Nobody Is Forced to Buy German Goods

Criticizing Germany for its export prowess is a bit disingenuous. It’s more an indication of America’s inability to compete.

The German trade surplus reaches ever higher levels month after month. Some of Germany’s European neighbors — along with the U.S. — criticize us for that. They demand that Germany increase its domestic demand, thus increasing demand for imported goods in order to prop up trade with those nations running trade deficits with Germany. Ultimately, they demand Germany do everything possible to stop flooding world markets with German export goods.

While criticism of weak German domestic demand is completely logical, it can’t be traced to Germany’s exports; that would imply that foreign consumers are being forced to buy German goods rather than goods produced locally. That, of course, is nonsense. Why is the demand for German goods so strong globally? This question is best answered by looking at automobiles and industrial machinery, Germany’s two leading export categories.

These goods are internationally competitive and, above all, superior in quality to similar products produced in other nations. One need only think of automobiles “made in Germany” or German-produced machinery that is tailored to specific corporate needs and the purchase of which includes onsite advice and consultation prior to sale.

Demand for these goods is particularly strong in developing nations like China, India and Brazil. Of course, value for money plays an important role; it’s precisely in the area of superior quality that Germany’s major exports dominate.

Critics also like to suggest Germany’s export surplus is a cause of the current eurozone crisis. Less wealthy nations have to pay for German exports. But that raises a question: Why do they continue to buy German products? They’re certainly under no obligation to do so.

Additionally, it should be noted that German export goods contain an increasing proportion of imported goods and services. Currently, that proportion accounts for some 25 percent; thus, approximately one-fourth of German exports already originates from foreign sources.

About half of those sources are in Europe and a major portion of those originate in eurozone countries, so German exports therefore help increase exports from the European Union. The importation of goods and services has a positive effect on the balance sheets of eurozone nations.

Meanwhile, the German trade surplus with other eurozone nations is relatively small. Germany’s total surplus in 2012 amounted to some 185 billion euros, of which 7 billion euros were with other eurozone nations — or roughly 4 percent. The large imbalance occurred with non-euro nation transactions, mainly the United Sates.

German export strength mainly illustrates the economic weakness of the United States, which had a trade deficit last year of 600 billion euros. If the German trade surplus reflects Germany’s international competitive ability, the American trade deficit reflects the serious inability of the United States to compete. But to blame German exports for that inability seems a bit disingenuous.