“Bell” from a German institute: 6 times more expensive than Brexit would cost Germany to cut off trade relations with China

Up to six times more expensive than Brexit it would be for Germany a possible trade “war” of the European Union with Chinaestimates the Ifo Institute for Economic Research in Munich and suggests alternative ways to limit dependence on countries with authoritarian regimes.

“Deglobalization makes us poorer. Instead of turning away from important trading partners without sufficient reasons, companies should seek alternative partners in other countries in order to limit one-sided and critical dependencies on specific markets and authoritarian regimes“, emphasizes the economist Lizandra Flachhead of the investigation, which was carried out on behalf of the Association of Bavarian Industry (vbw).

Especially in Germany, warns the Institutethe biggest losers will be the automotive industry (-8.47% in value added, -$8.306 billion), the transport equipment manufacturing companies (-5.14%, -1.529 billion) and the mechanical equipment manufacturers (-4.34%, -5.201 billion). “If Germany, as an exporting country, wants to redefine its business model, then repatriating supply chains is not a solution that will help the economy“, warns the Ifo and explains that a more promising option would be the creating strategic partnerships and concluding free trade agreements with countries of a similar mentality, such as e.g. USA. “This should be the goal of German and European economic policy,” comments Florian Dorn, co-author of the survey.

Ifo studied five possible scenarios, including this one between Western countries and China, combined with an EU-US trade deal. Such an agreement could, according to experts, offset to some extent the negative effects of the withdrawal of the economies of Europe and China, but not annihilate them.

RES-EMP

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