By Brenda J. Fisher

While German GNP growth is expected to reach only 2 percent this year, U.S. exporters should continue to do well as the unified German economy solidifies. U.S. exporters can take advantage of opportunities in environmental clean-up technologies, building materials and construction machinery manufacturing, and electric power generation and distribution, as infrastructure development continues in the five eastern German states.

U.S. exports to Germany in 1991 rose more than 13.6 percent, to a total of $21.3 billion, while U.S. imports of German goods dropped 6.9 percent to $26.2 billion. The resulting $4.9 billion deficit was half that of 1990.

U.S. exports 1991--$21.3 billion U.S. imports 1991--$26.2 billion

Traditional exports of EDP equipment, telecommunications equipment, automobiles, parts and accessories, as well as aircraft and associated equipment, and medical equipment, should show continued growth. U.S. exports in specialized niche sectors such as musical instruments, works of art and antiques, agricultural machinery, fresh and frozen seafood, and coal, also show increasing growth potential.

The economic and commercial joining of the two parts of Germany is making progress. The disruptions which followed unification in 1990 continue to give way to an interdependent system, with the rising investments of western German and foreign enterprises in eastern Germany acting as the driving force behind integration. While the lines separating eastern and western Germany are blurring, it is still necessary to analyze business activity in the two parts.

In western Germany, GNP growth is slowing from a high of 4.6 percent in 1990 to an expected 2.0 percent this year. The German government's annual report on the economy predicted this moderate growth based on moderate nominal wage increases, domestic business tax reform, a rebound in world economic growth, and a successful conclusion of the Uruguay Round.

Domestic demand should lose momentum as higher inflation, reduced disposable income, lower job growth, lower capacity utilization rates, and slower government spending cut private consumption and/or investment. A pick-up in external demand is the key to the recovery of the western German economy, contingent on an expected rebound in world trade, especially among Germany's major trading partners.

The burden of unification, combined with recent sharp increases in wages, taxes, and interest rates, have raised concerns in Germany about a loss of competitiveness. The German government is giving priority to budget discipline and further subsidy cuts, to a growth-oriented tax policy, to incentives for private investment--especially in the east, and to a "responsible" wage policy that is closely linked to productivity gains.

Since unification, eastern Germany has experienced a deep recession caused by its transition to a market economy. Industrial production is less than 40 percent of pre-unification levels and unemployment is 16.5 percent and rising. Despite high unemployment, wages are rising to western German levels, further crippling industry in the east.

However, there are signs that the bottom has been reached. A turnaround in the eastern German economy is beginning with double-digit growth rates predicted through the 1990s. While the Germans are forecasting 10 percent GNP growth for eastern Germany this year, it will not be due to self-sustained economic growth, but rather the consequence of public transfers from western Germany. These large transfer payments will both boost equipment and construction investment and maintain private consumption levels.

The Institute of German Business reported that western German and foreign businesses plan to invest about $70 billion in the five eastern German states by 1995, with about 40 percent of investment coming from industry. About one-third of all realized or planned investments will come from the energy and mining industries, and more than 13 percent will come from the service sector. Continued investment in construction, retail, chemical, and automotive sectors indicate the restructuring process is in full swing in eastern Germany and that a considerable number of jobs are being created.

The Commerce Department is again encouraging greater American participation in trade fairs as the most cost-effective vehicle for introducing new or improved products to the German market. Trade promotion events with Commerce support include major German international trade fairs featuring: fitness equipment and sporting goods (fibo and ispo), instrumentation (analytica), specialty electronics (smt/asic/hybrid), textiles (heimtextil and techtextil), and computers and communications (CeBIT).

To highlight opportunities for trade and investment in eastern Germany, the Commerce Department is planning an environmental industries trade mission to Berlin, Leipzig, and other eastern German cities this June, and an automotive parts trade mission to several eastern German cities, the Frankfurt automechanika trade fair, and Czechoslovakia in September. In addition, an airconditioning, heating, and refrigeration matchmaker will visit the Nuremberg IKK fair and travel on to Italy this October.

For additional information on opportunities to export to Germany contact the Commerce Department's Desk Officers at (202) 482-2434, 2435, or 2841.

Source: International Trade Administration, Business America Magazine