Germany fourth in protectionism ranking

Chancellor Angela Merkel lashed out at the United States (US) during the World Economic Forum in Davos (Switzerland) because of the many protectionist measures. She herself washed her hands in innocence: "We don't believe that shielding will get us any further."

Merkel also said she did not feel like putting a 'wall around the country'. But what does research by Euler Hermes show? Germany ranks fourth in the list of countries with the most protectionist measures. The country is next after the US, India and Russia.

Effects?
What are the consequences for the Netherlands and for our agricultural sector? Because of all our exports, the trade of agri-food products to Germany is the largest. I also had to think of Klaas Knot. According to the president of De Nederlandsche Bank, the Dutch economy is doing well and growth is continuing for the time being. "But in the long run, this growth will be threatened by trade-hampering developments." He was referring to the US and Brexit. Or maybe also in Germany?

First the facts: in 2017, 467 new protectionist measures were announced worldwide. That is significantly fewer than in 2016. Surprising, because you would think (if you are to believe the media) that more and more measures are being taken. The next surprise was the ranking by country; Germany in fourth place and Switzerland in sixth place.

Germany on track
Without it being noticed, Germany has been on the protectionist tour for some time now. The Netherlands cannot ignore that. We are pre-eminently an export country. The more barriers, the worse. Every year, Dutch companies export about €425 billion worth of goods. About 1/3 of the national income is related to trade and 2 million jobs are involved.

We supply more than €100 billion worth of goods to Germany every year, approximately 25% of which are agricultural products. Are we affected by the trade restrictions imposed by Germany? Not much you would think. Compared to the record year 2016, there was again a significant improvement in agricultural exports to Germany (+5%) last year.

Service sector is protected
If we zoom in on the type of measures that Germany is taking, it appears that the service sector in particular is being protected. This is what Marcel Fratzscher, the chairman of the German Institute for Economic Research and professor at Humboldt University in Berlin, says. Fratzscher argues that Germany's trade surpluses are partly due to German protectionism in many service sectors. "They are highly regulated and therefore difficult to access for foreign competitors."

According to its own research, the German government favors important sectors such as Transport, Machinery & Equipment and the Metal Industry with protectionist measures. The types of measures vary from tolls to trade finance policies.

Trade relationship is fruitful
Do I want to scare you? New. The growth figures prove that the trade relationship between the Netherlands and Germany continues to be fruitful. As familiar as the relationship with Germany is, we will have to stay awake and adapt well to changing circumstances. The specter of protectionism is haunting. Before you know it, it scares us too.

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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