3.1 Case study 1: GERMANYThe reason we choose Germany becausewe 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 largesteconomy in EU and one of the most powerful economies in the world. It also isone of countries having vibrant economy because its mixed economy provides afree market for consumer goods and business services.
In 2016, GDP of Germany was 3466.76USD billion and only after the United State, China and Japan. It was higherthan the UK and France, and accounted for 21 percent of the European Union’sGDP.
To get high GDP, trade is aprincipal factor to German economy as well. The total value of imports andexports equals 86 percent of GDP (Index of economic freedom). According toTrading Economics, imports from Germany in December 2016 were more than 78.8EUR billion and it grow by 8.5 percent year by year.
Germany mainly importmachinery and equipment which account for 13 percent of total imports,electrical products accounts for 12 percent of total import and both vehiclesand mineral fuels account for 9 percent of total import. Major import partnersof Germany include China that equals 10 percent of total import, theNetherlands (9 percent of total import), France (7 percent), the United States(6 percent), the United Kingdom (4 percent), etc. Furthermore, being the thirdbiggest export country in the world, exports account for approximately 50percent of German economic output. In December 2016, exports from this countrywere about 97 EUR billion and went up by 7.2 percent yearly. Like imports, mainexport products are vehicles which equal 18 percent of total sales, machineryand equipment (17 percent), 10 percent of electrical products, pharmaceuticalproducts (6 percent), etc.
Major export partner of Germany are the UnitedStates with 10 percent of total exports, France (9 percent), both the UnitedKingdom and the Netherlands account for 7 percent, 6 percent of China, etc. Leadingbusiness group of power-house in European Union has said that Germany’s tradewith Britain is already destroyed by Brexit. Spokesperson of the Association ofGerman Chambers of Commerce and Industry (DIHK) which represents more thanthree million German business and entrepreneurs, Thomas Renner warned thatalthough some single locations or companies might benefit from moving jobs andinvestment from the United Kingdom, the Germany economy will be damaged as awhole (Bennett O. 2017). Even when Brexit negotiations have just started, somenegative consequences appeared.
In 2016, exports from Germany to Britainreduced by three percent. According to a survey of DIHK, 40 percent of Germancompanies expect to trade less with Britain after Brexit and 10 percent ofGerman companies have plan to relocate investment out of the United Kingdom.Likewise, other branches such as financial sectors, pharmaceuticals andmanufactures are affected as well. Moreover, after the UK exited the group, thecontribution to the annual EU budget is estimated rise by 3 EUR billion(Clements L. 2016)Accordingto figures published by the Bundesbank – the country’s central bank in 2016,Germany import 60 EUR billion of goods and services from Britain and exported116 EUR billion to there (Thelocal.
de 2017). From these statistic, we can seeeasily that German import from the UK less than they export to UK so Germaneconomy does not depend much on its trade with UK. However, exports fromGermany to Britain reduced by three percent in 2016. Consequently, German exportsstill will suffer more than its import and the benefits of the Single Marketfor German industry would be eliminated a lot, especially in the automotivesector. Because the biggest exportcustomer of German car industry is Britain, it accounted for 25 percent oftotal export in 2015 (Bennett O. 2017). According to the German Association ofthe Automotive Industry (VDA), with five cars produced in Germany there isaround one car is sold in Britain while nearly 100 site producing cars orcomponent which belong to German firms are in the United Kingdom.
On the otherhand, carmakers and other industries also have warned that the spanning supplychains in European Union could be disrupted by more barriers to trade such ascustoms levies, regulatory differences, additional bureaucracy, longer waitingtime and more accurate border controls (Thelocal.de 2017). These trade barriers make cost higher. DavidDavis – British Brexit minister had declared that German businesses, especiallycarmakers put pressure on German government in order to continue trading openwith Britain – one of important export markets of Germany, but German industrygroups cast down on his claims (Hughes D. 2017)Therefore,a free trade agreement between two countries is needed.
President of theconfederation of German employer’s associations – Ingo Kramer – announced thatBritain is still an important partner for Germany but Germany need a fair dealfor both sides respecting the principle of single market freedom. Becausesingle market is one of main assets of the EU and Germany put the importance ofthe cohesion of the remaining 27 EU member states at top priority. Besides, tohighlight 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 andCanada (Clements L. 2016).
Tosum up, it is appreciated that the domestic economic environment in Germany isstable. Germany has many other key export destinations which could recompensefor decrease in Britain bound exports after Brexit as well. As a result, thoughsome economic sectors will be more seriously impacted, the economic affect ofBrexit for Germany economy will be not too hard to manage.