Cross-border trade in goods and services, the exchange of savings and investment capital – in short: the international division of labour – are responsible for a large part of the prosperity enjoyed by the world’s population. Germany is particularly deeply involved in this global supply network.
Globalisation is reflected in political structures, too: neighbour states are forming ever closer regional communities and intensifying mutual trade. In the European Union, for instance, the common internal market has secured its citizens a remarkable standard of living. Germany takes full advantage of the free movement of people, goods, services and capital in the EU, sending almost two thirds of its exports to other members states.
The common internal market has caused trade within the EU to flourish. The free movement of people, goods, services and capital has afforded the EU’s citizens an enviable standard of living.
The euro, introduced in 1999, is supposed to strengthen cohesion, too. At the time of its introduction, the euro countries committed themselves to pursuing sound financial policies with the aim of keeping the common currency stable. Some states, however, have not met their responsibilities. Now their enormous budget problems pose a threat to the other EU countries. For this reason, the Union should supplement its regulatory framework with a set of rules covering cases of insolvency, ensuring that creditors contribute to the rescue package.
The globalisation process determines the development of the world economy. Many companies invest abroad, founding subsidiaries there or taking holdings in already existing firms. Cross-border trade in goods and services has increased prosperity in the majority of countries.
The countries which have profited most from globalisation are those which have opened their markets. Yet despite the obvious advantages of the international division of labour, many countries continue to isolate themselves. Industrialised countries use trade barriers and subsidies to defend themselves against cheap agricultural produce from developing countries, preventing the latter from raising their standard of living. The poorest nations are often unable to hook into the world economy, lacking as they do a reliable infrastructure and growth-oriented economic policies. Many of these countries continue to be dependent on development aid.
Although many emerging economies have been trying to catch up, Germany has in recent years been able to maintain its strong position in world markets. Its market share of world exports is now – and has been since the early nineteen nineties – just over 9 %.
One of the most important factors in locating production facilities is labour costs. It is true that in recent years the increase in labour costs in German industry has been moderate. Due to the dramatic hike in the first half of the nineties, however, Germany continues to be one of the most expensive business locations in the world. German companies partly make good the disadvantage of high labour costs by achieving higher productivity than their foreign competitors. Higher prices can be justified by better quality and more innovative products. It is thus all the more necessary for a high-wage country like Germany to maintain its competitiveness by continuous improvement in the fields of education, science and research.