For free trade, exports and accessible markets – why Britain must stay in the EU
Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), came out strongly in favor of better general conditions for German business and of global free trade while speaking to the Export-Club Bayern e.V. in Munich. The export strength of the German automotive industry benefited the neighboring European states in particular, he said, and stressed that it was essential for Britain to remain a member of the EU. The Export-Club Bayern e.V. comprises 500 members from numerous branches of industry and is one of Germany’s leading business organizations.
Despite difficult conditions – a contracting Russian market, weak performance in Brazil, and slower growth in China – the German automotive industry was in a strong position, Wissmann stated. Its success was built on innovation and globalization. For example, every year the German automotive industry invests almost 30 billion euros in research and development around the world, and most of that is in Germany. What is more, over 60 percent of German passenger car production now occurs in other countries, and the figure is rising. This applies both to the automotive manufacturers and to their many suppliers, including numerous small and medium-sized enterprises.
Wissmann emphasized, “Our strategy of innovation and globalization is successful. Currently one car in five sold anywhere in the world bears a German group badge.” The successes were also noticeable among the employees in the automotive industry: “At this time our permanent workforce in Germany alone is 19,000 larger than it was one year ago, with a total of 785,000. This shows that the increasing production abroad has always supported employment at home.”
However, Wissmann continued, this success could not be taken for granted. “In the future we will only be successful if we remain the leader in innovation.” The German automotive industry had paved the way for this – by optimizing classical drive trains and developing alternative propulsion systems, especially in the field of electric mobility. By the end of 2015 German manufacturers will have a total of 29 volume models with electric drive in the showrooms. And, Wissmann said, the German automotive industry was also making good progress in the second major technological trend, connected and automated driving.
Yet as the VDA president pointed out, “The competitiveness of German sites is not a static, permanent state, and neither will it come about by itself. We have to work for it every day, and we must make the right choices during the successful periods.” He quoted the Chinese proverb, “Dig the well before you are thirsty.” This maxim applied, he said, not only to smart entrepreneurs, but also for business conditions in Germany. “We must do more work on the overall conditions for improving competitiveness. Excessive energy costs, retirement at 63, reduced flexibility on the job market, rising labor costs – all of this is less than ideal,” Wissmann underscored. The many “good social policy deeds” of recent months would turn out to be very costly in the future. A new course therefore had to be taken, he explained, which avoided additional burdens on industry and made Germany more attractive as a business location. “To strengthen industry and the SMEs, Germany needs stimulus for the companies’ drive to innovate and invest, and moderation in climate policy.”
Furthermore, Wissmann said, there was a visible worldwide trend toward protectionism, which should be resisted. He took Russia as an example, with its tough local content requirements and bans on purchasing certain vehicles not originating from the Eurasian Economic Union. Other examples could be found in Argentina, Brazil and India. The Indian Government, for instance, recently increased import duties on commercial vehicles to boost production at home. “The EU has been negotiating with India on a free trade agreement since 2007 – and the Indians haven’t budged an inch,” Wissmann emphasized.
“Germany and South Korea are the countries with the strongest international connections. Employment here in Germany is more dependent on accessible markets than our neighbors’ employment is. That is why we need free trade agreements, and that is why we need the TTIP. We must grasp this geopolitical opportunity and exploit it,” Wissmann said.
He defended Germany’s export strength – that has drawn criticism from Brussels: “You’d think that Germany’s success would be a role-model for other countries – including those within the European Union. Instead, this success is repeatedly turned against us, and we are accused of ‘having an export surplus.’ The European Commission is again calling on Germany to take ‘decisive political measures’ to reduce the export surplus. France, by contrast, is given an extended deadline for getting its annual budget deficit back in order. It’s almost impossible to explain that to ordinary citizens.”
The allegation that Germany’s supposed “savings policy” was exacerbating the crisis in the euro zone was untenable, Wissmann stressed. Not only had exports gone up, but imports into Germany had also increased. “Above all, the data confirm that our European neighbors share in Germany’s export success. Their proportion of German imports has continued to expand. In the automotive industry French and Italian suppliers, for instance, enjoy an immediate benefit – because the firms have long been inseparably linked within the network of international value creation. Valeo, Michelin and Brembo are just some of the best known examples. And a study by the Cologne Institute for Economic Research shows that if German exports rise by ten percent, upstream imports from EU partner countries increase by nine percent. So exports and imports depend on each other, Wissmann pointed out, adding: “With its strong industrial base, Germany cannot be held responsible for undesirable economic developments in the euro zone, but in fact it is the powerhouse driving the European economy.” The smoldering euro crisis could only be brought under control, he said, if the crisis countries improved their own competitiveness.
Wissmann made a passionate appeal for Britain to remain in the EU: “Now the European Commission and the German Government must also do everything they can to keep Britain in the European Union,” he declared. “Although it is important for the European Commission to tackle the ‘Greek topics,’ it is much more crucial to the future of Europe that Britain remains within the European Union in the long term,” the VDA president stressed. Germany in particular had many ties with the British mentality, such as the need to strengthen worldwide free trade, including the commitment to the TTIP, supporting market-economy solutions to business topics instead of excessive state interventionism, and not losing sight of the joint strategic interest of the net contributors Britain and Germany – “fiscal equilibrium” in the EU.
“Since 2001 Britain has been the most important partner for passenger car exports by the German automotive industry, in terms of absolute numbers,” Wissmann declared. In 2014 Germany exported 820,900 cars to the United Kingdom, which was 7 percent up on the previous year. This means that around one fifth of passenger car exports from German plants went to the UK. It is also extremely important in terms of the value of exported cars, coming a strong second after the US and accounting for 17.9 billion euros (up by 17 percent). The British car market has grown markedly during recent years, Wissmann pointed out, and in 2014 it reached the high level of nearly 2.5 million units. “The German group brands were able to keep up with this growth, and their share of the British market is just under 53 percent. And as a production location, too, Britain is significant to the German automotive industry because the German brands Bentley, Mini and Rolls-Royce build models there,” Wissmann said, and added that this integration – for which figures are available – must not be jeopardized by potential departure from the EU.