GCC, Germany seek new strategic horizons
By: ABDEL AZIZ ALUWAISHEG
I write this week from Berlin, where I took part in the GCC-Germany Economic and Business Forum. The event was organized by the Gulf Research Center and the Arab-German Chamber of Commerce and Industry. Several German government entities had significant presence and participation in the event, as well as several GCC countries and institutions, indicating the importance all attached to German-GCC relations.
The conference was supplemented by numerous side meetings, including one with Frank-Walter Steinmeier, Germany’s veteran foreign minister, who was recently re-appointed to the post after a four-year hiatus. For four years (2005–2009), Stenimeier had served as foreign minister under Chancellor Angela Merkel and was also her Vice Chancellor for two years (2007–2009). Last December, he was called upon once again to become her foreign minister.
Besides his post as foreign minister, Steinmeier is the head of the Social Democratic Party (SPD), Merkel’s coalition partner. As a close aide to SPD former leader Chancellor Gerhard Schröder, Steinmeier was known for his subtle, but formidable, influence behind the scene. He earned the nickname “Die Graue Effizienz (Grey Efficiency), a hint at Graue Eminenzm equivalent to the old French phrase éminence grise, which refers to a powerful but unofficial adviser.
One of the main conclusions of the Berlin conference was that while Germany and the GCC have a great potential, it has yet to be tapped to reflect the weight and role of each side in their own regions, as well as their growing prominence in world politics and the global economy.
Germany’s influence in our region has been historically subtle, focused publicly on economic interests, compared to other western powers, which have been more public about their security interests in the region.
In February, German officials indicated that Germany was going to assume a greater international role, ending an era of restraint. At the Munich Security Conference, Foreign Minister Steinmeier said, “Germany is too big to just sit on the sidelines and comment on world politics.”
Now it appears that Germany’s traditional role may be changing, as it seeks to regain its economic role in the region, and establish more visible political and security roles as well.
In the GCC region, Germany’s old economic prominence has been replaced by China and other Asian countries, German businesses in particular are not happy with this change. In my Berlin remarks, I pointed out how Germany has lost its GCC market share to China over the past 20 years.
While the volume of GCC-Germany trade has grown four-fold during the past two decades, its share has greatly declined. In 1992, GCC-German merchandise trade reached $6 billion, accounting for 7.5 percent of all GCC trade. In 2012, trade increased to $29 billion but represented less than two percent of GCC trade.
By contrast, during the same period, GCC-China trade increased from $2.5 billion in 1992 to $151 billion in 2012, a nearly 60-fold growth. Its share of GCC trade jumped from less than two percent in 1992 to over 10 percent in 2012.
The current level of GCC-German trade is meagre, not only in comparison with China, but with India, Japan, Korea, and the United States as well. In fact, in 2012, GCC trade with Thailand, a much smaller economy, topped its trade with Germany.
The relatively low level of trade between the GCC and Germany is especially surprising considering the combined size of their economies (over $5 trillion) and their consistently robust growth despite the global financial crisis and economic slowdown in much of the industrialized world.
During recent years, the trade balance has been consistently in Germany’s favor. In 2012, German exports to GCC countries accounted for nearly 90 percent of the two-way trade. Only $3 billion out of $29 billion went for GCC exports to Germany.
There are several reasons for the imbalance. For one, GCC exports are concentrated in energy, chemicals and petrochemicals, while German exports are diversified, including motor vehicles, machinery, chemicals, computer and electronic products, electrical equipment, pharmaceuticals, metals, foodstuffs and textiles. They also include big-ticket items such as military sales to GCC countries, which have been on the rise recently.
While Germany is one of the largest exporting countries, it has been at the same time quite protective of its markets vis-à-vis GCC petrochemicals, despite the fact that GCC countries have quadrupled their imports from Germany over the past decade. For example, German industrialists have taken a leading role in preventing a trade deal between the GCC and the European Union. Among the best-organized lobbyists and influence peddlers in Brussels, they have allied themselves with other European producers to erect one obstacle after another to prevent the deal from being concluded. The latest and most enduring hurdle so far came in the guise of language about “export duties,” which the EU side has insisted on injecting into the trade deal as it was nearing completion. The extraneous conditions that the EU wanted to impose led to suspension of the long-negotiated deal.
As usual in trade protectionism, the interests of the majority of German and European consumers were sacrificed for the sake of a few aging producers. If GCC petrochemicals were to be allowed free access to German and European markets, they may lead to lower consumer prices, greater welfare, and efficiency improvements in those old European industries.
Instead of zero-sum protectionism, German and European producers could easily enter into win-win partnerships with GCC producers, as well as tap into the more hospitable environment in the Gulf by increasing their investment in the region.
As Germany seeks to enhance its global role, partnership with the GCC could provide a logical partnership, in economic and geopolitical terms. However, old notions of nationalist economic policies have to be revisited and hopefully jettisoned once and for all in Germany and the rest of Europe.