Germany and Europe can effectively thwart China’s growing industrial dominance with specialized niche technologies coupled with bold policy-making, according to economic researchers in Berlin.
The country and continent have already managed on several occasions to find solutions when other nations threatened to outpace them technologically, said Martin Gornig, director of research for industrial policy at the German Institute for Economic Research (DIW).
“The answer is always ‘niche’,” he told dpa in an interview this week. “To say that we do mass production better here is nonsense.” But there are many applications – for example in robotics within the construction sector – where more specialized technologies are required.
This is where Germany could regain its leading position, the DIW economist said.
However, this would require bold policy-making that is prepared to take the risk of identifying and promoting specific technologies. There is nothing to be gained from the approach of so-called “technology neutrality” – focusing on outcomes rather than favouring specific technologies – which has been frequently pursued to date, for example in the automotive sector, Gornig stressed.
Technology neutrality is the wrong strategy
“Technology neutrality spells the decline of German industry if it results in insufficient investment in any particular technology,” according to the expert. The term, he explained, means hindering the development of new technologies and safeguarding vested interests in old ones.
Through this approach Germany has, for example, failed to keep pace with developments in the Chinese car market, which is focusing on e-mobility to a much greater extent.
“German products used to be successful in China because Chinese buyers had the impression that they were better cars than their own,” said Gornig. “Today, they are asking themselves why they should pay more for inferior cars from Germany.”
Need for competition-oriented trade policy
Even imposing tariffs on Chinese electric cars would not, in the expert’s view, save the European and German car industries.
“Imposing tariffs on electric cars is a bit of a nightmare. It means our companies are being encouraged not to make any adjustments. They can carry on producing poor-quality electric cars,” said Gornig. “We need competitive pressure to drive technological progress. We need a competition-oriented trade policy, particularly with regard to China.”
Europe must develop other strategies to prevent dumping and market-conquest tactics from China, the economist urged. There is certainly scope for temporary special tariffs; these are accepted practice within the Organisation for Economic Co-operation and Development (OECD).