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Business

German Trade Booming with EU Candidate Nations

Contrary to popular fears that EU enlargement would bring economic disadvantages, new figures suggest that German foreign trade with the new EU members began booming even before the ten formally joined the bloc.

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Germany's export motor has roared back to life as far as eastern Europe goes.

Figures released by the Federal Statistics Office on Monday indicated that the prospect of looming EU enlargement alone had considerably bolstered German foreign trade with the ten candidate countries.

The Wiesbaden-based Statistics Office said that German exports to the ten EU candidate countries soared in February this year by 10.8 percent to €4.9 billion. The statisticians traced the export boom in particular to Germany's flourishing trade with the Czech Republic, which rose by 5.7 percent, with Poland by 10.8 percent and with Hungary by 9.3 percent.

Overall German trade with EU on the upswing

At the same time, imports from the EU accession countries to Germany showed a similar upward trend for the same period, the authorities said.

Total imports rose by 13.8 percent as compared to February 2003 to €5 billion. In particular, imports from Poland and Hungary showed strong above average growth of 15.5 percent and 16.4 percent respectively.

The Federal Statistics Office underlined that total German exports to the old 15-member EU as well as the ten accession countries jumped in February by 6.7 percent to €36.9 billion, whereas imports from these countries grew by 5.3 percent to €56.6 billion for the same period.

Figures could assuage fears of EU expansion

The figures bring much-needed good news on the economic front for Germany amid an enduring period of gloomy economic growth forecasts, weak production and persistent unemployment. At the same time, the statistics are expected to partially refute widespread fears in Germany that EU enlargement would largely bring economic disadvantages.

Gerhard Schröder im Bundestag EU Erklärung

German Chancellor Gerhard Schröder

Speaking on May 1 -- the day the ten largely eastern European countries joined the EU -- German Chancellor Gerhard Schröder said that Germany, which for many years made up the eastern border of the EU, stood to gain much from enlargement by being once again at the heart of Europe. He pointed out that economic integration between old and new members was already underway and that Germany exported nearly as much to its eastern neighbors as it did to the United States.

"The enlargement will not make us poorer, but rather richer," he said. However, he also renewed calls for harmonizing EU taxes, saying there could be no one-sided tax competition at the expense of those countries that are net contributors to the EU budget.

Tax and job worries

Produktion bei Siemens in Polen

Electronics giant Siemens has already moved some production to Poland.

Both Schröder's government and Germany's conservative opposition are worried that once the EU expands, companies will be tempted to move production facilities to eastern European countries with rock-bottom labor costs and taxes. Such a migration would undermine Germany's tax base while moving jobs abroad.

German politicians are particularly sensitive to corporate tax issues, since Germany has some of the highest non-wage labor costs in the world and the country borders the largest new EU member Poland. Whereas the tax burden for companies in Germany averages around 39 percent, Poland lowered its corporate tax rate from 27 to 19 percent this year. Several other EU accession countries have even lower rates.

Saying nobody wanted to take away the right of the new members to encourage foreign investment, Schröder has called for an EU-designated corridor to avoid destructive tax dumping. "The future of our country cannot lie in joining a merciless competition of low wages and tax rates," he said.

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