{"id":39361,"date":"2024-03-01T12:20:31","date_gmt":"2024-03-01T11:20:31","guid":{"rendered":"https:\/\/frankfurt-main-finance.com\/?p=39361"},"modified":"2024-03-27T15:46:04","modified_gmt":"2024-03-27T14:46:04","slug":"take-need-for-action-to-reinforce-economic-security-and-support-net-zero-a-german-japanese-perspective","status":"publish","type":"post","link":"https:\/\/frankfurt-main-finance.com\/en\/take-need-for-action-to-reinforce-economic-security-and-support-net-zero-a-german-japanese-perspective\/","title":{"rendered":"Need for action to reinforce economic security and support net zero \u2013 a German-Japanese perspective"},"content":{"rendered":"\t\t
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Nearly 9,000 kilometers separate the capital cities of Berlin and Tokyo, but in many ways, there is very little distance between Germany and Japan. Both countries are \u201cvalue partners\u201d that actively reinforce their bilateral relationship (\u201ctransformation partnership\u201d), both are members of multilateral fora like the G7, and they have commonalities in their \u201chigh tech\u201d economic profile. Germany and Japan are also among the largest trading nations globally (rank 3 & 4). They, hence, rely on the undisturbed functioning of global trade and supply chains <\/strong>to provide sources of demand for their exports and of supply of input materials and components for domestic value creation.<\/p>\n

In the context of Germany\u2019s and Japan\u2019s net zero commitments, both countries face similar transformation needs. This implies that potential global supply chain disruptions do not only interfere with some of the traditional hallmarks of their manufacturing industries \u2013 automotive, electronics, pharmaceuticals, etc. \u2013 but also present risks to the adequate supply of the key technologies <\/strong>that are needed to realize their emissions-reduction targets. The COVID-19 Pandemic and the war in Ukraine are just recent real-world examples of large-scale disruptions affecting both countries heavily. Governments are starting to respond with initial strategies and policies, including the US, EU, and Japan.<\/p>\n

For an effective and efficient response <\/strong>to the risks associated with global supply chains we recommend a 3-step approach<\/strong>:<\/p>\n

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  1. Perform a comprehensive vulnerability analysis<\/strong> that assesses strategically important goods with respect to, e.g., import intensity to identify substantial supply dependencies from individual trade partners (directly [tier 1] but also indirectly via sub-supplier relationships [tier 2 and beyond]).<\/li>\n
  2. Define a set of strategic measures to mitigate<\/strong> identified vulnerabilities by reducing the likelihood of critical supply disruptions or limiting the impact should disruptions occur.<\/li>\n
  3. Seek alignment and build cooperations with like-minded partners<\/strong> with a view to avoiding competing mitigation strategies, to leveraging on pooled resources, and to improving position vis-\u00e0-vis 3rd <\/sup>countries; Germany and Japan are suitable partners<\/strong>, especially given their weight in global trade.<\/li>\n<\/ol>\n

    To make this tangible in light of Germany\u2019s and Japan\u2019s transformation partnership, we conducted an outside-in vulnerability analysis (step 1)<\/strong> for solar panels as an example of a key net zero technology with limited domestic production capacities. We focused our analysis on an in-depth assessment of tier 1 and 2 bilateral trade flows along the solar panel supply chain<\/strong>. This analysis indicated for both countries a substantial reliance on China<\/strong> (details in annex<\/em>): Both countries import more than two-thirds of solar panels<\/strong> from China. This means that any disruptions to the supply of solar panels from China can significantly slow down the expansion of renewable power generation<\/strong> in Germany and Japan, putting net zero and industrial objectives at risk<\/strong>. Import concentrations in components and raw materials that are inputs to solar panels also imply that final assembly cannot be shifted domestically to compensate supply shortfalls on short notice.<\/p>\n

    Potential strategic measures (step 2) to mitigate the identified concentration risks may generally aim at:<\/strong><\/p>\n