Around 60 percent of German companies are struggling with disruptions in supply chains and logistics due to the war in Ukraine, according to the Association of German Chambers of Industry and Commerce (DIHK). Head of Foreign Trade and Member of the Executive Board of the DIHK Dr Volker Treier spoke to Diplomatisches Magazin about the tense situation.
DM: Mr. Dr Treier, which sectors are affected and what are the consequences?
Dr Volker Treier: Even before the war, the breadth of the German economy has been struggling with delivery problems and price increases. Particularly industrial companies, which often depend on supplies of raw materials and intermediate goods from abroad, complained about a lack of materials. But the construction industry and wholesale trade are also affected to a considerable extent. From ammonia to tin – as diverse as our economy is, so are the reports about materials that are delivered much later, not at all or at significantly higher prices. As a result, companies have to cut back their production or even shut down the assembly lines completely. Orders cannot be processed. Companies start looking for new suppliers. However, building new supply chains takes time.
DM: A survey by the Association of German Chambers of Industry and Commerce (DIHK) showed that German companies had to deal with trade barriers more and more often even before the Ukraine war. What were the trade barriers here?
Dr Volker Treier: We have been observing increasing protectionism for several years. Last year, 54 percent of foreignactive companies were affected – a new and sad high. Most often, companies are concerned about local certification requirements or increased safety requirements. Additional testing of products or internationally unusual safety regulations cost companies time and money and create more bureaucracy. Other hurdles in international trade include nontransparent legislation in the target countries, an increase in customs duties, sanctions, and pressure for more local production of goods. Let me sum it up like this: Globalisation is in a bad state.
DM: The pandemic had already taken its toll on companies. Have lessons been learned from the pandemic?
Dr Volker Treier: On the one hand, yes: the aid for the economy – apart from a bumpy initial phase – ultimately worked well and is still having positive effects. After all, the state has so far provided almost 140 billion euros in aid to businesses and the self-employed. Here, the business community was also involved at an early stage and on a regular basis. The fact that administrations in Germany can also act quickly and unbureaucratically is also one of the positive experiences. On the other hand, Corona has ruthlessly exposed weaknesses. For example, it rarely worked out that regulations were applied uniformly throughout the entire federal territory. And another “lesson learned”: Data protection is an important right – but what is needed is a pragmatic approach that takes intelligent deletion concepts into account. In the future, the work should be much more data-based and consistently digital. Then government measures could be applied in a much more targeted manner.
On the part of the companies themselves, the topic of “diversification of supply chains” is now very important. Just-in-time production has become more difficult and will remain difficult in view of increased uncertainties. Warehousing and risk protection are becoming more important. All this increases costs and in the end will also be at the expense of consumers.
DM: Rising energy and raw material costs are currently causing problems for companies in this country. What does the DIHK demand of politicians in this regard? Does the DIHK expect insolvencies?
Dr Volker Treier: Almost all sectors are affected by the dramatic price increases for electricity, gas and fuel. Politicians should therefore do everything they can to relieve the burden on affected companies. In addition to abolishing the EEG levy, this also includes lowering the electricity tax and other state levies. Some companies need low-interest KfW loans in the short term and also emergency payments to prevent production stoppages. In the medium term, the aim is to increase the supply of renewable energy and facilitate direct contracts or self-supply. Individual companies in the paper and steel sectors are already discontinuing production. Overall, the glass and ceramics industry is strongly affected, but also metal processing companies and freight forwarders.
Interview Marie Wildermann