated the US from the first space. The United States are now occupying the third place after France, which retained the second position. This was reported by Federal Association of Commerce and Industry Chambers of Germany (DIHK), which noted that the information is just preliminary assessment of last year's total volumes of export-import operations.



According to Destatis, in 2015, China ranked fourth in the foreign trade of Germany, behind the US, France and the Netherlands. The country then was the largest importer into the German market, but took only the fifth place among the most important buyers of its goods. However, German exports to China grew rapidly during the 2016, said Head of DIHK’s foreign economic department Volker Treier. This pushed China up to the first place.  

The United States remains Germany's largest export market, further noted Volker Treier. However, "German exports in the United States fell more than 5 percent last year." If US economic growth accelerated, it could "win at least the second place" in the overall standings, the expert suggested. Then, however, he added: "Unless, of course, new US President’s policy on customs spoils the game." Thus, DIHK fear that Donald Trump’s protectionism will lead to a noticeable cooling of bilateral trade, in particular, weaker German exports in the United States.

It should be noted that trade turnover between the two countries suffers from pronounced imbalances. Germany sold goods to the United States at 113.7 billion euro in 2015, but imported for just 60.2 billion euro. According to Destatis, there’s no other country in the world with which Germany had such a giant (53.5 billion euro) trade surplus.

In other words, America has a huge trade deficit with Germany. Donald Trump says that it is unfair. In response, German experts point out that made-in-US goods are in little demand in Germany. "Weakness of the US economy lies in a low volume of exports, so it would be reasonable to increase competitiveness of export products", - said director of Hamburg Institute for International Economics (HWWI) Professor Henning Vöpel, analyzing loud protectionist statements and decisions of Donald Trump.

"The German trade surplus with the US has almost tripled since 2000, but this occurred not because Americans today are four times less diligent than then" - argues Spiegel Online’s columnist Thomas Fricke. He criticizes the German government for its "austerity" regime. If the Germans had more money, they would have increased consumer activity, and they would be more likely to buy American products as well, he said.

Protectionist statements and actions of President Trump have obviously exacerbated a long-standing debate about the huge trade surplus in Germany, which has long been criticized in the European Union and international economic organizations. Yet, Germany itself has never been embarrassed with its own trade deficit, for example, with China. In 2015, it amounted to EUR 20.6 billion. 

It is revealing that in 2016 the German-Chinese trade not only increased, but also become more balanced thanks to growth of exports from Germany to China. This is a good basis for further development of cooperation, especially on the background of growing US protectionism. There is now a high probability that Berlin and Beijing will work together to defend the principles of free trade. Chinese President Xi Jinping, speaking in mid-January at the World Economic Forum in Davos, assured that he is going to act that way.

Therefore, it may well be that China has permanently entrenched in first place in the list of the most important foreign trade partners of Germany, while role of the United States may continue to fade. 

source: dw.de






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