Does Germany need the EU&Euro if they trade more with China?


Trade with China is big…literally.

Image is open source as usual, has been liberated from wikipedia for the obvious emancipatory reasons.

I raised this issue in class and sort of left it hanging… to follow up….
The latest German 2010 trade stats suggest that while France remains the number 1 trading partner for exports for Germany, the United States is number 2 and China is number 6. The Dutch and and Italians are in positions 3 and 5 respectively, and the UK is Germany’s fourth largest trading partner.You can find them here:,property=file.pdf

I’ve used rough rounding of the numbers in what follows.

Notice that China, the USA and the UK are all countries NOT in the Eurozone, and only the UK is an EU member (and a grumpy one at that for now). The combined value of exports that Germany shipped off to China, USA and the UK in 2010 was about 179bn Euros….but remember they got paid in dollars or sterling mostly for those exports and not Euros.

The combined value of their exports to their Eurozone countries of France, Netherlands and Italy would be about 212bn Euros, and a lot more if you count all Eurozone members. The total value of German exports to the other Eurozone countries was about 390bn in 2010.

Mind you if you look at the value of exports to other non-European countries India (9bn),  Brazil (10bn), Russia (26bn), Turkey (16bn), Japan (13bn), South Korea (10bn), Australia (8bn), South Africa (8bn) and the United Arab Emirates (8bn), Mexico (7bn) and Canada (6bn), Taiwan (6bn) and Singapore (6bn), Saudi Arabia (6bn), Hong Kong (6bn), you get a figure of about 145bn euros which can be added to the 66bn exported to the USA and 54bn exported to China. This gives a grand total of about 245bn Euro was exported to non-European and non-Eurozone countries in 2010, which is obviously less than exports within the Eurozone, but is also a surprisingly large chunk of trade.

If you look at imports, China, the UK and USA also feature heavily in positions 1, 4 and 6th as regards the value of imports-or about 160bn Euro worth of imports.

And the point is?

The point is that non-Eurozone and non-European trade is essential for Germany and may well be growing-especially trade with China.

As one academic commentator put it:

Although Germany’s export economy still needs European markets (60 percent of German exports still go to the eurozone) it’s trade is increasingly with emerging economies outside Europe. In particular, German exports to China grew by more than 70 percent in the 18 months from the beginning of 2009 to mid2010. Goldman Sachs has projected that, if these trends remained unchanged for the next 18 months, exports to China would be roughly at the same level as exports to France by the end of 2011.”*

However, a closer look at the stats also reveals Germany’s strategic paradox: on the one hand her economy is a global champion but on the other she still relies on neighboring markets in the Eurozone which are for now simply too valuable to ignore. They may not be growing much, or very dynamic, but they are still valuable.

The Italians are the fifth biggest export destination for German industry (59bn euros) and exports to Spain are worth 34bn. This means Germany has a hard-headed interest in making sure these trading partner countries do not go bust and suffer a serious economic crash that would depress demand for German products, goods and services.

Exports to Portugal, Ireland and Greece on the other hand are possibly too marginal to get much worked up. Merely about 18bn worth of exports were bought by these countries in 2010 and that is surely going downwards as austerity reduces buying power and demand. Germany exported almost as much to non-Eurozone Turkey and more to non-Eurozone (but EU member) Sweden in 2010.

Implications? Germany does not really NEED to bail out small peripheral Eurozone states in the same way that they cannot let Italy or Spain slide into the abyss.

Conclusion: Germany probably still needs the EU and the Eurozone as a trading partner, but she also wants and needs an EU that facilitates her easy access to global expanding markets in China and Brazil. If exports to these countries dramatically increase over the coming decades, by the middle of this century German’s trade with European neighbors may be worth an awful lot less, and therefore her interest in European integration could conceivably wane.

We don’t know of course if that is how things will go. Perhaps the economies of China or India will overheat and suffer problems depressing demand. Globalization can suddenly retreat-it did in the 1930s. Moreover, one cannot simply read off politics from trade stats and patterns, but there has to be a link in some way.

Yet the really bad news is for countries like Ireland or Greece however. These stats show how marginal a position small peripheral countries have in Germany’s objective sense of priorities (although Ireland is an important source of imports for Germany). Germany probably still needs the Eurozone and the EU quite badly…but not every difficult and costly member of the Eurozone and not every pesky little member state of the EU………

Which begs the question: Do we need them?

*Hans Kundnani (2011): Germany as a Geo-economic Power, The Washington Quarterly, 34:3, 31-45


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