needs stronger instruments, such as a strengthened investment review process and a subsidy review process. These can increase the stability and openness of globalisation because they can act as a deterrent to other trading powers and push them to comply with global trade rules. The multilateral system will be strengthened if Germany and the EU are maintained as a strong pillar alongside the US and China.
- The appropriate framework for action is the EU. Germany has neither the economic nor the political power to resist pressure from China or the US by itself. It is a significant inconsistency that in an integrated single market, the instruments of external protection, for example against hostile takeovers in key technologies, reside mainly at national level, while investments, once made, allow access to the entire single market. Germany should support EU initiatives that provide for greater centralisation of such decisions. In the area of foreign policy, it would be advisable to reconsider the unanimity principle.
- In economic areas of outstanding strategic importance, it is necessary to increase the resilience of value chains. This means that dependencies on individual producers, for example of modern digital technologies, must be reduced through a diversification strategy. Mention should be made here of key technologies including computer chips and essential raw materials for the production of green technologies.
Implementing the proposals in the four specific fields of action discussed above – resilience, technology, climate and health – would bring clear benefits to Germany and the EU. Strengthening the European economy and European decision-making structures will benefit the economy while creating room for manoeuvre relative to international partners and competitors. Support for, and reinforcement of, global public goods is a strength of the EU and Germany.
The new German government cannot be a neutral bystander. While the transatlantic relationship is of central importance, the EU cannot rely on the US to defend its international economic interests. Instead, Germany and the EU need to develop a strong and proactive agenda to manage foreign economic relations, which are essential for German and European prosperity.
Wolff, G. (2021) ‘Germany’s foreign economic policy: four essential steps’, Bruegel Blog, 23 September