_ On 4 July 2022 the Austrian newspaper Tagesstimme published a column by MIWI economist Yuri Kofner.
For the first time since the post-war period, the “world export champion” imported more goods and services than it exported in May 2022. The economist Yuri Kofner explains the causes and shows possible ways out.
The German balance of trade fell to minus one billion euros from the high of almost 250 billion euros in 2017. Together with the high inflation rate of almost eight percent, unprecedented in the history of the Federal Republic, this is the “monkey” for the impending implosion of the German economy.
The reasons for this dramatic reversal are twofold. On the one hand, growth in German exports has stagnated in recent years. The main factor for this is the decreasing international competitiveness. In the country index for family businesses, Germany slipped from 9th place when Merkel took office to 16th place in 2021. Even the hope of becoming the export master of “green technologies” is hardly ever fulfilled. Exports of solar panels, inverters, wind turbines, electrolyzers and electric batteries are flat or falling, especially compared to China.
The whole situation is exacerbated by bottlenecks in container freight. In the North Sea, two percent of global maritime trade was “stacked” in June, in addition to constant port closures in China due to its no-Covid doctrine. In addition to stagnating export growth, the negative trade balance is mainly due to the extremely high prices for energy imports, but also for raw materials. For example, the exchange import price for natural gas has multiplied by July of this year to just under 130 euros per MWh from less than 20 euros on average in 2021. And the Hamburg commodity price index rose to over 150 euros from just under 100 euros in the previous decade.
Homemade reasons from politics
The main factors behind this price explosion are above all home-made: the energy transition and the abandonment of Russian energy sources. Once again, Washington is also benefiting significantly from Germany’s sanctions policy, which is desperately trying to replace some of the oil and gas imports from Russia with those from the USA. However, since American tanker gas and oil is much more expensive, this is reflected in the statistics in the form of the negative trade balance. What could a pragmatic, national-interest federal government do to reverse this negative trend?
Well, first it should enable cheap energy for its economy by phasing out nuclear and coal. At less than five cents per kWh, these are the generation-wise cheapest import-independent energy sources. The relocation of production (reshoring and nearshoring in technical jargon) are popular demands of the right. In the long term, however, this cannot be effectively implemented through protectionism, but solely through improving the location conditions: lower taxes, little bureaucracy, cheap and secure energy, well-trained specialists, good infrastructure, etc.
Return of nuclear energy?
However, many raw materials and important energy sources for German industry, such as nuclear fuels, oil, gas and in the future also hydrogen, cannot simply be produced “at home” and must therefore continue to be sourced from abroad. Trade diversification through long-term supply contracts with many new trading partners is the order of the day here. Since more than half of the countries in the world are not “flawless” democracies anyway, their own values may only play a subordinate role here. The national real political economic interests have to be decisive.
This also includes abandoning supply chain legislation and the EU’s carbon border adjustment mechanism (climate tariff). Both are driven by green ideology, will end up harming both the developing countries and the environment, costing the German economy around 2.5 percent of gross national product each year.