German Protectionism and Western Europe

f 1 *HE vigorous growth of Western Germany's foreign trade I in recent years must be regarded as part of the great ** expansion in the German economy since the monetary reform of mid-1948. The explanation of that expansion lies in the inflow of manpower from Eastern Germany, the moderate expenditure on defence, and the Federal Republic's fiscal policy. By means of extensive application of indirect taxation, gradual reduction of direct taxes, generous allowances for depreciation and tax exemptions for those parts of income that are ploughed back into business, as well as by special low rates for income from overtime and exports, the government has stimulated the will of the people to earn money, save, invest and export. What is more, the German export industries have been favoured by a particular increase in the demand for the traditional German export commodities which accompanied the international augmentation of armaments. Since 1950, Western Germany's exports have increased from about 8.4 to about 22 milliard D.M., or about 164 per cent., although owing to higher prices volume rose only by 123 per cent.. Taken by itself, an increase of this magnitude would seem to be of serious consequence to Germany's competitors. In relation to world trade, however, the exports of the Federal Republic in 1954 amounted merely to 7 per cent, or only two-thirds of the Western German share of world exports in 1938. For the United Kingdom the figures for 1938 and 1954 were 13 and 11 per cent, respectively, and for France 4 and 6 per cent.. From this angle the German export increase in itself is no international problem. Nevertheless, Germany's trade balance has repeatedly given occasion for tension between Western Germany and her trade partners, especially the countries associated with the Organ

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