Germany is one of the world’s leading industrial countries, and much like Poland, it has one of the most open economies in the world. More than one in every four jobs in our country is linked to exports. Germany is also one of the world’s largest importers: its manufacturing sector uses raw materials and primary products from international supplier industries. Our second-largest neighbour, Poland, plays an important role here. Our bilateral trade volume has grown an astonishing twelve-fold since 1994. Even during the pandemic, our economic relations have not lost their dynamism, from which many Polish and German entrepreneurs have been profiting for almost thirty years.
Economic diplomacy has certainly contributed to this success. However, it is not only about numbers, there is more to it. Let us take a look behind the scenes at how Germany’s economic diplomacy works. Find out why it is so crucial for Germany and who plays prominent roles in the game of trade, and foreign investments. Finally, yet significantly, how does all this affect Polish-German relations?
The changing world and what it means. Or why we need economic diplomacy
No one could have imagined how dramatically the world has changed in recent years. This change affects many areas of our lives and raises essential questions about our healthcare and education systems, the way we work or travel and above all, about how we think about the future of our countries, citizens and economies. Subsequent years will bring much uncertainty, but one thing is clear: the COVID-19 pandemic and economic recovery will be key challenges.
We will have to face a range of challenges in our markets. Relocation of supply chains in strategic sectors such as health, energy, or high technology is one of the most frequent subjects in current debates. Potential shifts will bear on global and bilateral economic cooperation, trade and investment. Some developments seem to indicate increasing protectionism and market distortions such as punitive tariffs, standards dumping, or bilateralisation of economic relations.
At the same time, the pandemic has not stopped many of the fundamental processes going on in the world. Digital transformation is changing the world at breath-taking speed. Big data and artificial intelligence are causing economic and political shifts in the world. The same goes for climate change and the need to reduce greenhouse gas emissions and rebuild our energy systems.
Prosperity and employment in both Germany and Poland are highly dependent on foreign trade and open markets regulated by rules. Every day we watch in awe as German companies work to retain their market footing in the face of global competition and provide predictability for their employees. In order to meet the challenges ahead of them they need support by economic diplomacy.
There is another reason why economic diplomacy is needed. It is our values. As Germany and German business benefit from a large network of global economic links, they have a particular responsibility to protect the rights of people working in global supply and value chains. A country’s economic performance and its role in the world are closely intertwined. This is why Germany’s status as an economic powerhouse is central not only to our wealth, but also to our diplomatic influence and to the defense of our values and principles, together with our EU partners.
So, how does German economic diplomacy look like in practice?
Three pillars of economic diplomacy
Close relations based on mutual trust with partners are vital to cultivate and expand trade relations with the world at large. Success in international trade and investment relations depends in no small degree on active and effective economic diplomacy. The German system to promote foreign trade and investment is characterised by a division of responsibilities between state and business. We can distinguish three leading institutions here:
- The Federal Foreign Ministry and Germany’s missions abroad
Promoting foreign trade and investment is one of the Foreign Ministry’s main tasks. More than 220 Embassies and Consulates represent German interests, including economic ones, in host countries and international organisations. In our Embassy in Warsaw and our Consulates General in Kraków, Gdańsk and Wrócław, economic affairs departments advise and inform German companies and entrepreneurs on local political and economic realities and developments, socio-cultural nuances, and business practices. They assist companies in dealing with government institutions, to which they generally have better access given their function. Our diplomats also provide political support in individual justified cases and welcome visiting delegations and economic fact-finding trips from Germany. The overriding aim is always to improve market access and support competitive principles.
If you have ever been in contact with one of our missions abroad, you probably know that many Embassies also have specialists from other Federal Ministries. In Warsaw, they offer their expertise in agriculture, science, health, and social affairs.
Furthermore, diplomats abroad are supported by the Foreign Ministry in Berlin, whose economics department is in constant touch with companies, branch associations and other business institutions involved in international economic activity. Our staff in Germany also ensures smooth coordination of the work with different ministries.
2. German Chambers of Commerce Abroad
German Chambers of Commerce Abroad are, so to say, official missions of German business. They are voluntary associations of companies from Germany and the respective host country. They lobby the interests of businesses from both Germany and partner countries and promote commercial activity in both directions. One of their most important tasks is promoting foreign trade and investment to benefit members and non‑members. They offer a wide range of services for domestic businesses involved in bilateral trade: market/industry analyses, support finding business partners, fair trade participation, legal advice, and much more.
The German Chambers of Commerce Abroad maintain 140 locations in over 90 countries and have a membership of some 50,000 companies. The chamber in Poland (AHK Poland) is based in Warsaw and has several regional offices across the country. It represents the interests of around 1.000 member companies and has successfully worked to develop German-Polish economic relations for more than twenty-five years! The Chamber´s importance for business is demonstrated by the fact that the AHK Poland is the bilateral Chamber with the most significant number of member companies in Poland and one of the world’s biggest among the German AHKs.
Detailed information is available at www.ahk.pl.
3. Germany Trade & Invest (GTAI)
Germany Trade and Invest is an economic development agency of the Federal Government, supported by the Federal Ministry for Economic Affairs and Energy funding. In over 50 locations worldwide, GTAI promotes Germany as an industry and technology hub. It also provides a wide range of business information to facilitate German companies’ access to international markets.
German export-oriented companies can find tenders, assessments of the business sector, country reports and market analyses, and import regulations and business advice. But this is just a tiny sampling of the wide range of services the GTAI offers. If you are wondering which interesting areas and industries the GTAI has its eye on, click here for more information: www.gtai.de.
What forms and instruments?
The German Government also directly supports German companies in their business activities abroad. Federal guarantees and investment agreements are critical instruments for hedging against political (and economic) risks in risky markets. Other vital instruments are the foreign trade fair programme for small and medium-sized enterprises and strategic projects abroad. However, the core part of our economic diplomacy is dialogue with companies and business associations – no one can tell us better what business needs than business itself.
Polish-German economic relations – a success story worth telling
2021 marks the 30th anniversary of signing the Neighbourhood Treaty between Poland and Germany. Economic relations, which have flourished in a breathtaking way during this period, have a positive impact on bilateral relations, which far transcends the realm of economics.
Today, Germany is by far Poland’s most important trading partner – both for imports and exports. In 2020, almost 29% of Polish exports went to Germany. At the same time, Poland’s importance for German foreign trade has grown continuously. Last year, Poland replaced Italy as Germany’s fifth most important trading partner with a trade volume of more than EUR 123 billion. In a local comparison, our trade performs very well. For example, German foreign exchange with Poland is more than twice as large as that with Russia, and Germany´s trade with the Visegrad 4 is bigger than the one with China.
German companies are at the forefront of foreign direct investment in Poland, both in numbers and investment volume. Since 1989/1990, they have invested about 39 billion Euros. A large part of the investment flows into the automotive industry and outsourcing business processes (especially in the IT sector), but also into many other sectors, creating hundreds of thousands of qualified and paid-above-average jobs.
Less and less, this is a one-way street. Germany also attracts a growing number of Polish companies, which invest more and create jobs there, i.a. in the petroleum, chemical, IT, and services sectors. Polish investments in Germany reached a volume of more than two billion euros, according to the German Bundesbank.
Poland and Germany can boast many joint economic achievements, and the two economies are now closely linked. Today, our two strongly export-oriented countries have many shared interests, for example, in open markets and lifting trade tariffs. We have a lot to work for together, and still a lot to gain together!
We are glad that Poland emerges from the COVID-19 crisis with one of the smallest economic slowdowns of all EU countries. I am sure this will provide a sound basis for our future, even stronger economic cooperation. I am looking forward to it!
Would you like to find out more? Is there something you are particularly interested in? Or would you like to share with us your thoughts on German economic diplomacy and German-Polish relations? Visit our website or contact our Economics Department on www.polen.diplo.de/pl-de!
Autorem artykułu jest Ambasada Niemiec w Polsce. Publikacja powstała w ramach projektu „GospoStrategie – dyplomacja gospodarcza w Polsce!”, który został objęty honorowym patronatem Ministerstwa Rozwoju, Pracy i Technologii.
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