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German engineering companies losing massive market share due to subtle trade barriers

German engineering companies are losing massive market share due to trade barriers around the world, according to a new report.

Globally its most successful sector, and represented by industry association VDMA, Germany’s engineering companies say they have lost between 70 and 100 percent of export markets in some countries.

The VDMA blames “egoism” and a climate of protectionism, according to Die Welt, which notes that subtle instruments such as localization initiatives and regulations, as well as the traditional blunt ones such as tariffs and subsidies, are being used to obligate companies to avoid buying from overseas machine builders.

The VDMA says its study shows that mechanical engineering companies from Germany are increasingly competing with companies that receive “extensive export subsidies” in their home countries.

This is particularly true for the most important export markets of the German mechanical and plant engineering industry: China, USA, Russia and the EU states.

“In some cases, between 70 and 100 percent of machinery exports in these countries compete with subsidized products,” says the VDMA.

The VDMA says export subsidies are an important factor in the trade context and are becoming increasingly important in many customer countries.

Ulrich Ackermann, Managing Director of VDMA Foreign Trade Department, says: “As a result, competition is distorted by export promotion at the expense of mechanical engineering industry in many G20 countries.

“We were surprised by the rapidly increasing importance of competition-distorting export subsidies from third countries in the form of tax incentives and unbound export financing, and this should be urgently addressed politically.”

Ackermann adds: “Open export markets are essential, especially for the mechanical engineering industry in Germany, which has a medium seized structure and is at the same time export-oriented.

“In an increasingly protectionist market environment, EU free trade agreements with our important trading partners are the means of choice.”

However, some observers also point to Germany’s own trade barriers, as they see them.

Professor Dr Simon Evenett, director of the Swiss Institute for International Trade and Economic Development and head of the Global Trade Alert Team, says: “Germany and the EU are no role models with regard to free trade either.

“The main barriers for foreign machinery suppliers are primarily technical regulations and export promotion. Unfortunately, these tools are widely used internationally.”

The VDMA published its report under the banner of the Global Trade Alert Team, in association with the University of St Gallen, Switzerland.

Ulrich emphasized the importance of less protectionism. “A free world needs free trade. Only this basic formula makes sense in international cooperation.”

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