Germany profits enormously from international economic integration. The strength of this integration is delineated by the total stock of German direct investment abroad, which since 1990 has increased almost sixfold to some €1.1 trillion (2015). Through the resulting stakes in more than 36,000 companies, the German economy is responsible for 7 million jobs abroad (2015). On this basis, it generates a foreign turnover (€2.7 trillion in 2015) that is more than double the value of German exports (€1.2 trillion in 2015). Foreign direct investments by German companies open new markets and thereby ensure that the German economy remains competitive. Moreover, foreign direct investments help establish high labour and social standards in developing countries.
Foreign Investments in Germany: Motor for Jobs, Growth, and Prosperity
In Germany, foreign investments are fuelling growth, prosperity, and job creation. Through their shareholdings, foreign companies are engaged in running production plants and cultivating strong business ties with German partners. Not least in recent years, Germany has witnessed increased investments from China, in particular. Although these investments spark politically controversial discussions, they are proof of the confidence that international investors have in Germany.
Data from the German Bundesbank shows how important FDI is for the German economy. In 2015, the stock of foreign investment in Germany totalled €466 billion. Foreign investors have stakes in some 16,000 companies and are responsible for some 2.9 million jobs in this country. They generated revenues in Germany totalling €1.5 trillion in 2015.
However, ever fewer direct investments are being made in industrial countries worldwide. By contrast, the growth markets of the emerging economies are becoming ever more attractive. In 2000, some 19 percent of international investment flows were directed towards developing and emerging countries; by 2016 that figure had risen to 36 percent. From a longerterm perspective, the attraction of Europe, in particular, is declining: while the EU’s share of global FDI stock was still 40 percent in 1990, it had fallen to below 30 percent by 2016. For this reason, Europe must focus on assuringwork on staying attractive to foreign investors.
Tightening of Investment Screenings
The increase in Chinese investments has stoked the political discussion about whether the state has enough leeway to prevent unwanted investment. Those who advocate tighter state control over investments believe that the innovative strength and sustainability of the German – and European – economy are threatened by strategic and often state-promoted investments from abroad in companies specializing in cutting-edge technologies. They moreover see strengthening of the state’s rights to intervene as a way to prompt other states to further open their markets (“reciprocity”). In mid-2017, the German government expanded its control over foreign investments by tightening the Foreign Trade and Payments Ordinance. In September 2017 the European Commission submitted a proposal for a regulation on investment controls. The BDI regards precautionary political measures to protect the national security and order as necessary. But it must be made also clear that foreign investments are welcome in Germany. We, the BDI, reject a foreign trade law that increasingly blocks investments from abroad.
BITs Guarantee Freedom of Investment and Open Markets
In order to promote German investments abroad, those investments must be safeguarded against political risks. Bilateral investment treaties (BITs) offer legal protection to investors. For this reason, the BDI advocates a high level of protection in future BITs. The aim is to guarantee freedom of investment and to ensure open markets. At the same time, the right of states to engage in regulatory activities in the public interest must be protected in such agreements. The trade agreement between the EU and Canada (CETA) includes a chapter on investment protection which meets the latest standards and, through inclusion of up-to-date regulations, has done away with many of the weaknesses of the old BITs. Moreover, the introduction of a Multilateral Investment Court (MIC), as proposed by the European Commission, could be a fitting response to the criticism of the private arbitration courts that are commonplace today.