Trump v German Auto Industry, Bad Lessons In Basic Economics

A BMW plant in Spartanburg, U.S.A.
A BMW plant in Spartanburg, U.S.A.
Chris Bryant


BERLIN — When they want Donald Trump to grasp a topic, his advisers have learned to keep things simple. Visual aids help.

Unfortunately, global economic imbalances -- the massive trade deficits of the U.S. and U.K. and surpluses of Germany and China -- are complicated and intractable. No matter, Trump has found a simplistic way to frame the problem: Americans buy lots of German cars, whereas mean Germans don't buy many from the U.S. Ergo, the overall U.S. trade deficit with Germany was about $65 billion last year. And deficits are bad.

Germany's auto industry makes an odd target for several reasons, as I'll explain below. Regardless, on Thursday Trump warmed to his theme: ‘"Look at the millions of cars that they sell in the U.S. Terrible. We're going to stop that," he said, according to German media. "The Germans are bad, very bad."

Let's leave aside basic economics for a second, which is pretty clear about the advantages for a country in specializing in an industry. If selling lots of cars is somehow a hallmark of low morals, the Germans are unquestionably evil. Last year German manufacturers sold 1.3 million cars in the U.S., whereas U.S. brands sold about half a million in Germany (the latter is of course a much smaller market).

Nowadays, cars are often made where they're sold.

Despite investments in local production German automakers still import quite a lot of cars. Trump's Manichean view of global auto sales doesn't withstand much further probing though. Nowadays, cars are often made where they're sold. German carmakers have quadrupled yearly production in the U.S. to 850,000 units since 2009. About 40 percent are sold locally.

Similarly, many American vehicles sold in Germany are built there by Ford and General Motors Co's Opel brand. So a more pertinent question might be to ask GM's CEO Mary Barra why she's having to retreat from Europe by selling Opel.

GM has suffered about $9 billion in losses in Europe in just seven years. So an American manufacturer has had unfettered access to Germany's car market, and failed. As the German foreign minister says, U.S. carmakers should "build better cars'.

Trump's own buying choices have reflected this reality. His timing is also odd. Volkswagen AG's U.S. sales plummeted 8 percent last year after the dieselgate scandal. BMW AG is doing even worse. Its U.S. sales fell 10 percent last year, as consumers stopped buying sedans and started buying trucks and SUVs.

Plus BMW is a net exporter of cars from the U.S. If Trump were consistent, he would be a BMW fan. Mercedes and VW remain net importers to the U.S., according to Barclays, but both are investing heavily in American production.

Which brings me to my final point. You can't have a big trade surplus unless you're a net exporter of capital. Years of wage restraint, coupled with an aging society, have led to a huge surplus of German savings, some of which flow to the U.S.

Rather than targeting German autos with tariffs, Trump would have a far stronger case in urging the miserly Germans to cut taxes and boost investment. That might encourage more domestic purchases of U.S. goods.

There are limits, though. Even if you gave Germans a raise, it's doubtful many would rush out to buy a Ford, Jeep or Buick. Like trade deficits, buying habits die hard.

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Why This Sudan Coup Is Different

The military has seized control in one of Africa's largest countries, which until recently had made significant progress towards transitioning to democracy after years of strongman rule. But the people, and international community, may not be willing to turn back.

Smoke rises Monday over the Sudanese capital of Khartoum

Xinhua via ZUMA
David E. Kiwuwa

This week the head of Sudan's Sovereign Council, General Abdel Fattah El Burhan, declared the dissolution of the transitional council, which has been in place since the overthrow of former president Omar el-Bashir in 2019. He also disbanded all the structures that had been set up as part of the transitional roadmap, and decreed a state of emergency.

In essence, he staged a palace coup against the transitional authority he chaired.

The general's actions, which included the arrest of Prime Minister Abdalla Hamdok, are a culmination of a long period of tension between the civilian and military wings of the council.

A popular uprising may be inevitable

The tensions were punctuated by an alleged attempted coup only weeks earlier. The days leading to the palace coup were marked by street protests for and against the military. Does this mark the end of the transition as envisaged by the protest movement?

Their ability to confront counter revolutionary forces cannot be underestimated.

The popular uprising against Bashir's government was led by the Sudan Professional Association. It ushered in the political transitional union of civilians and the military establishment. The interim arrangement was to lead to a return to civilian rule.

But this cohabitation was tenuous from the start, given the oversized role of the military in the transition. Moreover, the military appeared to be reluctant to see the civilian leadership as an equal partner in shepherding through the transition.

Nevertheless, until recently there had been progress towards creating the institutional architecture for the transition. Despite the challenges and notable tension between the signatories to the accord, it was never evident that the dysfunction was so great as to herald the collapse of the transitional authority.

For now, the transition might be disrupted and in fact temporarily upended. But the lesson from Sudan is never to count the masses out of the equation. Their ability to mobilize and confront counter revolutionary forces cannot be underestimated.

Power sharing

The transitional pact itself had been anchored by eight arduously negotiated protocols. These included regional autonomy, integration of the national army, revenue sharing and repatriation of internal refugees. There was also an agreement to share out positions in national political institutions, such as the legislative and executive branch.

Progress towards these goals was at different stages of implementation. More substantive progress was expected to follow after the end of the transition. This was due in 2022 when the chair of the sovereignty council handed over to a civilian leader. This military intervention is clearly self-serving and an opportunistic power grab.

A promised to civilian rule in July 2023 through national elections.

In November, the rotational chairmanship of the transitional council was to be passed from the military to the civilian wing of the council. That meant the military would cede strong leverage to the civilians. Instead, with the coup afoot, Burhan has announced both a dissolution of the council as well as the dismissal of provincial governors. He has unilaterally promised return to civilian rule in July 2023 through national elections.

Prior to this, the military had been systematically challenging the pre-eminence of the civilian authority. It undermined them and publicly berated them for governmental failures and weaknesses. For the last few months there has been a deliberate attempt to sharply criticize the civilian council as riddled with divisions, incompetent and undermining state stability.

File photo shows Sudan's Prime Minister Abdalla Hamdok in August 2020

Mohamed Khidir/Xinhua via ZUMA

Generals in suits

Since the revolution against Bashir's government, the military have fancied themselves as generals in suits. They have continued to wield enough power to almost run a parallel government in tension with the prime minister. This was evident when the military continued to have the say on security and foreign affairs.

For their part, civilian officials concentrated on rejuvenating the economy and mobilizing international support for the transitional council.

This didn't stop the military from accusing the civilian leadership of failing to resuscitate the country's ailing economy. True, the economy has continued to struggle from high inflation, low industrial output and dwindling foreign direct investment. As in all economies, conditions have been exacerbated by the effects of COVID-19.

Sudan's weakened economy is, however, not sufficient reason for the military intervention. Clearly this is merely an excuse.

Demands of the revolution

The success or failure of this coup will rest on a number of factors.

First is the ability of the military to use force. This includes potential violent confrontation with the counter-coup forces. This will dictate the capacity of the military to change the terms of the transition.

Second is whether the military can harness popular public support in the same way that the Guinean or Egyptian militaries did. This appears to be a tall order, given that popular support appears to be far less forthcoming.

The international community's appetite for military coups is wearing thin.

Third, the ability of the Sudanese masses to mobilize against military authorities cannot be overlooked. Massive nationwide street protests and defiance campaigns underpinned by underground organizational capabilities brought down governments in 1964, 1985 and 2019. They could once again present a stern test to the military.

Finally, the international community's appetite for military coups is wearing thin. The ability of the military to overcome pressure from regional and international actors to return to the status quo could be decisive, given the international support needed to prop up the crippled economy.

The Sudanese population may have been growing frustrated with its civilian authority's ability to deliver on the demands of the revolution. But it is also true that another coup to reinstate military rule is not something the protesters believe would address the challenges they were facing.

Sudan has needed and will require compromise and principled political goodwill to realise a difficult transition. This will entail setbacks but undoubtedly military intervention in whatever guise is monumentally counterproductive to the aspirations of the protest movement.


David E. Kiwuwa is Associate Professor of International Studies at University of Nottingham

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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