International perceptions of Germany’s and Europe’s competitiveness

At a glance

• Germany and Europe urgently need new economic partners. However, in the global economic race, the EU is increasingly falling behind. Emerging economies expect comprehensive economic partnerships from global economic powers that go far beyond trade. Therefore, Germany and the EU need a strategic realignment of their foreign economic policy – one that closely integrates trade, economic, foreign, and development policies while focusing on their own economic interests. Only then does Europe stand a chance of remaining globally competitive.
• Active economic diplomacy is the foundation for building economic partnerships. However, Europe’s diplomacy is often perceived as ineffective and condescending. A political and diplomatic exchange on equal footing is essential to support European businesses abroad. Consequently, Europe’s relations with emerging economies require a diplomatic reset, based on shared interests and a willingness to engage in partnerships on an equal footing.
• Europe benefits from global trade and open markets like no other economic region. However, the EU’s trade negotiations with several emerging economies are making little progress. These countries reject the EU’s non-trade-related demands, such as environmental and labor protection requirements. The EU should adopt a pragmatic and flexible approach in trade negotiations. Moreover, trade agreements should be embedded in comprehensive economic partnerships that consider the economic interests of partner countries. Lastly, Europe must continue to advocate for a fair and rules-based trade system as well as a functioning WTO.
• Germany’s foreign trade promotion should be strategically realigned to support businesses in accessing new markets and production locations. Special attention should be given to small and medium-sized enterprises (SMEs), which are deeply integrated into global industrial supply chains. Instruments for foreign trade promotion must be simplified and tailored more precisely to the needs of businesses. High requirements, such as those in sustainability, must not lead to competitive disadvantages for German companies.
• Development cooperation should integrate values and interests within a holistic approach. This includes linking development cooperation more closely with economic interests where appropriate and embedding it in a comprehensive foreign economic strategy.

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