Total Local: It’s Time to Support a Country’s Indigenous Economy
The money you pay for any product goes to a local manufacturer, benefits the economy of your country in the long run, and doesn’t strengthen external economies
This is exactly how it should be. It brings a renewed sense of hope, that you are doing your bit for your country of residence
In a meeting to discuss the export controls on the vaccines in April 2021 German Chancellor Angela Merkel lamented that the European Union had “allowed” India to become a major pharmaceutical producer in the world, while the industry has declined in Europe.
“The truth is we haven’t treated our pharmaceutical industry so well for many years…I am glad that we still have pharmaceutical production in Belgium, Holland, Germany. We now have a situation with India where, in connection with the emergency situation of the pandemic, we are worried whether the pharmaceutical products will still come to us,” said Merkel, adding,
“Of course, we have only allowed India to become such a large pharmaceutical producer in the first place, also from the European side, in the expectation that this should then also be complied with. If that is not the case now, we will have to rethink.”
While Merkel’s worries about Europe in general and Germany in particular may have been justified the timing of her statement was definitely wrong.
India, the world’s largest vaccine manufacturer, had drawn plaudits from all over for helping more than 100 countries by supplying vaccines at an extremely affordable cost, besides giving away millions of doses to friendly countries for free. However, that vaccine diplomacy, dubbed “Vaccine Maitri” in many circles, ensured the world’s second most populated nation faced a shortage of doses when hit by the second wave of COVID-19.
Even as the number of reported cases crossed 30 million, the official death count approached 400,000 and both the local and western media went on an overdrive with negative stories on India, its authorities’ struggle to arrange for vaccines became all the more palpable. Many questioned if it was worth helping others when your own people suffered.
The German embassy was quick to alleviate the tension, posting a series of tweets expressing sympathy and concern for the ongoing COVID-19 crisis and promising cooperation to fight the pandemic. Even Merkel’s realized the timing of her statement was not appropriate and a statement was released saying Germany stands in solidarity with India in the “common fight” against the pandemic, and that her government is “urgently” preparing a “mission of support” for India as it battles a massive spike in cases.
The damage control was done, and things are back to normal now. That said, if one delves deep into the statement made by the German Chancellor it is not difficult to realize her concerns aren’t unfounded.
It is not just the pharmaceutical industry but many others where outsourcing has ensured trouble for the western countries. In a bid to cut costs and in the quest for cheap labor and big markets for finished goods most major companies from Europe and North America establish their manufacturing units in Asian countries like China, India and Vietnam. In what can be termed as a tight slap on the face of modern capitalism the tide has now turned against the West, with China having emerged as the most important player and India a market difficult to ignore.
Merkel may have been vocal about India being allowed to become a pharmaceutical powerhouse. However, she is equally aware of how dependent her country has become on China over the years.
The much revered German automotive industry, for example, has been in recent years entirely at the mercy of China. Major German auto manufacturers like Audi, BMW, Daimler-Benz and Volkswagen sell more cars in China than in any other country. In fact, one in three German cars are sold in China, and with the exception of BMW’s facilities in Bavaria, the Asian powerhouse is home to the largest research and development capabilities of the company.
It is a fact that over the last decade or so China has emerged as the world’s largest suppliers of car parts, exporting motor vehicle parts and accessories worth $34.8 billion in 2018, while also becoming both the world’s largest producer of and market for motor vehicles since 2009. Add to it the COVID-induced economic woes and China doesn’t shy away from arm-twisting tactics to exploit this German dependence.
Sample this, in July 2018, when economic cooperation between Germany and China was blossoming, there were plans to combine Germany’s powerful auto industry and China’s technology giant, Huawei. In the Post-COVID scenario, Europe’s largest economy was in two minds over whether to allow Huawei to help build its 5G next generation mobile network. This at a time when German automakers were working closely with Huawei, and their country had already surrendered its advantage to China.
While Merkel’s government, like the rest of Europe, was under tremendous pressure by the US government to terminate dealings with Huawei — with fears that the company would allow China’s government to spy on or control European and American communication networks, the Chinese were all set to take advantage of their new role as a key strategic player and an increasingly indispensable economic partner. No points for guessing the course of action of the German government.
The overdependence had palpably led to blackmail by the Chinese, and a subsequent fear that the German car industry will be pushed out of the Chinese market.
The same dependence applies to FFP2 masks and corona self-test kits. Despite many such stocks being found faulty and countries like Spain and the Czech Republic returning them these Chinese products abound European markets.
It is a fact that the Chinese economic growth in recent decades can be attributed to cheap imitations of successful Western products, their mass production and subsequent dumping in various markets around the world. The “Made in China” label on a product assures two things,
1) It is cheap
2) It won’t last for long
Coming back to Merkel’s concerns they are valid in more ways than one. The German over dependence on China and other countries had adversely impacted the country’s economic authority. In such a scenario when a product carries a Hergestellt in Deutschland (Made in Germany) tag, or for that matter a store puts a placard outside saying #Support Your Local, it brings a renewed sense of hope, that you are supporting the economy of your country — the money you pay for the product goes to a local manufacturer. This is exactly how it should be.
This is exactly how it is in China. Isn’t it? What are companies like Ali Baba, Baidu, Cosco, Huawei, Tencent, Weibo and others? Inspired from the likes of Amazon, Google, Maersk, Apple, Facebook, Twitter etc. Right? The Chinese authorities restricted these Western companies to make way for their own versions. So why can’t Germany as well as the rest of Europe restrict Chinese companies. In fact it is a pleasant surprise to see products in a few German outlets that carry the message Not Made in China. Well literally (picture below).
Even as Merkel completes her last few days in office, there’s some good news for her.
Earlier this June, Robert Bosch GmbH opened a 1 billion Euro semiconductor chip factory in Dresden, aimed at gradually helping alleviate supply constraints and in the long run ensure broader efforts to make Europe less dependent on imports from Asia or the U.S. Carmakers use chips in everything from computer management of engines to driver assistance systems, and it is by far the core component.
And Merkel had time and again expressed concern that Europe cannot make the semiconductor chips and batteries it needs to compete for the production of cars as well as the development of smart appliances, and that it risked falling behind in areas like quantum computing, chips and batteries, essential for the future of the car industry as it shifts to make more electric vehicles.
A global chip shortage has hit automakers hard after many cancelled orders when plants were idled during the pandemic. No points for guessing which country was in pole position to take advantage of this scenario.
Bosch’s largest ever investment is a significant step in making Germany self dependent, as is every little product that comes with the Hergestellt in Deutschland label.
However, Chinese products continue to flood the markets in Germany. For instance, enter any apotheke (pharmacy) or supermarkt (super market) and look for a corona self test kit. Chances of it being a Chinese product is 100 per cent. That is anything but good news.
Thankfully, some medical masks are now being locally manufactured. And that definitely is good news. A positive start has been made. Hopefully, it is a precursor to something more significant.
