Countries of the World/COUNTRYS.BIN/dp/0407/04073.txt

Text File | 1991-06-25 | 30KB | 479 lines

$Unique_ID{COW04073}
$Pretitle{373}
$Title{Federal Republic of Germany (West Germany)
Chapter 6A.   Industry}
$Subtitle{}
$Author{Warrick E. Elrod, Jr.}
$Affiliation{HQ, Department of the Army}
$Subject{industry
production
steel
percent
west
german
coal
million
germany
states}
$Date{1982}
$Log{Frankfurt Skyline*0407301.scf
Figure 12.*0407302.scf
}
Country:     Federal Republic of Germany (West Germany)
Book:        Federal Republic of Germany, A Country Study
Author:      Warrick E. Elrod, Jr.
Affiliation: HQ, Department of the Army
Date:        1982

Chapter 6A.   Industry

[See Frankfurt Skyline: Frankfurt Skyline]

     Industry in Early 1982 faced a somewhat uncomfortable future, at least
for the near term. The economy had reached a cyclical turning point in
mid-1980. At that time it turned sharply downward after a little more than two
years of robust, almost boom, expansion. The economic decline in the Federal
Republic of Germany (West Germany or Federal Republic) was part of a world
economic decline, especially in Western industrial nations, which was caused
to a marked degree by the 1979-80 increases in petroleum prices. The major
impact of the petroleum price spiral on industry was twofold: production costs
rose significantly as petroleum products became ever more expensive because
the United States dollar, in which oil was priced, appreciated rapidly against
the deutsche mark; and export markets, a vital aspect of industry, weakened
for West German goods as the increased petroleum prices forced trading
partners to shift from other imports in order to meet the higher petroleum
prices.

     Industrial investment activity was mixed, but there were some favorable
expectations that investment spending would blunt the economic decline. The
construction industry was hard hit, in part because of rising interest rates
as the German central bank (Deutsche Bundesbank) reluctantly used a higher
interest rate policy to stem the flow of capital to American markets where
significantly higher interest rates prevailed. With stimulative policy
desirable in the face of over 1 million unemployed, the Bundesbank action
was forcing restrictive actions.

     The depressed iron and steel industry faced severe problems of oversupply
and competition as suppliers faced weakening worldwide demand for steel. As
the only steel-producing member of the European Economic Community (Common
Market) not granting export subsidies to its industry (practically all
privately owned), West Germany considered the competition basically unfair
and had given notice of intention to try to change the community's pricing
system for steel. It was the only member country to oppose a Common Market
quota system, which it considered protective of inefficient producers.

     In August 1981, however, the government made a major change in its
position and approved the equivalent of US $560 million as an aid package for
its domestic steel industry and announced that it had prepared plans for
levies on imports of subsidized steel from other Common Market countries and
had taken administrative measures to impose the levies quickly should it
become necessary. Although the European Coal and Steel Community was still
trying to eliminate by 1985 all state aid to the steel industries of member
states, West Germany felt it had to take steps to counteract "massive
distortions of competition" abroad that had begun to threaten domestic jobs
and the survival of its steel industry. The aid package, to run from 1982 to
1985, had four major components: grants of up to 10 percent of investment
costs to support major restructuring and modernization without expansion of
capacity; a federal research program for modernization; investment grants to
those federal states with areas heavily dependent on steel that were
undertaking job-creation programs; and fostering parallel, independent
investment planning among steel companies to avoid creation of new production
capacity.

     Consumption goods industries were expected to show low levels of
investment; but fast-growth industries, including data processing, office
machines and equipment, aircraft, and chemicals, were expected to show
offsetting increases. Surprisingly the automotive industry, suffering as
were manufacturers in other major automobile-producing countries from a
worldwide slump in sales as severe as in 1974-75, expected investment to
remain strong. Channeling of funds into technical improvements was motivated
by the need to meet Japanese competition. Energy conservation was also a
strong motive for investment in the automotive as well as in other industries.
Overall, investment remained strong in fast-growth industries, in industries
seeking to apply new technology and expand research and development, and in
industries where conservation of energy had become paramount.

     In 1981 West Germany remained the largest exporter of manufactured
goods in the world. During the 1970s exports averaged about 25 percent of
gross national product and foreign trade (exports and imports) almost 50
percent. The industrial sector was especially vulnerable to conditions of
worldwide demand and needed at all times to keep pace with international
competition. A worldwide slowdown can therefore be damaging to West German
export growth to the extent that world incomes stagnate or rise at a
significantly slower rate. From mid-1979 to mid-1981 the deutsche mark had
declined by almost 25 percent against the United States dollar, thereby making
West German goods cheaper for American buyers. But the full effect of this
favorable turn in lowering prices of West German exports could be months in
coming, given the lag in international trade adjustments in response to
changes in foreign exchange rates.

     Industrial recovery in 1982 and later will depend very much upon wage
negotiations. Average wage increases on the order of 5 percent were the rule
in settlements in 1981. Continuation of such agreements would represent a
moderation of the settlements in most preceding years. With productivity
likely to grow at a much lower rate during a period of slow industrial growth,
the 1981-82 pattern of settlements would aid in maintaining some degree of
price stability as cost pressures on prices would ease. Management and labor
seemed readier to discuss macroeconomic issues that affected both than at
any time since the 1977 unraveling of the concerted economic action program,
or social partnership (Sozialpartnerschaft), after many years in existence.

Major Industrial Sectors

Coal and Lignite

     Coal has been the country's most important natural resource, in large
part making possible the industrial leadership attained in the late
nineteenth century. Earlier of great value in the chemical industry, in
powering the steam engine, as fuel for the superb rail transport system, as
coke for smelting and refining iron, and as a raw material for numerous other
industries, coal in the early 1980s remained vital to the metallurgical and
electric industries.

     The chief locations of hard coal production are the Ruhr district-the
largest coalfield in Europe-and the Saar (see fig. 12.). Reserves are
estimated at about 70 billion tons, an amount sufficient for about 800 years
at the 1980 rate of production of 87 million tons, slightly above the levels
of 1977-79, but below production levels of 1976 and earlier. The post-World
War II peak was reached in 1956 (102.5 million tons); the decline in annual
production since that date has been due to competition from petroleum-in
1981 being slightly reversed-and the lower cost of imported coal. West Germany
produces approximately 5 percent of coal mined the world over but is projected
to produce only a little over 2 percent by the year 2000. Its own production
is expected to rise by only 25 percent, while coal production in such
countries as Australia, Canada, China, India, United States, and the Soviet
Union will rise by 100 to 400 percent.

     The metallurgical (63 percent) and electric i