German industry lobby urges priority for growth and competitiveness

A new policy paper published by the Federation of German Industries (BDI) calls for “making German industry, growth, and competitiveness the top priority” in Germany.

Based on this foundation, the BDI document sets out guiding principles for German foreign policy.

According to German Foreign Policy, the document, published last Friday (25 September), strongly emphasises that existing dependencies must be consistently reduced in both Germany and the EU.

The document highlights a “systemic rivalry” between the EU and China and advocates “de-risking”, particularly in the field of critical raw materials.

The BDI advocates a similar “de-risking” regarding the US as well. However, the document states that this should not come at the expense of long-term strategic relations with the US.

Expanding the EU’s “partnerships” worldwide with other countries and alliances is also among the policy recommendations.

Top priority: Growth

The BDI is the most influential association of German industry, representing 38 separate member associations, more than 100,000 companies, and approximately eight million employees.

In its latest policy paper, the association calls for “new economic policy orientations” in light of weakening growth and declining competitiveness in Germany and Europe, as well as fundamental shifts in global politics and the international system.

Titled “Principles of Economic and Trade Policy”, the document is published against the backdrop of ongoing debates on crisis and reform in Germany and calls for “making German industry, growth, and competitiveness the top priority”.

This document is understood not as a political wish list for day-to-day politics, but rather as a common guideline for member associations.

Finding of “systemic rivalry” with China

In its sections on foreign trade and European policy, the document highlights, on the one hand, the EU’s competition with China, classifying it as “systemic rivalry”.

Referring to China’s “state-driven” market distortions, it states that the implementation of existing measures to bolster the Union’s competitiveness remains inadequate.

Arguing that “de-risking” and reducing dependencies regarding the People’s Republic of China remain the correct approach, the BDI wants these steps implemented “more rigorously”.

According to the BDI, even if “de-risking” incurs costs, including those arising from Chinese countermeasures, “remaining passive is, in the long run, economically far more expensive and irresponsible in terms of security policy.”

According to industrialists, the EU in particular must reduce its strategic dependence on critical raw materials in response to the “challenge” posed by the Chinese economy to the “open social market economy”.

In addition, it seeks to ensure the “rapid and legally robust implementation of investment screening and export controls”.

This translates into tighter restrictions on investments by Chinese companies and exports to the People’s Republic of China.

Finally, the report highlights the need for new economic “defensive instruments”, including anti-dumping and anti-subsidy measures, to counter competitive distortions.

Ambivalent stance in relations with the US

At the same time, the document adopts a stance toward the US that is at times similar to the position taken toward China.

The document identifies a “progressive paradigm shift in US trade and industrial policy” and advocates a “self-confident” and “interest-driven European position”.

Furthermore, it proposes establishing an “enhanced transatlantic de-risking dialogue” aimed, on the one hand, at safeguarding European autonomy and, on the other, at developing shared transatlantic priorities regarding critical technologies and resilient supply chains.

Finally, the BDI advocates adopting appropriate countermeasures against US protectionist measures that weaken the competitiveness of European companies.

However, it is urged that this should not come at the expense of long-term strategic relations with the US.

Emphasis on new partners beyond the US and China

According to the BDI, beyond realigning its relations with China and the US, the EU must also expand its strategic partnerships with other regions of the world.

The goal is to build a “resilient network of like-minded partners”, “particularly for raw materials and key technologies of strategic importance”, offering “market access, investment protection, and the diversification of critical supply chains”.

Throughout this year, the EU has signed a series of trade agreements with countries and economic blocs across the world.

In January, a free trade agreement was signed with Mercosur, the South American trade bloc comprising Argentina, Bolivia, Brazil, Paraguay, and Uruguay. Bolivia is not a party to the agreement because it became a full member of Mercosur after the treaty text was finalised.

Eliminating tariffs on more than 91% of EU exports to Mercosur countries, this agreement was the culmination of negotiations that lasted more than a quarter of a century.

Also in January, the EU signed a trade agreement with India, regarded as the largest free trade agreement in India’s history.

Under the terms of the agreement, both sides aim to reduce or eliminate tariffs on more than 95% of their bilateral imports.

A comprehensive rapprochement is also taking shape in EU relations with Canada. Canada, whose relations with the US have deteriorated significantly due to Trump’s annexation threats, welcomes this development.

On 16 September, European Commission President Ursula von der Leyen formally invited Canada to become the EU’s first “associate member”.

Presenting this unprecedented offer to Canadian Prime Minister Mark Carney at the European Parliament, she stated that the EU and Canada “view the world from the same perspective”, for instance regarding the war in Ukraine.

Von der Leyen’s offer followed Carney’s call on ten EU member states to finally formally ratify the EU’s trade agreement with Canada, which was signed nine years ago.

Carney argued that this would make all parties “more resilient, more independent”, and more prosperous.

Known as the Comprehensive Economic and Trade Agreement (CETA), which provisionally entered into force in 2017, the agreement between Canada and the EU has not yet been ratified by ten EU member states.

This is primarily due to concerns that Canadian agricultural exports could harm European farmers.

Industrial bosses want wage suppression

In addition to foreign trade and European policy, several other areas are addressed in the BDI policy paper.

For instance, one section addresses “economy, competition, regulation, and industrial policy”. Here, it is stated that Germany as a business location needs growth-enhancing measures and structural reforms.

“High labour and energy costs, alongside the high tax burden on labour and capital”, rank among the most critical areas where reforms are deemed necessary.

The BDI also advocates introducing “spending discipline” to prevent massive public expenditure, including military build-up and infrastructure, from spiralling out of control.

In the section titled “Digital and Innovation Policy”, it is noted that technological sovereignty and resilience must be advanced.

This encompasses the “expansion of common European data spaces, further development of an integrated digital single market, simplification of digital regulation, and robust cybersecurity architectures”.

Furthermore, it demands that Germany and the EU expand their capacities across the entire semiconductor supply chain, from research and design to basic chemical products and system integration.