Doing Business In Germany: A Country Commercial ... - Export.gov

Return to table of contents
Chapter 1: Doing Business in Germany
• Market Overview
• Market Challenges
• Market Opportunities
• Market Entry Strategy
Market Overview Return to Top
The German economy is the world's fourth largest and, after the expansion of the EU,
accounts for more than one-fifth of European Union GDP. Germany is the United States'
largest European trading partner and is the sixth largest market for U.S. exports.
Germany’s "social market" economy largely follows free-market principles, but with a
considerable degree of government regulation and generous social welfare programs.
Germany is the largest consumer market in the European Union with a population of
over 82 million. However, the significance of the German marketplace goes well beyond
its borders. An enormous volume of worldwide trade is conducted in Germany at some
of the world’s largest trade events, such as MEDICA, Hannover Fair, Automechanika,
and the ITB Tourism Show. The volume of trade, number of consumers, and Germany’s
geographic location at the heart of a 27-member European Union make it a cornerstone
around which many U.S. firms seek to build their European and worldwide expansion
strategies.
Market Challenges Return to Top
The German economy has improved markedly in recent years. The economy took a
serious hit during the economic crisis, but recovered quickly. Like most other OECD
countries GDP declined significantly in 2009 (by 4.7%), but grew by 3.6% in 2010, the
highest rate since unification. Following a 3% growth in 2011, the pace of expansion is
expected to slow in 2012. Most economic research institutes have lowered their 2012
GDP forecast to 0.6% from 1.0% predicted in October 2011.
The labor market remained resilient during the economic crisis and continued to be
strong in 2011. In addition to a series of labor and social reforms implemented in recent
years, many experts credit the government-funded short-time work program for limiting
unemployment. Other factors, such as moderate wage increases, flexibility in bargaining
agreements, numerous company-level alliances to retain jobs, and employers’
willingness to accept higher unit labor costs, also contributed to the stability of the
German labor market. Job cuts in logistics and manufacturing have been offset by job
creation in other sectors, such as services and health care. Also due to a declining
workforce, average unemployment dropped to 2.976 million over the course of last year,
with an average jobless rate of 7.1% – down from 7.7% in 2010. For 2012, the
government expects unemployment to decline to an average of 6.8%.
Although unemployment is still higher in the east of the country than the west (11.3%
versus 6.0%), it dropped to the lowest level in 20 years. The number of persons in