The economic damage of decoupling in Germany

International division of labour compensates for the disadvantages of interrupted supply chains

What would be the price if the EU were to decouple itself from global trade and reshore companies? And how could possible consequences be mitigated? These are the questions addressed by the decoupling study conducted on behalf of the Foundation for Family Businesses, which looks specifically at trade in primary and intermediate products. For this purpose, the study analysed approximately three million sector-district connections.

The results are alarming – especially for large family businesses, for which the loss of added value would often be two to three times greater than the average. However, certain regions and individual sectors of the economy would also be affected to an above-average extent. In many districts, real income would fall between 20 and 36 per cent as a result of decoupling from all overseas regions. The northwestern part of Germany would be particularly affected.

The authors of the study, Gabriel Felbermayr, President of the Austrian Institute of Economic Research (WIFO), and Dr Oliver Krebs, Zurich, therefore recommend approaching the issue of decoupling with great caution. In particular, sufficient time to adapt and mitigate regional policy measures is crucial.