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1994-05-02
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<text>
<title>
Germany: World Trade Outlook
</title>
<article>
<hdr>
World Trade Outlook 1992: Germany
Investment Boom Could Boost U.S. Capital Goods Exports
</hdr>
<body>
<p>By Brenda J. Fisher
</p>
<p>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.
</p>
<p> 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.
</p>
<p>U.S. exports 1991--$21.3 billion U.S. imports 1991--$26.2
billion
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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.
</p>
<p> 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).
</p>
<p> 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.
</p>
<p> For additional information on opportunities to export to
Germany contact the Commerce Department's Desk Officers at (202)
482-2434, 2435, or 2841.
</p>
<p>Source: International Trade Administration, Business America Magazine
</p>
</body>
</article>
</text>