Bài tập tình huống về toàn cầu hóa case study 4 germany can change to confront export slump, but will it

JUNE 29, 2009 Germany Can Change to Confront Export Slump -but Will It? BY MARCUS WALKER Germany, in the grip of a massive export slump, firmly believes it has no alternative to export-led growth But there is an alternative the country just doesn't have the stomach for the changes it would require Germany's gross domestic product, the value of all its goods and services, has fallen by nearly 7% in the past four quarters, driven largely by foreigners buying fewer German goods One lesson of this crisis: Even worse than having a credit bubble burst, like in the U.S., is depending on customers whose credit bubble is bursting When exports make up 47% of your GDP, and exports drop 17% year over year as Germany's did in the first quarter the effect is to wipe out years of previous economic growth in a stroke Angela Merkel There are three ways that Germany, the world's fourth-largest economy, could respond One is to sit tight and wait until global trade recovers That's what Chancellor Angela Merkel's government and much of corporate Germany plan to In their view, this recession is an almighty cyclical hiccup, but Germany's economy is fundamentally sound Defenders of the status quo say Germany's export dependence reflects its comparative advantage: Germany is good at engineering, and other countries especially fastdeveloping ones such as China need a lot of new machinery So the government is subsidizing companies' payrolls to preserve their work forces and know-how until foreigners start spending again But there are drawbacks to being the world's toolmaker Global investment spending can be highly volatile, as this recession shows It's doubtful whether German exports will grow as fast after this crisis as they did in the bubble years before it, because the U.S and parts of Europe will save more and consume less for a while And employment in Germany's main export sectors machinery, cars and chemicals is in long-term decline as companies cut costs and steadily shift production to cheaper countries to stay competitive Germany's brief comeback in recent years may have been a last hurrah for the country's postwar manufacturing base A second option is to increase domestic consumption, and labor unions say it's high time Export competitiveness has come at the expense of consumer spending, they argue, because German companies have browbeaten workers into forgoing pay raises for years German households' disposable incomes barely rose during the country's growth spurt from 2005 to 2008, when GDP rose by nearly 7% Unlike Americans, German consumers don't like to shop with credit cards to make up for stagnant incomes The difficulty is what to about it To revive wage growth, German unions want the government to set a national minimum wage, and make union-negotiated pay rates compulsory across whole sectors "The balance of power in the labor market has shifted in favor of companies in recent years, and we must change that," says Gustav Horn, director of the Macroeconomic Policy Institute, a union-backed think tank in Dusseldorf But pushing up wages through regulation could hurt employment among less-skilled workers And employment is key for consumption "People who gain or lose jobs change their spending behavior more than people who get a pay raise," says Elga Bartsch, economist at Morgan Stanley in London Associated Press Germany's gross domestic product, the value of all its goods and services, has fallen by nearly 7% in the past four quarters, driven largely by foreigners buying fewer German goods Above, a technician assembles turbines at Siemens Energy factory in Goerlitz, eastern Germany The third option would be to foster entrepreneurship in new sectors, to supplement Germany's traditional strengths in cars and engineering Many knowledge-based and service industries that power growth elsewhere, such as computers and software, pharmaceuticals and biotech, have largely passed Germany by "Somebody created a comparative advantage in machinery and BMWs in the 1960s, but nobody has created anything much since," says Adam Posen, deputy director of the Peterson Institute for International Economics in Washington German public policy and the country's state-dominated banking system focus on rewarding existing companies rather than new ones, Mr Posen says To some extent, Germany is trying to promote new sectors Subsidies have turned the country into a leader in solar energy But Germany is second last in the number of business start-ups among 18 advanced economies surveyed by the Global Entrepreneurship Monitor, an international research project Only Belgians found fewer new businesses than Germans, the survey finds A recent study by consultants McKinsey & Co says Germany could double its average economic growth to 3% a year if it got serious about new industries, from research-led sectors to services for the growing number of elderly consumers Without such an effort, German living standards will decline relative to other advanced economies, the report warns But genuinely diversifying Germany's economy would require an overhaul of the country's universities, banking and capital markets, bureaucracy, taxes and welfare state, labor market and immigration laws, say economists That's unlikely to happen soon The nation is tired of reforms, after years of controversial changes to cut budget deficits and long-term unemployment Ms Merkel has maintained widespread popularity in her first four-year term by reassuring Germans that their government won't trouble them with too much change Politics and a public longing for stability and security mean Germany is likely to choose a second-best economic future Describe the situation Germany was facing, what industries considered as having offered Germany comparative advantage in the past? Why? If there were no economic crisis, would Germany have to think of their options? Could they have kept their position which such hypothesis? Would it have been a sustainable strategy? From the perspective of international trade theories, which of the three options you support as Germany was trying to keep its export-led position? Explain What can Vietnam learn from the case? With the current situation, what can you suggest on the current Vietnamese import and export structure (i.e what to import, what to export), with Germany in particular (given the option you supported in Question 3), and with other trade partners? ... Explain What can Vietnam learn from the case? With the current situation, what can you suggest on the current Vietnamese import and export structure (i.e what to import, what to export) , with Germany. .. trouble them with too much change Politics and a public longing for stability and security mean Germany is likely to choose a second-best economic future Describe the situation Germany was facing,... consumers don't like to shop with credit cards to make up for stagnant incomes The difficulty is what to about it To revive wage growth, German unions want the government to set a national minimum