The curious structure of German exports

The number that sent me into this started as an oddity in the tax tables: the total taxable sales German businesses report to the VAT authorities. It now runs close to nine trillion euros. For scale, German GDP is about four trillion, and goods exports in 2023 were 1.56 trillion.

It is an odd place to start, because turnover is not a number people argue about. It does not show up in debates about the German model. But once you look at it, the usual export story gets more interesting.

First, a caveat: turnover is not GDP under another name. It is a gross transaction figure. A steel producer sells to a parts maker, the parts maker to a car company, the car company to a dealer, and each sale is counted in full, three times over in that chain. GDP is stricter. It counts only the value added at each step.

So turnover running to about twice GDP does not mean Germany is twice as rich as the national accounts say. It means the economy is full of intermediate transactions. Turnover measures how much value moves through firms, not how much new value they create. The ratio still tells you something: it is a picture of the gross structure underneath.

That distinction makes turnover useful in a different way. The turnover-to-GDP ratio is surprisingly stable, usually close to two. What is interesting is how it behaves in a crisis. Because turnover carries the full price of every transaction, it reacts strongly when input prices move through supply chains, so price shocks show up sharply.

In 2009, when oil and world trade fell hard, turnover dropped 9.5 percent while GDP fell 3.6. In 2022, when energy prices tore through the economy, turnover rose about 15 percent against GDP's 8. In 2020 the pandemic was a shock to real activity, not to prices, and the two lines moved much closer together.

So turnover is not better than GDP. It answers a different question: how much transaction volume German firms push through the domestic economy, and how exposed that volume is to prices.

This is where exports enter the story.

Germany is usually described through its exports, and fairly so. The country shipped 1.56 trillion euros of goods in 2023 and runs large trade surpluses. "Export economy" is not wrong.

But exports are a narrow window. Domestic taxable turnover is roughly five times goods exports. Much of that is double-counting, some of it is domestic business-to-business churn. Still, the comparison is a useful reminder: the export figure is not the whole operating footprint of German firms, even inside Germany.

Now the tricky part. German firms do a large amount of business that sits in no German turnover figure, no GDP figure, and none of the metrics you see in daily headlines or in the gloomier books about German decline.

It has a name: outward Foreign Affiliate Statistics, or FATS. These track the companies abroad that German parents control, their sales, their staff, their locations. If BMW builds and sells a car in the United States through a US subsidiary, that activity belongs to US GDP. Not German GDP. Not German turnover. Not a German export, unless something actually crosses the border from Germany.

In 2023, German-controlled affiliates abroad turned over 3.39 trillion euros and employed 6.7 million people. That is about 40 percent of German domestic turnover and around 80 percent of German GDP, though the GDP comparison mixes a gross sales figure with a value-added one.

A car company is the easiest way to see it.

In the old picture, a German manufacturer builds a car in Germany and exports it. The finished car crosses the border and shows up in German turnover and the trade statistics.

In the current picture, the same firm keeps design, engineering, headquarters, platform work, software, finance, and some of the hard components in Germany. Assembly and volume production move to a plant abroad that the firm still controls. The German side exports components or invoices services to that plant. But the finished car is built and sold in South Carolina, Mexico, China, or somewhere else.

The point is that statistics are territorial, and the structure above barely touches headline GDP. The split happens at the border. The home side shows up in German GDP, turnover, exports, and jobs. The foreign side shows up only in the host country's GDP and in outward affiliate statistics.

What interests me is the size of this still-German economy that is basically invisible to the usual macro figures. It suggests the corporate side of the country is more decoupled from the domestic economy than GDP or CPI would have you think. Individually, these firms hold a large share of their resources, employment, and capital base outside the home jurisdiction and the rules that come with it.

This also changes how I read the export story.

From 2010 to 2023, turnover at German-controlled affiliates abroad grew about 5.7 percent a year and their employment about 2.8 percent. Over the same period domestic turnover grew about 3.8 percent, goods exports about 3.9, GDP roughly 3, and domestic employment under 1.

This is not a claim that everything is fine, or that the German model has no problems. It is a different point: German firms have grown a large part of their activity outside the statistics that dominate the debate, and the more dynamic growth is partly still here, just not on the factory floor. It is in the head office. That may be well known in the trade, but the scale of it is mostly missing from the popular story.

The United States is the cleanest example.

Germany exported 157.9 billion euros of goods to the US in 2023, its biggest single goods market. A large number. But German-controlled companies operating inside the US turned over about 760 billion in the same year, almost five times as much.

So a debate framed only around German exports to America misses most of the German corporate presence there. A lot of it is not Germany shipping goods into the US. It is German-owned firms producing, selling, employing, and paying tax locally, inside the US economy.

That matters for how we talk about trade exposure. A tariff threat hits exports. It can hit supply chains and margins in less obvious ways too. But the affiliate figure shows that "Germany sells to America" is far too small a description of what German firms actually do there.

One last point is easy to get wrong. If German affiliates abroad turn over 3.4 trillion euros, how much of that comes home? Not much, if we mean a measurable direct effect.

In 2023, German residents earned about 158 billion euros on outward direct investment. Around 99 billion was paid out, about 35 billion was reinvested abroad. Net of what foreign owners earned on their investments inside Germany, the direct-investment income balance was about 70 billion.

Seventy billion is not nothing. But against 3.4 trillion of foreign affiliate turnover, it may as well be invisible. It is also about 1.7 percent of GDP, the comparison most people would reach for, and one that hides more than it shows. Even gross national income, the measure built to catch what a country earns abroad, registers only that thin slice of profit, not the activity behind it.

The effect is structural and quiet. Foreign scale helps sustain head offices, engineering teams, design work, patents, platforms, finance, and component production at home. Some of that shows up in exports, some in service and royalty flows, some only inside the firm's own accounts.

Firms are organised around products, platforms, suppliers, customers, tax structures, and ownership. They do not line up neatly with the border the national accounts draw. In the public conversation that mostly gets lost, and what gets lost with it is that the exposure has shifted: less of the jobs kind, more of the capital kind.

So the discovery left me with two things. The larger-than-GDP turnover figure is what let me see the ghost turnover behind it, and with it the more dynamic pockets of growth that never return to the GDP line. And it showed how much more nuanced the offshoring story is than the headline version, with most of the real mechanics sitting underneath it.

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