04. June 2021 | Position
World trade has considerably regained momentum after the slump caused by the corona crisis. At present, this benefits especially the German export industry.
However, structural problems persist: Protectionist measures are on the rise worldwide; in particular, China is intervening in economic processes by way of planning and distorting competition. The USA is committed to multilateralism while promoting “Buy American” and a return of industrial production. Moreover, the stability of international supply chains has decreased. In the EU, too, there is a growing debate on more sovereignty by protecting domestic production. Furthermore, with its “Green Deal” the EU Commission wants to focus its policies on climate and environmental protection and the circular economy – which comes with the conception of new trade barriers such as border adjustment measures.
The industry benefits from global networks
With its products, the German chemical and pharmaceutical industry, as part of innovative international value networks, contributes globally to prosperity and the UN sustainable development goals. In 2019, the industry exported goods worth ca. 202 billion euros. Out of this, roughly half went to countries outside the EU. During the same period of time, Germany imported chemical-pharmaceutical goods to the value of more than 145 billion euros. The German chemical and pharmaceutical industry itself imports raw materials, other inputs and technology. Many companies of the industry have production sites worldwide and benefit from the proximity to customers, specific location advantages and their know-how lead based on intellectual property rights. Also, foreign companies invest and produce in Germany.
Changing world trade calls for agile EU
Within the framework of the World Trade Organization (WTO), the German chemical industry has successfully integrated itself in global markets and the international division of labour. This trade order has eroded gradually in recent years. Therefore, the EU has presented proposals for a WTO reform.
The EU itself orients its trade strategy to the principle of an “open strategic autonomy”: The EU must be brought in good shape for the changing global environment without putting its openness into question. All the same, the EU’s processes for trade agreements are comparatively lengthy. The agreement with the South American common market “Mercosur” is ready for ratification but on hold, while facts are being created in Asia with two major trade agreements (RCEP and CPTPP).
THE VCI IS CALLING FOR THE FOLLOWING
- Open markets and modern trade rules – instead of protectionism
Germany and the EU should work for open markets and fair competition rules – and against protectionism. Climate protection, food, healthcare and prosperity can be safeguarded only with free, rules-based trade where intellectual property rights are protected. The EU should reform the WTO together with the USA, Japan, China and others.
- Constructive dialogue with the USA
The EU should seek unity with the new US administration. The tariffs introduced under US President Trump should be abolished, and an agenda for close cooperation in topics of sustainability and security should be developed.
- Meet China on equal footing
The European Union needs to respond to China’s geopolitical and industrial policy strategies with an EU strategy of its own. The EU should support companies in the competition of systems with China and coordinate these efforts with partners.
- Make up for competitive disadvantages from the Green Deal without protectionism
The EU’s ambitious goals and measures under its Green Deal might cause competitive disadvantages for the chemical and pharmaceutical industry. It is counterproductive to make up for such disadvantages with unilateral measures at external borders which are only intended to render imports more costly. Also, it is important that the German federal government advocates export and trade interests inside the EU.
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