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Competition

'Made in Germany' label under EU scrutiny

A tag to showcase quality - or a thing of the past? A EU proposal could put an end to the renowned "Made in Germany" label as we know it. Experts fear negative repercussions, but some might profit.

The European Commission's plan to revamp the "Made in Germany" label doesn't sit well with everyone. "I think nothing of it, because it will result in more bureaucracy," said Jürgen Varwig, president of the German Society for Quality (DGQ).

Until now, those producing the goods were allowed to attribute the label to all products "whose main features were produced in Germany or stem from German production," said Volker Treier of the German Chambers of Industry and Commerce (DIHK). Take a gasoline pump: "If development, design and final assembly take place in Germany, and it's only parts from suppliers which come from abroad, it might very well be considered a Made in Germany product."

But the label is by far more than a simple designation of origin, Varwig added. "It's manufacturing, reliability, durability - everything which can be summarized as 'quality.' And you also buy into an image - the German art of engineering for instance."

Worth more than 100 billion euros?

According to estimates, the label could be worth more than 100 billion euros ($133 billion), because both companies and consumers decide to buy more expensive German goods instead of cheaper products from other countries.

Made in Germany (photo: Arne Dedert/ dpa)

The label has been a unique selling point for years

But Varwig says this unique selling point would be threatened by the EU Commission's plans which would require manufacturers to document each stage of production - and then assess which facility has added most of the product's value. Depending on the outcome, it then helps determine customs as laid out in a new EU customs code scheduled to come into force at the end of this year.

"We would virtually see quality features replaced by customs formalities," Varwig said.

The DIHK also wants to stick to current regulations, because the optional label has proved its worth, Treier said.

When in doubt, companies need to provide evidence that they were allowed to attribute the label to its products, he said. That ensures manufacturers don't trifle with the label.

If the EU had its way, he adds, mandatory labeling would lead to additional costs for medium-sized companies - and would leave consumers with no better protection than before.

However, trademark and competition lawyer Morton Douglas disagrees. "I don't think this is going to affect medium-sized businesses so much. It's rather big players who buy much more from suppliers abroad. They might not be able to use the Made in Germany label as much as they do now." Owners of mid-sized companies with a wide range of in-house production would be able to handle this quite well, he added.

Why now?

But there might be another reason behind the EU's plan, DIHK and DGQ say. They suspect it is protectionism. It would help weak EU member states in the south fight off Southeast Asian low-wage countries. As a next step - instead of individual country labels - the EU could introduce a new "Made in EU" label.

Daimler AG Mercedes-Benz S-class automobiles travel along the production line inside the company's factory (photo: Thomas Niedermueller/Getty Images)

A "Made in EU" label would harm export nations like Germany; weaker EU members could profit

Such a label would be problematic for an export nation like Germany, Varwig said. "Of course we want Europe as a whole to succeed, but this has to happen in terms of other countries stepping up their game when it comes to competitiveness. And it shouldn't be accomplished by simply changing the rules."

Wolfgang Grupp, who heads apparel manufacturer Trigema, is in favor of a mandatory proof of origin. All his products are manufactured in Germany.

He only imports raw materials like cotton which cannot be grown here. He says Germany as well as Europe doesn't need to engage in this self-destructive battle with cheap Asian competitors. What's necessary is a change of heart: "I don't need to be the largest automotive manufacturer in the world - I have to produce the world's best car. We have to be able to produce everything of the highest quality."

Much ado about nothing?

He says his industry showed that many competitors who left Germany for low-wage countries because they assumed production costs would be cheaper are now economically worse off than before. Some even had to quit altogether.

But no one has to kiss the Made in Germany label goodbye just yet, since the EU Commission's proposal still needs to be approved by both the European Parliament as well as the EU's member states. Germany's DIHK recommends to simply toss the proposal in the bin.

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