President of ZEW Achim Wambach on the National Industrial Strategy 2030

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Germany’s Federal Minister of Economics Peter Altmaier recently submitted the National Industrial Strategy 2030, his answer to the “process of rapid and profound change” in the global economy. While his strategy has aroused scepticism in some quarters, the industrial sector has emerged as one of its ardent supporters.

Achim Wambach discusses German Industrial Policy in his recent statement
Professor Achim Wambach, president of the ZEW – Leibniz Centre for European Economic Research in Mannheim, analyzes the strategie of Germany's Federal Minister of Economics.

Recent analysis published by the German Federal Ministry of Economics contains a wealth of insight. The major US tech companies dominate the European market and continue to expand. These companies remain extremely innovative and belong to the world’s largest investors in research and development. At the same time, China has doubled its share of global economic output over the past 15 years to more than 18 per cent. With its “Made in China 2025” campaign, China is poised to become the world leader in multiple sectors. The 2016 acquisition of the German company Kuka by the Midea Group, a Chinese electrical appliance manufacturer, is just one example. Germany, and Europe in general, are in danger of being left behind.

There is still time to act, provided German politicians do their homework. Many aspects of Peter Altmaier’s plan to improve Germany’s national infrastructure deserve unqualified support. But country-wide broadband network, e-government services and investment in physical infrastructure appear on every election campaign platform. The trick is actually implementing them.

Germany began to create a bulwark against America’s powerhouse corporations in 2017 with the pathbreaking 9th amendment to the Competition Act (GWB), and the upcoming 10th amendment will continue this project. The federal government’s “Competition Law 4.0” Commission is currently reviewing the need for revisions to European competition law. The question is whether regulatory authorities require new or better tools to prevent Internet giants from abusing their dominant market position. Another focus lies in creating more legal certainty for companies when working together to build their own platforms or merge datasets.

No European champions at the expense of fair competition

The competition from China is different. Because Chinese companies are partially protected and subsidized by the state, they have an unfair advantage over their European competitors. It is therefore important that the EU put more pressure on China to open up its markets and level out the playing field. The planned investment deal between Europe and China – which should be followed by a comprehensive trade agreement – would be an important step towards achieving this goal. But even without a deal in place, Europe can flex its muscle by levying higher countervailing duties on Chinese goods.

By contrast, Peter Altmaier’s plan to change European competition law in order to create more “German and European champions” is too clever by half. If European champions can emerge from mergers while maintaining a fair competitive environment, then such mergers should already be possible today. But if the emergence of European champions leads to cartel formation, then antitrust authorities must take action – for the sake of consumers as well as stronger competition.

In this sense, it is hard to understand why German industry had decided to push so hard for the creation of European champions. The model of the Chinese state-owned enterprise not only means being big; it also means that the government has a say in business decisions. This can neither be in the interest of companies nor in the interest of those who support a social market economy. As past experience has shown, fair competition and free enterprise are always preferable to giant oligopolies and state supervision.

Date

22.03.2019

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