Letter IEDI n. 914–New principles of the German industrial strategy
While Brazil continues to witness the persistent contraction of its industry, which reached its lowest point in 2018 (11.3% of GDP), the world's major powers have increasingly sought to strengthen and build new industrial skills.
This is what Germany did in early February this year, announcing an industrial strategy that includes state intervention for the strengthening of national sectors and companies, as a reaction to foreign competition and defense against acquisitions of strategic agents by non-Europeans.
Moreover, in mid-February, the “Franco-German Manifest for a European Industrial Policy fit for the 21st Century” created the possibility for the new German strategy to be extended to the European Union (EU).
In the document "National Industrial Strategy 2030: Strategic guidelines for a German and European industrial policy", by the Minister of Economy and Energy, Peter Altmaier, the new German position is described as a "response to the movements of global economic forces", marked by an acceleration of globalization and innovation, a rise in state intervention by several countries and the increasing abandonment of multilateral agreements.
The document recognizes that the strength of the German economy lies in its highly competitive and innovative industry, which remains a leader in many industrial sectors (steel, chemical, mechanical, optical, medical, green technology, armaments, aerospace, additive manufacturing).
However, increasing threats to Germany's global industrial position have been identified due to the emergence of new technologies (mainly artificial intelligence and bio-technologies), in which the country still lags behind others, such as the USA or even China.
There is, therefore, a risk of significant value added losses for Germany, and also for Europe, if domestic firms fail to achieve a leading position in disruptive technologies. In the German government's assessment, without the large share of industrial jobs the country could not maintain its high levels of income, education, environmental protection, social security, health and infrastructure.
The preservation and strengthening of the country's industrial base are, therefore, considered to be of national interest and an important task for which the State needs adequate tools and means. The German initiative's main principles are:
• Sovereignty and industrial and technological capacity, i.e. Germany must be able to withstand global competition in all areas, especially when it comes to key technologies and breakthrough innovations.
• Re-industrialization, predicting an increase in the industry's share of Germany's total value added from the current 23% to 25%, and to 20% in the case of the EU by 2030.
• Preservation of domestic value chains, that is, the maintenance of all links in the production chain is considered essential so that each of them is more resilient, increasing competitive advantages.
• Process of catch-up in areas where the country already has some scientific-technological competence, to avoid losing industrial dominance.
• Strengthening of small and medium-sized industrial enterprises.
• Enabling the emergence of "national and European champions" (revision of antitrust rules), since in an increasing number of domains critical mass is necessary for an industrial actor to successfully participate in global competition. The fact that no new national champion has emerged in the country in the last 50 years is seen as worrying by the German government.
The German industrial strategy, however, sets limits to state intervention and reinforces its commitment to the open and free market economy model. From the economic principle of proportionality, it establishes a greater degree of state intervention the greater the importance of the economic process. The German State may take a shareholding in companies considered strategic, but for a limited period of time.