German companies love America. About 5,600 of them invest in the US market, according to the German-American Chamber of Commerce. As of September 2022, this represents an investment of approximately $650 billion (€605 billion). Big companies like Siemens, Volkswagen and Linde aren’t the only ones looking to step up their efforts in the US now. In some cases, we even build entirely new production facilities.
“There are many reasons for that,” says Dirk Dohse, director of the Center for Innovation and International Competition Studies at the Kiel Institute for the World Economy (IfW). “One is growing geopolitical tensions. Many German companies see the US as a ‘safe port’. Other reasons are the relatively low cost of energy and the very generous subsidies provided under the Inflation Control Act. “
Inflation Control Law Attracts Companies
of Inflation control law (IRA) is a multi-billion dollar grant program initiated by the U.S. government under President Joe Biden. Despite its name, its goal is not so much to curb inflation as it is to protect the climate. There is about $430 billion in the IRA pot, of which $370 billion will be allocated to promoting his CO2 reduction technology, and the rest for healthcare.
However, subsidies and tax credits are related to companies benefiting from using US products or manufacturing their own products in the US. So, for example, a buyer of an electric car in the US with a battery made in the US would receive a premium of around $7,500. Wind turbines or solar farms with American-made components are also eligible for subsidies. From the U.S. perspective, commodities from countries with which the U.S. has free trade agreements, Mexico or Canadais also accepted.
companies are already responding
The US government’s subsidy program under the IRA has already delayed or threatened to shut down German electric vehicle battery production plants. Grünheide’s Tesla For example, the Swedish company Northbolt, which planned to build a factory near Berlin or in Heide, Schleswig-Holstein, would probably invest in the United States first.
So should Germany be concerned about its status as a manufacturing hub? I’m here. “But we are also starting at a high level. I don’t think de-industrialization is happening nationwide.”
Prime Minister Olaf Scholz and European Commission President Ursula von der Leyen have already made statements to US President Joe Biden, warning that US luxury subsidies could lead to a crisis are doing. competitive distortion For European companies against US rivals.
Shortly thereafter, it was announced that Brussels intended to contest its own IRA. green program It will also give EU Member States the freedom to offer their own subsidies.
Crisis of “subsidy spiral”
Economists believe such a confrontation would be a dangerous move. “I don’t think we should be fighting over subsidies,” Doce says. “At the end of the day, this is taxpayer money. We need to think carefully about whether this will benefit society in the long run.”
He said he was very disappointed when subsidies attracted innovative companies working in the field of “green technology” that were grown, maintained and nurtured with German and European taxpayers’ money. available there. “But throwing more taxpayer money after them is not the solution,” says Doce. , suggests that it is associated with a certain degree of loyalty to location.
Germany as a Place: Praise and Criticism
So, given that many German companies are investing more in the US to benefit from IRA subsidies, how do internationally active US companies view Germany as a base of operations? Is not it?
“Europe’s largest economy remains an important and attractive location for many US companies,” Simone Menne, president of the American Chamber of Commerce in Germany (AmCham Germany), told DW. “A large number of very well-trained skilled workers, a dense infrastructure, her network, prestigious colleges and universities, excellent political stability, a strong presence on the EU market and other factors It is an important argument in favor of investing in Germany.”
However, annual Transatlantic Business BarometerThe latest edition of was published on March 16th, but we are not so optimistic. According to this survey of US companies in Germany conducted by AmCham Germany, location valuations in Germany will fall for the third year in a row in 2023.
In last year’s Business Barometer survey, 59% of US companies in Germany rated their location as “good or very good.” By 2023, that figure has dropped to 34% of his. The quality of our workforce (94%), supplier network (68%) and research and development (68%) are highly rated. However, only 38% of US businesses expected Germany to improve as a location over the next three to four years, compared to 43% in 2022.
Soaring energy prices act as a deterrent
However, it is also true that many of the American companies surveyed in Germany in 2022 reported increases in sales (68%), headcount (42%) and investments (42%). Of those surveyed, 53% expect his 2023 sales to increase, with the same number saying they will expand their business over the next three to four years.
The disadvantages they see in Germany are labor costs, digital infrastructure, and a shortage of skilled workers. But they reserved strong criticism of the high energy prices compared to other countries even before Russia started the war in Ukraine.
AmCham President Simone Menne said: Germany therefore needs to be more convincing in other ways, she says. Offer needs to be improved. Securing skilled workers, reduce bureaucracy and expand digitization. “This will help as well as secure investment from the United States,” he says.
IfW economist Dirk Dohse points to the decision by the US tech giant. apple: We plan to spend another €1 billion to expand our chip design center in Munich. “If Germany invests taxpayer money wisely in research, training and infrastructure instead of wasting it on subsidies, it will remain an attractive destination for foreign investors in the future. believes Doce.
This article is translated from German.