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FY 1999: Germany |
I. EXECUTIVE SUMMARY This Country Commercial Guide (CCG) presents a comprehensive look at Germany's commercial environment, using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of several U.S. government agencies. The September election and the state of the German economy are at the center of the political and economic debate at the time of this writing. (The outcome of the September 27 election may necessitate an update of this Country Commercial Guide shortly after the event.) Only Germany's failure in the 98 soccer worldcup temporarily replaced the coming election and high level of unemployment as the most talked about public issues. High unit labor costs, growing social security and non-wage labor costs, combined with very modest inflows of foreign investment have prompted the government to adapt a program to make Germany a more competitive commercial environment in the longer term. An eroding tax base, massive net transfer payments to eastern Germany, high unemployment related public expenditures and efforts to satisfy the 1997 Maastricht deficit criterion (three percent of nominal GDP) have pushed the government to try to increase its public revenues and reduce its expenditures, and will also dominate the public debate in 1999. While fundamental economic restructuring and reform is difficult at any time, Germany's high level of structural unemployment and growing number of long-term unemployed has dampened tax revenues and increased unemployment-related expenditures, further reducing the government's room to maneuver. Unemployment set a post-war record of 11.4 percent in 1997 although it has moderated slightly in the first half of 1998. Foreign direct investment, anemic in 1997, also picked up in the first half of 1998. Many experts estimate that a sustained growth rate of above 2.5 percent is required to reduce Germany's unemployment from current levels. Real growth for 1998 is estimated in the 2.5-3.0 percent range, fueled mainly by higher exports and moderate increases in domestic investment. The continued strengthening of the economy this year combined with a leveling off or perhaps modest decline in unemployment may aid the government's ability to enact reforms. The direction of this reform will depend to a large extent on the outcome of the September federal elections. So far, modest progress has been made in reforming the labor market, including incentives to employers to hire the unemployed and incentives to the unemployed to get back to work. Wage increases have moderated, and wage negotiations between employers and unions have yielded somewhat more flexibility than had been evident in the past. For American companies, the German market, Europe's largest, continues to be attractive in numerous sectors, and remains an important element of any comprehensive export strategy in Europe. While U.S. investors must closely study the bottom line before buying into Germany or expanding their position, they can count on high levels of productivity, a highly skilled labor force, quality engineering, a first-class infrastructure, and a privileged location in the heart of Europe. Successful market entrants are those that have innovative products featuring high quality and modern styling. Particularly in the consumer goods sectors, Germans appreciate innovation and high technology. New solutions in the multi-media area, and technologies and services which will help more Germans join the Internet generation, offer great potential. U.S. products are especially well regarded when they offer cutting edge technology: computers and computer software, electronic components, health care and medical devices, synthetics and automotive technology. Price will not always be the determining factor for the German buyer, even for inputs in the intermediate stages of production, where the manufacturer cares deeply about his own product and service reputation. Approaching the German market, exporters must recognize the country for what it is: a decentralized collection of states and regions as diverse as those in the United States. Bavarian and Rhineland tastes, for example, differ distinctively, for example. An American company seeking sales in Germany must ensure that its marketing strategy takes these differences into account and should choose a distributor with country-wide capability, often necessitating several regional locations. Too often, U.S. exporters seek to service their clients from a single European location, or even directly from the United States. After initial entry into the German or European market, this is likely to be inadequate, especially recognizing that the chief competition faced by most American companies are the German domestic firms themselves, with their natural advantage of proximity. Success in the marketplace can be achieved by countering this comparative disadvantage with high quality products and service, at the right price. Establishing a physical presence in Germany may be the right solution for some firms. German efforts to privatize the energy, telecommunications and transportation sectors are being assessed by numerous American firms because of the attractive opportunities they imply. For investors, the high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs can be generous enough to lower the effective tax rates to a more internationally competitive level. Germany presents few formal barriers to U.S. trade or investment interests (with the exception of the EU Common Agricultural Policy). Germany's regulations and bureaucratic procedures, however, can prove a baffling maze, blunting the enthusiasm of U.S. exporters. While not discriminatory in the classic sense, government regulation is often complex and may offer a degree of protection to already-established local suppliers. Safety or environmental standards, not inherently discriminatory but sometimes zealously applied, can complicate access to the market for U.S. products. American companies interested in exporting to Germany should do their homework thoroughly and make sure they know precisely which standards apply to their product, and that they obtain timely testing and certification. This is doubly important because, to the extent EU-wide standards are developed, there is a high probability that the existing German standard will form the basis for the eventual European standard. Further information on Germany and other European markets can be found on the "Showcase Europe" homepage: http://www.sce.doc.gov; this is a comprehensive source for a wide range of market research and business counseling information assembled by the U.S.& Foreign Commercial Service which is designed for U.S. exporters exploring the European marketplace. Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-Rom or via the Internet. Please contact Stat-USA at 1-800-Stat-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.mac.doc.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce. Trade Information Center by phone at 1-800-USA-TRADE or by fax at (202) 482-4473.[end of document]
Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.