Evaluation and development of the target country system in the European context
On 12-13 December 2024, the Policy Learning Platform hosted a peer review on behalf of the Senatsverwaltung für Wirtschaft, Energie und Betriebe (Berlin Senate Department for Economic Affairs, Energy and Public Enterprises) on adapting foreign trade support to changing European and global environments.
The main policy challenges
The Berlin Senate complements the foreign trade instruments of Germany’s federal government by promoting location-specific internationalisation of Berlin’s business community. Their Foreign Trade Strategy provides policy guidance for the regional support schemes and the city’s international offices.
The strategy is implemented jointly with key business stakeholders, such as the city’s business promotion agency “Berlin Partner” and Berlin’s Chamber of Industry and Commerce (IHK). Jointly, the partners decide on the bi-annual prioritisation of target countries.
The peer review served as an opportunity to reflect on the current prioritisation methodology, and to discuss how to consider resilience and sustainability principles in future international business promotion.
Current state of affairs
Berlin’s foreign trade strategy is designed to complement the strategies already in place at the EU and national level. The EU establishes the fundamental framework conditions for the EU internal market by shaping external trade relations and negotiating international trade agreements and rules.
The German nation-state aims to diversify Germany's trade and supply relationships and offers a comprehensive range of instruments. In 2018 Berlin introduced the concept of international economic cooperation (KIW) promoting location-specific internationalization. KIW aims to internationalize Berlin companies and attract new businesses to the city, thus strengthening the city’s economic and innovative capabilities and securing and creating local jobs.
The concept is tailored to the needs of small and medium-sized enterprises (SMEs) and startups, as they form the backbone of Berlin’s economy.
The fundamental idea of KIW is to maintain a systematic and consistent focus on Berlin’s target markets in foreign trade. Being countries where Berlin products are in high demand and where there is a huge potential for cooperation and direct investment in both directions.
This so-called target country system guarantees the efficient deployment of personnel and financial resources in Berlin’s foreign trade sector. Furthermore, to increase stakeholder interest adopting a long-term approach to a clearly defined country portfolio is an effective way. Through this system, the top 14 target countries, with a strong focus on the top 4 ranks, are at the centre of the State of Berlin’s economic internationalization activities and support programs.
The current top four target countries (last reviewed and updated in 2023) are the US, China, Poland and France. The other 10 are Great Britain, Japan, Korea, India and the hubs Dubai (incl. Gulf States) and Singapore (incl. ASEAN countries).
Berlin’s funding instruments for international economic development are aligned with the KIW and, hence, focus strongly on the top 14 countries. They facilitate international economic cooperation and cross-border economic activities.
Peers from across Europe
Alongside Luc Schmerber, Rene Tõnnisson and Thorsten Kohlisch from the Policy Learning Platform, six highly committed peers from different European countries participated in the peer review and provided valuable insights into their approaches to foreign trade support.
- Inma Rodriguez Lopez and Giulia Diamante - ACCÍO, Catalonia
- Kolja Harders - Ministry of Economy and Innovation of Hamburg
- Marek Tiits - Policy Lab, Estonia
- Peter Jaspers - Flanders Investment and Trade Strategy Office
- Sara French - Trade & Growth, London & Partners
Together with the Berlin team, they engaged in the co-creation of targeted policy recommendations, inter alia diving into:
Jointly, the participants elaborated and discussed tailor-made policy recommendations on how to address the policy challenges faced by our beneficiary.
Key recommendations
- Not all regions do select target countries. It is possible to have a bottom-up strategy building on the needs of the companies.
- Content should come first – the regional prioritisation comes second. When prioritising, the first step is to look at the strong economic sectors in Berlin and then look for suitable market opportunities (in target countries or regions). Involve strongly local actors (clusters, other partners) and let them prioritise their target countries/regions
- The sectoral focus of the Foreign Trade Strategy should be aligned with the innovation strategy and further strategic documents, as relevant.
- When using economic data for selecting target countries, it needs to be balanced with other (qualitative) factors:
- Supply and Demand (existing portfolio needs to be considered, open calls…)
- Projects from companies
- Local representations, partners (own capacity to provide support in those regions)
- Geopolitical considerations
- The EU market remains the most important trade market
- Most SMEs will export first or only to European countries, most likely even to neighbouring countries
- In practice, when defining target regions/countries:
- Do not underestimate the differences in the Single Market (EEN observances)
- There is no argument for seeing the EU as one target region: very few sectors have an identical Europe-wide appeal/proposal
- The principle of ecological, economic and social sustainability is not well-suited for the selection of target countries, due to strong differences across the globe on relevant legislation and constraints.
- Those criteria are often integrated into standards and international trade agreements, which are out of direct influence of regions.
The host’s policy challenges, and all the peer suggestions will be available shortly in the follow-up report.
Peer review publication
Find more information on the methodology and experiences of previous beneficiaries in our publication.
Apply for a peer review
Start your peer review application process today and find solutions to your policy challenge with our expert and peers!