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http://www.latimes.com/bu...
From the Los Angeles Times
GLOBAL REPORT
Germany's Big Trade Secret
It has been the world's largest exporter of goods every year since it overtook the U.S. in 2003. Its trade surplus was six times that of China in 2004.
By Bertrand Benoit and Richard Milne
Financial Times
June 19, 2006
HAMBURG, Germany — Like most other industrial nations, Germany is anguished about the dangers of globalization. Heated global competition is being blamed for high unemployment and sluggish growth. Calls for state intervention to protect Germany's industry, its jobs and its way of life are rife.
Ask Peter Kohler, though, and he will tell you a different story.
For the 65-year-old retired sea captain and port manager, globalization is the best thing to have happened to his country in a long time. "Look at that power," he said as he stood near a container-loading bridge as it lifted a 40-foot-long metal box through the air.
The Eurogate terminal is one of Hamburg's four (soon to be five) container ports and is among the thriving city-state's biggest success stories of recent times. Since 2000, cargo traffic in Europe's second-largest commercial harbor has doubled thanks to booming international trade. By 2015, it will have doubled again.
Everything here is getting bigger: the containers (from 20 feet to 40 feet and now to 45 feet); the ships (from Panmax, the maximum size able to pass through the Panama Canal, to Post-Panmax and to Super-Post-Panmax); and, of course, the Chinese-made container-loading bridges.
The port is in permanent expansion.
It is a little-known fact that in spite of Germany's unexceptional economic data, no other industrial nation has so successfully harnessed the opportunities offered by an interconnected global economy.
This country of 80 million, often painted as angst-ridden, risk-averse and allergic to change, has been the world's largest exporter of goods every year since it overtook the U.S. in 2003.
In 2004, the most recent year for which the Organization for Economic Cooperation and Development provides comparable data, German companies exported just under 780 billion euros' (about $1 trillion) worth of products, nearly as much as Britain, France and the Netherlands combined. Its trade surplus was six times that of China.
Exports have become the main driver of German growth. Today, 9 million jobs depend directly on them and they generate 40% of gross domestic product. "Every second job here is for exports — Germany would be a lousy economy without exports," said Klaus Kleinfeld, chief executive of Siemens, the engineering group.
Yet exports tell only half the story. At 1.2 billion euros, the sales of German companies' foreign subsidiaries now exceed exports. Members of the Frankfurt stock exchange's Dax-30 index make three-quarters of their sales abroad. In 2004, German businesses invested 584 billion euros and employed 4 million people outside Germany.
Festo, a maker of motors for automation technology, is a good example. It makes most of its components in Germany but assembles them all locally at its 55 foreign subsidiaries. "The growth is abroad but through it jobs are guaranteed in Germany. Our company lives from globalization," Chief Executive Eberhard Veit said.
At Flender, a gear maker owned by Siemens, 80% to 85% of products end up abroad, and the company has production facilities dotted around the world. "We need to go where our customers are, where the demand comes from," said Manfred Egelwisse, head of Flender.
Global success of this magnitude raises questions. What has led to it? How durable is it? Does it benefit the German economy as a whole? And, in a country where many are uncomfortable with globalization, what is the effect on society if Germans feel excluded from the benefits?
One explanation lies in the nature of the global economic boom. As Elga Bartsch, an economist at Morgan Stanley, puts it, "German companies have benefited over-proportionally from what is primarily a capital-expenditure upswing."
Because engineering accounts for a bigger share of gross domestic product in Germany than in comparable economies, the country has benefited more from investment-driven global growth. German companies, in other words, have provided the machines and vehicles that faster-growing economies have used to build their factories, fleets and infrastructure.
Being "Exportweltmeister" (export world champion), however, does not come without risks. Perhaps the biggest challenge for Germany's leaders is to ensure that the fruits of globalization are more equally shared while taking care not to undermine companies' ability to reap the benefits.
Failure to do so not only would harm the current economic recovery, it could also lead to a breakdown in social cohesion — with far-reaching political implications. Surveys already show that fear of unemployment and declining income are Germans' top concerns. The trend is fueling a gradual erosion of support for Germany's large, established parties and benefiting the extremes.
For Gunter Schall, director of international affairs at the BDI federation of German industry, the problem is clear: "The opportunity for society to participate in the success of companies has decreased, which explains the backlash against globalization. The key problem for politicians now is that this development can no longer be countered through power or pressure, only through incentives."
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