Regulatory Reflorm in Germany: Enhancing Market Openness through Regulatory Reform

This report assesses the impact of regulations and the regulatory process in Germany on trade and investment, as well as the extent to which market openness considerations are incorporated into the general policy framework for regulations. The assessment is based on six efficient regulation principles developed by the OECD, namely: transparency, non-discrimination; avoidance of unnecessary trade restrictiveness; use of internationally harmonized standards; streamlining conformity assessment; and integration of competition principles into the regulatory framework. Through broad application of the six efficient regulation principles Germany has been very successful in establishing a regulatory framework that has competently underpinned German participation international competition and the global economy. International stakeholders trading with or investing in Germany are confronted with an extensively elaborated regulatory framework of high quality. Particular mention may be made of the important steps taken to facilitate customs procedures, with a positive impact on trade flows. Equally, the country has taken a leading role in contributing to the spread of internationally harmonized standards and the recognition of foreign measures. The reduction of barriers to trade and investment worldwide has enabled Germany to take advantage of the expanding global market. At the same time a gradually more open market in Germany has provided benefits to consumers and contributed to economic growth and innovation. The progressive liberalisation of the German market has been driven not only by domestic forces, but even more so by regulations that follow from agreements at the regional and international level. Despite Germany's success in establishing a regulatory system that strongly supports market openness, there remains room for improvement in some areas. The general accessibility of regulatory information permits high levels of transparency; however, the extreme complexity of the legal architecture represents a significant challenge to new market entrants, particularly foreigners. Non-domestic stakeholders may need a substantial amount of time and resources to understand various and occasionally duplicative regulations and institutions applying them. This circumstance is rendered more acute by the exactness with which the regulatory framework is implemented. In addition, there is room for progress in the area of public procurement, where the country is not profiting from the opportunity of taking a forefront position within the EU which would reflect its economic capacity. Among EU countries Germany has the lowest level of public procurement tenders openly advertised at the European level and does not provide adequate legal protection for bidders competing for tenders below the EU threshold. In Germany, like in other EU countries, the regulatory processes in areas directly or indirectly affecting trade and investment are initiated at the EU level or directed by decisions of the EU with implementation often taking place at the national level. Reflecting this distribution of responsibilities, there is a tendency at the national level not to consider the full extent of international implications. At the national level the advantages of adopting an international perspective are not yet taken to their full extent. To give an example, regulatory impact assessments do not explicitly address trade and investment related aspects. The German administration is aware of the need to further change the regulatory framework in order to enhance economic growth. Several promising ongoing reform initiatives address many, if not most, areas covered in this report. The impact and pace of these reforms remains to be seen and evaluated.