In my blog last week, I explored some of the challenges facing our economy as we develop and grow out of recession. One of the key issues is to strengthen our trade performance, and, as in the past, to sell our national products and services boldly on a global platform.
The publication of some trade statistics gives some grounds for optimism on this front: we are doing well in increasing our markets with Italy, Holland, Belgium and many others. Of alarm and concern, however, is our balance of trade with Germany. It seems that, when it comes to the exchange between what are, arguably, the two most powerful economies in Europe, the flow of trade is dis-proportionately one-directional: so why are we buying German goods, but failing to gain any real traction with German markets. We need to examine why it is that the most significant market within the Eurozone is not buying British.
Preliminary investigation suggests that the problem is not the United Kingdom’s alone. Germany is running a colossal trade surplus with most countries in Europe: something which has created concern around the corridors in Brussels. Their focus is on the risk of macro-economic imbalances generating more instability within the Eurozone. Similar anxieties have been expressed in Washington, where it is felt that the Germans have been too sluggish in assisting their European partners out of the economic malaise.
From a European Union perspective, it seems that the course on which the institution is set is legalistic. If Germany’s trade imbalance remains stubbornly high, this will be deemed by the European bureaucracy to be in breach of the ‘macro-imbalance’ rules, and enforcement action (with qualified majority voting) could be taken. I doubt the sense in adopting this response.
Whilst Germany’s reluctance to purchase goods and services from abroad is creating a potential deflationary bias, it cannot be denied that the strength of the German export market is an asset to the country and the Eurozone. As so often with European Union institutions, the obsession with ever-closer union and enforced compliance cloud the most important point. And it is hardly as if Europe is on the brink of a catastrophic deflationary spiral.
No, the challenge is a more obvious one – if somewhat harder to accomplish. We, and the rest of the world, need to work much harder to crack the challenge of German markets. The only reason that they are not buying can be that we are not producing what they want at a price they are prepared to pay. Given our relative strengths in high-level manufacturing, information technology and innovation, I would have considered our compatibility with Germany’s engineering prowess more than compelling.
And whilst the situation with Germany is especially acute, it mirrors the task facing us as a nation genuinely striving to prosper. We need to re-discover our zeal for trade – supplying and selling in world markets as a genuine global player. Germany, it seems, will be a tough nut to crack, and that is why it may take a little more focus than with those countries with whom we have already achieved some progress. But as Europe’s biggest economic players, we both deserve an enhanced economic relationship – and we are the ones to do the catching-up on trade.