Export-Dependent Germany Faces Reckoning As Protectionism Spreads

The entire German business model, based on exporting its goods and services, may have to change as populists forces surge in its leading trading partners.

Port of Hamburg
Port of Hamburg
Holger Zschapitz


BERLIN — Germany's economy is successful because of its exports. But that success may be coming to an end as nations that buy Germany's goods and services are facing serious political crises.

Germany will have to adapt as populists forces surge in Britain, France, the Netherlands and the U.S. Diminishing volumes of sales in the export market could severely harm the German economy, killing employment and prosperity.

This time, as they say everything is different. Strategists and analysts at German banks are not taking the risk of being regarded as optimists. They had previously played down the possibility of Britain's exit from the European Union and shrugged off Trump as a joke. This will not happen again. Now, the strategists of the country's biggest financial institutions are examining all possible risks. No danger is too insignificant to be thoroughly analyzed.

Among the potential dark scenarios, Germany's Commerzbank points to one particularly touchy issue. They are questioning the entire German business model, using just one chart to demonstrate the country's colossal growth of exports since the turn of the century. For some countries, they expect it to flatten or fall drastically.

The graph shows that Germany's most important buyers have been haunted by political upheaval that might get worse next year. "Six of Germany's most important buyer countries are afflicted with political insecurity. Many investors fear another push towards the anti-establishment movement," says Commerzbank.

Germany owes growth in the last couple of years mostly to global trade. But now, with the pushback against globalization, Germany will be forced to reinvent itself.

"We are entering an era of de-globalization," says George Saravelos, a strategist at Deutsche Bank. Countries that grow nationalistic will significantly reduce trade surpluses that countries like Germany currently enjoy.

The U.S., Germany's most important partner, will be the biggest headache. President-elect Donald Trump has made clear that he wants to reduce America's trade deficit. Over the last 12 months, Germany has exported goods and services of 108 billion euros to the U.S., whereas imports from there have accounted for only 59 billion euros. Thus, trade surplus with the U.S. amounts to about 50 billion euros. At the turn of the millennium, Germany's surplus was only 12 billion euros. Under Trump, that's what Germany might be heading toward again.

Germany's second biggest trade partner, France, is facing presidential elections next year. Conservative candidate François Fillon has already announced a radical reform program. He wants to make his country more competitive by increasing exports. Today, Germany generates a surplus of 35 billion euros trading with its neighbor, a figure that has been consistent over the last five years.

Germany's third biggest trade partner, Britain, is about to leave the European Union following the Brexit referendum, which most certainly will cut back trade relations. For the moment, Britain's collaboration with Germany mostly benefits the latter. The trade surplus for Germany has doubled since 2012, and amounts to 52 billion euros today.

Never a straight line

Trade with the Netherlands and China is not exactly threatened even though both partners are facing political instability. Netherlands is preparing for elections in the spring and populist Geert Wilders has a good shot at winning. China, on the other hand, must rigorously fight the decline of its currency. Their foreign currency reserves have melted by one trillion dollars since 2014.

Moves toward nationalization and sealing off trade are not unprecedented in Europe's history. Globalization has never been a linear process. For instance, World War I interrupted the first big wave of globalization. Protectionist measures by the end of 1920s shut it down altogether. "In 1928, on the eve of the Great Depression, (U.S. President) Herbert Hoover won the election with a manifesto that stipulated higher custom duties on agricultural products," says Saravelos, drawing parallels with the situation today.

Two years after Hoover's announcement, taxes on more than 20,000 products had been levied, surpassing anything previously seen in U.S. history. America's most important trading partners — Canada, France and Britain — reacted with counter-measures. Germany pulled out of the trade partnership altogether. The rest, as we know, is history.

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In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.

It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park


Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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