External economic policy

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The importance of foreign trade and investment for German industry

Global trade and international investment are among the most important prerequisites for growth, employment and prosperity in Germany. More than in any other economy of comparable size, German companies are strongly interlinked with the international division of labour. Foreign trade is the driving force behind Germany's economic relations abroad. Even in unfavourable global economic conditions, exports of goods and services have proven to be a crucial factor for job creation in Germany.

Here are just a few facts that highlight the importance of external economic relations for Germany:

• Germany is the world's leading exporting country.
• Exports count for more than one third of Germany's GDP.
• One out of every three Euros earned by the German economy is earned abroad.
• Every fifth job in Germany depends on German products and services selling well on global markets.

A wide range of imported goods and services expands the choices enjoyed by private households and increases the competitive edge of companies that need to buy inexpensive primary products.

New challenges facing Germany's external economic policy

The level of integration of German industry within international markets is constantly increasing. The main factors influencing this development are the ongoing process of integration within the European Union, the increasing globalisation of world markets, the opening of new markets and the increasing use of the Euro as a currency unit of international trade.

Globalisation offers enormous opportunities for German industry. However, at the same time it is also a great challenge, as shown by changes in the international division of labour as well as dramatic shifts in various countries' shares of world trade (as can be seen by the rising importance of such countries as China, India and Brazil on the world market). Increased competition on international markets and the rapid technological developments present German industry with the challenge of maintaining and increasing its leading position in important sectors.

German creativity, dynamism and efficiency have helped make Germany an economic leader among industrialised nations. The challenge is to maintain this position. To create and maintain jobs in Germany, German companies must consolidate their international competitive edge. At the same time, Germany must continue to assert itself as an attractive location for foreign investment.

Objectives of external economic policy

One of the essential aims of German external economic policy is to actively support the creation of global conditions that foster free trade and competition. Germany places a strong priority on the successful completion of the Doha round of world trade talks as a crucial means for enhancing growth and employment in Germany.

Germany's external economic policy also seeks to strengthen the competitive position of German companies - especially small and medium-sized enterprises - on world markets. While companies naturally are expected first and foremost to develop business opportunities on their own initiative, the German government supports German firms' efforts to open up and secure foreign markets for their goods and services. The federal government uses a wide range of foreign trade promotion instruments to reduce risks and to provide companies with a broader scope for make decisions regarding foreign investment, international cooperation and cross-border fusions.

The scale of change and the new challenges posed by the global economy make it essential for Germany to have a forward-looking external economic policy. The Federal Government has taken on this challenge through its "Active Worldwide" foreign trade campaign, which was approved by the Federal Cabinet in 2003.

The importance of foreign trade and investment for German foreign policy

German industry's efficiency and competitiveness also play a significant role in Germany's foreign relations. Trade and economic links create confidence and thus help to stabilise international relations.

This also means that Germany's external trade in strategic goods - particularly arms, defence products and dual-use goods - must be oriented toward security requirements and comply with legal and international obligations. The limiting and control of this trade contributes to conflict prevention, peace-building, the maintenance of human rights and sustainable global development.