3.1 2016, GDP of Germany was 3466.76 USD

3.1 Case study 1: GERMANY

The reason we choose Germany because
we want to analyze how Brexit affect the strongest economy in European Union
(EU) and how Germany deals with this difficult problem.  It is evaluated that Germany is the largest
economy in EU and one of the most powerful economies in the world. It also is
one of countries having vibrant economy because its mixed economy provides a
free market for consumer goods and business services.

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In 2016, GDP of Germany was 3466.76
USD billion and only after the United State, China and Japan. It was higher
than the UK and France, and accounted for 21 percent of the European Union’s
GDP.

To get high GDP, trade is a
principal factor to German economy as well. The total value of imports and
exports equals 86 percent of GDP (Index of economic freedom). According to
Trading Economics, imports from Germany in December 2016 were more than 78.8
EUR billion and it grow by 8.5 percent year by year. Germany mainly import
machinery and equipment which account for 13 percent of total imports,
electrical products accounts for 12 percent of total import and both vehicles
and mineral fuels account for 9 percent of total import. Major import partners
of Germany include China that equals 10 percent of total import, the
Netherlands (9 percent of total import), France (7 percent), the United States
(6 percent), the United Kingdom (4 percent), etc. Furthermore, being the third
biggest export country in the world, exports account for approximately 50
percent of German economic output. In December 2016, exports from this country
were about 97 EUR billion and went up by 7.2 percent yearly. Like imports, main
export products are vehicles which equal 18 percent of total sales, machinery
and equipment (17 percent), 10 percent of electrical products, pharmaceutical
products (6 percent), etc. Major export partner of Germany are the United
States with 10 percent of total exports, France (9 percent), both the United
Kingdom and the Netherlands account for 7 percent, 6 percent of China, etc.

 

Leading
business group of power-house in European Union has said that Germany’s trade
with Britain is already destroyed by Brexit. Spokesperson of the Association of
German Chambers of Commerce and Industry (DIHK) which represents more than
three million German business and entrepreneurs, Thomas Renner warned that
although some single locations or companies might benefit from moving jobs and
investment from the United Kingdom, the Germany economy will be damaged as a
whole (Bennett O. 2017). Even when Brexit negotiations have just started, some
negative consequences appeared. In 2016, exports from Germany to Britain
reduced by three percent. According to a survey of DIHK, 40 percent of German
companies expect to trade less with Britain after Brexit and 10 percent of
German companies have plan to relocate investment out of the United Kingdom.
Likewise, other branches such as financial sectors, pharmaceuticals and
manufactures are affected as well. Moreover, after the UK exited the group, the
contribution to the annual EU budget is estimated rise by 3 EUR billion
(Clements L. 2016)

According
to figures published by the Bundesbank – the country’s central bank in 2016,
Germany import 60 EUR billion of goods and services from Britain and exported
116 EUR billion to there (Thelocal.de 2017). From these statistic, we can see
easily that German import from the UK less than they export to UK so German
economy does not depend much on its trade with UK. However, exports from
Germany to Britain reduced by three percent in 2016. Consequently, German exports
still will suffer more than its import and the benefits of the Single Market
for German industry would be eliminated a lot, especially in the automotive
sector.  Because the biggest export
customer of German car industry is Britain, it accounted for 25 percent of
total export in 2015 (Bennett O. 2017). According to the German Association of
the Automotive Industry (VDA), with five cars produced in Germany there is
around one car is sold in Britain while nearly 100 site producing cars or
component which belong to German firms are in the United Kingdom. On the other
hand, carmakers and other industries also have warned that the spanning supply
chains in European Union could be disrupted by more barriers to trade such as
customs levies, regulatory differences, additional bureaucracy, longer waiting
time and more accurate border controls (Thelocal.de 2017).  These trade barriers make cost higher. David
Davis – British Brexit minister had declared that German businesses, especially
carmakers put pressure on German government in order to continue trading open
with Britain – one of important export markets of Germany, but German industry
groups cast down on his claims (Hughes D. 2017)

Therefore,
a free trade agreement between two countries is needed. President of the
confederation of German employer’s associations – Ingo Kramer – announced that
Britain is still an important partner for Germany but Germany need a fair deal
for both sides respecting the principle of single market freedom. Because
single market is one of main assets of the EU and Germany put the importance of
the cohesion of the remaining 27 EU member states at top priority. Besides, to
highlight the role of trade deals with Britain outside of the European Union,
Germany has participated in reaching out to the UK with the United States and
Canada (Clements L. 2016).

To
sum up, it is appreciated that the domestic economic environment in Germany is
stable. Germany has many other key export destinations which could recompense
for decrease in Britain bound exports after Brexit as well. As a result, though
some economic sectors will be more seriously impacted, the economic affect of
Brexit for Germany economy will be not too hard to manage.