Basics 5/6: An open economy with a huge global footprint

Globalization is transforming the world economy and allows business across international markets. Germany is a highly open economy and attains a similar level of openness as smaller economies usually reach. In 2014, German exports accounted for 46 percent of GDP. Total German imports constituted up to 39 percent of GDP.1

Germany was the 22nd (out of 75) most open economy worldwide in the International Chamber of Commerce’s 2017 Open Markets Index, which puts Germany at the top of both the G7 and the G20 countries. The index contains four key components: openness to trade, trade policy, foreign direct investment (FDI) and trade-enabling infrastructure .2 The openness of the German economy is also expressed by several multilateral and bilateral trade agreements, as well as multiple industry-specific agreements.

German companies are known for their high degree of specialization, which is demonstrated by a high number of German “hidden champions”. This idea was identified by Hermann Simon and describes companies that are world leaders in highly specialized niches such as for example porcelain bathroom fittings (Duravit) or church organ manufacturing (Klas), who serve the global market but largely go unnoticed by the general public. The “hidden champions” are particularly present within the “Mittelstand”.

About the author: Mark Pfeiffer is a German based retail professional, piloting nonfood consumer goods of international companies into German retail.

Source:
1 OECD: International Trade, 2016
2 The International Chamber of Commerce: ICC Open Market Index, 2017

Photo: Mark Pfeiffer