Prepared by: New Zealand Embassy Berlin, with support from NZTE Berlin

Summary

  • Against the backdrop of Brexit and Covid-19, some New Zealand exporters may be reviewing their business approach to – and footprint in – continental Europe. The Netherlands often comes up as a potential hub, but Germany is also worth considering.
  • What speaks for Germany is its sheer market size, its central location within the EU-27, and its strong logistics infrastructure and services. However, the Netherlands is an equally strong performer and whilst a smaller market offers a few other advantages.

Report

As of 1 January, the UK will have left the EU single market and customs union. As a result, shipping goods from the UK to the continent (or vice versa) will become a lot more complicated.

In addition, the current pandemic has challenged existing supply chains. Against this background, some New Zealand exporters may be reviewing their business approach to – and footprint in – Europe.

Shipping goods on demand from New Zealand or using the UK as a hub for the EU market may no longer be fit for purpose.  Consequently, exporters have begun to look at other options, such as using the Netherlands as a hub. This report looks at Germany as another possible alternative.

Market size / proximity to market

Germany is our key goods export market in the EU-27. More broadly it is the world’s fourth largest economy (and the largest in the EU, with a higher GDP than that of the 20 smallest EU economies combined) and the third largest importer.

Most companies exporting to the EU will find that Germany is their biggest market on the continent, and proximity to market or even being in the market matters, for logistical, market development, regulatory and many other reasons. However, internal borders within the EU are less relevant than they used to, and therefore the Netherlands and Belgium, located between Germany, France and the UK, can equally claim proximity to some of the EU’s wealthiest regions (and Rotterdam as Europe’s biggest port is closer to some of those than Hamburg).

On the other hand, now that the UK has left the EU and with eastern countries such as Poland showing stronger growth, the centre of EU economic gravity is arguably shifting.  

Logistical performance and other factors to consider

Hamburg is the third busiest port in Europe (after Rotterdam and Antwerp), and together with Bremerhaven, German ports’ container handling exceeds that of all other EU member states (but has been on the decline in recent years). Frankfurt handles the greatest volume of air cargo of all EU airports, ahead of Paris and Amsterdam.  And Germany’s DHL and Schenker rank first and third in Europe in terms of logistics revenue.

Estimates suggest that Germany alone reprents 25-30% of the EU logistics market. Whilst these statistics are impressive, once more they arguably relate to the sheer market size of Germany – but how does Germany compare to others with regards to the quality of its logistics?

The World Bank’s Logistics Performance Index (external link) (2018) ranks Germany first globally (!), ahead of Belgium (third) or the Netherlands (sixth). More specifically and importantly, it outperforms all competitors with regards to the efficiency of the customs clearance process (although not everyone in the market may confirm that…), the quality of its trade and transport related infrastructure, and the competence and quality of its logistics services. It ranks second (behind Finland) with regards to the ability to track and trace consignments, third (behind Belgium and Denmark) on the timeliness of shipments, and fourth (behind Belgium, Sweden, Austria) in terms of ease of arranging competitively priced shipments.

Other comparative research – albeit a bit more dated – is slightly less favourable. A Prologis study (external link) (2017) ranked the Netherlands as the most desirable logistics location in Europe, outperforming Germany with regards to the regulatory environment, labour availability, and transportation infrastructure. Germany came out first only with regards to the aforementioned proximity to major consumption centres, although the report noted that the Duesseldorf/Rhein-Ruhr area in particular was catching up on other fronts as well.

A Dutch benchmarking exercise (external link) (2016) concluded that Dutch hubs were competing well on cost and outperformed German competitors (Duisburg, Frankfurt, Leipzig) on quality, across various sectors. Regulatory advantages of the Netherlands over Germany include favourable tax/VAT regulations, and lower requirements and less complexity around business representation/setting up a business (which takes nine procedures and eight days in Germany, according to the World Bank’s Ease of Doing Business Index (external link)). Labour costs are slightly lower in Germany than in the Netherlands, but Dutch labour law is more liberal.

There are of course even more things to consider. One reason why the UK has been so appealing to New Zealand exporters has arguably been the cultural proximity and the shared language. Clearly, Germany is culturally more different (as are the Netherlands, Belgium or France), and the average level of English is still lower in Germany compared to the Netherlands or the `Nordics´.

On the upside, as perception research (external link) commission by New Zealand Story has shown (and as many can confirm from personal experience), many Germans are excited about New Zealand. This speaks well to the appeal our products could increasingly have in this market, and the positive perceptions Germans hold of dealing with us. At the end of the day, the decision for or against Germany as a hub into the EU will also depend on the actual product, and the exporter’s sales or market development strategy.

Who can advise and assist?     

New Zealand/German agencies offering support include NZTE (external link), the German-New Zealand Chamber of Commerce (external link), offering help to find German business partners, and Germany Trade and Invest (external link) (GTAI), which assists companies to expand their business presence to Germany.  

Disclaimer

This information released in this report aligns with the provisions of the Official Information Act 1982. The opinions and analysis expressed in this report are the author’s own and do not necessarily reflect the views or official policy position of the New Zealand Government.  The Ministry of Foreign Affairs and Trade and the New Zealand Government take no responsibility for the accuracy of this report.