German Export Performance

GiNN-BerlinKontor.—Unlike the global financial and economic crises, the crisis in the euro area has had little effect on German export trade performance. Nils JANNSEN and Stefan KOOTHS, both of the Kiel Institute for the World Ecomomy explain why this is so in an article entitled “German Trade Performance in Times of Slumping Euro Area Markets,” which has been published in the current issue of Inter­economics. They explain that the German export sector, which traditionally has performed very well, has been able to redirect its exports from crisis-stricken euro-zone countries to countries with comparatively healthy economies, particularly to the emerging market countries in Asia.

This has accelerated a regional export trend in German export trade that has been going on for some time. The share of German exports going to the euro area has fallen from 46 to 40 percent since 1999, while the share of German exports going to Asia has risen from 10 to 16 percent. One reason for the good performance of Germany’s export sector is that it has been able to greatly improve its price competitiveness, not only because the euro has become weaker, but also because the sector has moved labor-intensive production stages to other countries, because it has integrated itself better into international value chains, and because of the moderate wage policies pursued in the sector since 2004. Another reason is the sector has been able to attain a high degree of non-price competitiveness.

A large share of its exports is comprised by R&D-intensive products, and it has specialized in top-quality goods, nonstandardized goods, and custom-made goods, like highly specialized capital goods. This has given it a relatively high pricing power. German capital goods are especially interesting for emerging economy countries because they, by their very nature, need such goods. A further reason is that the German export sector, by stepping up its entrepreneurial efforts in such countries, has been able to compensate for the decrease in its exports to the euro area.

Jannsen and Kooths point out that German export trade performance could still be affected negatively by the crisis in the euro area: “Nevertheless, if the economic slowdown in the euro area were to continue to worsen, it would put a considerable dent in German exports.” On the other hand, the German export sector could play a role in rebalancing intra-euro area trade flows. “The expertise of German export companies in international markets may play a helpful role in this process, since it makes them interesting co-operation partners for those firms in the distressed European countries that intend to strengthen their export activities. By integrating their business models into the international value chains of already successful global firms, they might find a short-cut to target foreign markets that would otherwise remain beyond their scope due to high entry costs.” (Quelle: Kiel Institute Press Release: ifw-kiel)

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