Bài tập tình huống về toàn cầu hóa case study 4 germany can change to confront export slump, but will it

JUNE 29, 2009

Germany Can Change to Confront Export Slump -but Will It?
BY MARCUS WALKER
Germany, in the grip of a massive export slump, firmly believes it has no alternative
to export-led growth. But there is an alternative -- the country just doesn't have the
stomach for the changes it would require.
Germany's gross domestic product, the value of all its goods and services, has fallen
by nearly 7% in the past four quarters, driven largely by foreigners buying fewer
German goods.
One lesson of this crisis: Even worse than having a credit bubble burst, like in the
U.S., is depending on customers whose credit bubble is bursting.
When exports make up 47% of your GDP, and exports drop 17% year over year -- as
Germany's did in the first quarter -- the effect is to wipe out years of previous
economic growth in a stroke.

Angela Merkel

There are three ways that Germany, the world's fourth-largest
economy, could respond.
One is to sit tight and wait until global trade recovers. That's
what Chancellor Angela Merkel's government and much of
corporate Germany plan to do. In their view, this recession is an
almighty cyclical hiccup, but Germany's economy is fundamentally sound.
Defenders of the status quo say Germany's export dependence reflects its comparative
advantage: Germany is good at engineering, and other countries -- especially fastdeveloping ones such as China -- need a lot of new machinery.
So the government is subsidizing companies' payrolls to preserve their work forces
and know-how until foreigners start spending again.
But there are drawbacks to being the world's toolmaker. Global investment spending
can be highly volatile, as this recession shows.

It's doubtful whether German exports will grow as fast after this crisis as they did in
the bubble years before it, because the U.S. and parts of Europe will save more and
consume less for a while.

And employment in Germany's main export sectors -- machinery, cars and chemicals
-- is in long-term decline as companies cut costs and steadily shift production to
cheaper countries to stay competitive.
Germany's brief comeback in recent years may have been a last hurrah for the
country's postwar manufacturing base.
A second option is to increase domestic consumption, and labor unions say it's high
time. Export competitiveness has come at the expense of consumer spending, they
argue, because German companies have browbeaten workers into forgoing pay raises
for years.
German households' disposable incomes barely rose during the country's growth spurt
from 2005 to 2008, when GDP rose by nearly 7%. Unlike Americans, German
consumers don't like to shop with credit cards to make up for stagnant incomes.
The difficulty is what to do about it.
To revive wage growth, German unions want the government to set a national
minimum wage, and make union-negotiated pay rates compulsory across whole
sectors.
"The balance of power in the labor market has shifted in favor of companies in recent
years, and we must change that," says Gustav Horn, director of the Macroeconomic
Policy Institute, a union-backed think tank in Dusseldorf.
But pushing up wages through regulation could hurt employment among less-skilled
workers. And employment is key for consumption. "People who gain or lose jobs


change their spending behavior more than people who get a pay raise," says Elga
Bartsch, economist at Morgan Stanley in London.

Associated Press
Germany's gross domestic product, the value
of all its goods and services, has fallen by
nearly 7% in the past four quarters, driven
largely by foreigners buying fewer German
goods. Above, a technician assembles
turbines at Siemens Energy factory in
Goerlitz, eastern Germany.

The third option would be to foster entrepreneurship in new sectors, to supplement
Germany's traditional strengths in cars and engineering. Many knowledge-based and
service industries that power growth elsewhere, such as computers and software,
pharmaceuticals and biotech, have largely passed Germany by.
"Somebody created a comparative advantage in machinery and BMWs in the 1960s,
but nobody has created anything much since," says Adam Posen, deputy director of
the Peterson Institute for International Economics in Washington. German public
policy and the country's state-dominated banking system focus on rewarding existing
companies rather than new ones, Mr. Posen says.
To some extent, Germany is trying to promote new sectors. Subsidies have turned the
country into a leader in solar energy.
But Germany is second last in the number of business start-ups among 18 advanced
economies surveyed by the Global Entrepreneurship Monitor, an international
research project. Only Belgians found fewer new businesses than Germans, the survey
finds.
A recent study by consultants McKinsey & Co. says Germany could double its
average economic growth to 3% a year if it got serious about new industries, from
research-led sectors to services for the growing number of elderly consumers. Without
such an effort, German living standards will decline relative to other advanced
economies, the report warns.

But genuinely diversifying Germany's economy would require an overhaul of the
country's universities, banking and capital markets, bureaucracy, taxes and welfare
state, labor market and immigration laws, say economists.


That's unlikely to happen soon. The nation is tired of reforms, after years of
controversial changes to cut budget deficits and long-term unemployment. Ms.
Merkel has maintained widespread popularity in her first four-year term by reassuring
Germans that their government won't trouble them with too much change.
Politics and a public longing for stability and security mean Germany is likely to
choose a second-best economic future.
1. Describe the situation Germany was facing, what industries considered as
having offered Germany comparative advantage in the past? Why?
2. If there were no economic crisis, would Germany have to think of their
options? Could they have kept their position which such hypothesis? Would it
have been a sustainable strategy?
3. From the perspective of international trade theories, which of the three options
you support as Germany was trying to keep its export-led position? Explain.
4. What can Vietnam learn from the case? With the current situation, what can
you suggest on the current Vietnamese import and export structure (i.e. what
to import, what to export), with Germany in particular (given the option you
supported in Question 3), and with other trade partners?