A paradigm shift in foreign trade law? That's what the German coalition agreement says.

With the inauguration of Federal Chancellor Friedrich Merz, the coalition agreement between the Social Democratic Party of Germany (SPD) and the Christian Democratic Union/Christian Social Union (CDU/CSU), outlines key reform plans in foreign trade law. We have compiled the most important plans below. 

“Paradigm shift” in export control and simplified export processes

The agreement seems to bring about legal changes in foreign trade. The new government is planning to amend the Foreign Trade and Payments Act (AWG). The foreign trade approval process is to be simplified and accelerated. It remains to be seen whether and to what extent the positions from the previous government's growth initiative will be taken into account. According to the initiative's guidelines, for example, a declaration procedure in the area of licensing as well as permanent licenses should be introduced. The future government has indicated that export licenses may no longer be necessary. Instead, exports are to be subject to random checks. The extent to which these measures can actually be implemented remains to be seen. Germany has committed itself to compliance with controls, including in the area of arms exports, through binding international and supranational treaties.

Innovations in the defense sector

In the area of defense, the agreement explicitly states that “barriers” affecting dual-use research or research cooperation should be removed. Cooperation between research institutions, industry, and government actors in the defense sector should be made more accessible and intensified. This could affect more than just purely national projects.

In future, export licenses for military equipment will be even more closely aligned with foreign, economic, and security policy interests. The governing parties are committed to arms control, non-proliferation, and disarmament. It is therefore conceivable that the aforementioned random checks will not be applied in the defense sector. Irrespective of this, in addition to the licensing requirement under the AWG, there are also licensing restrictions based on other laws for the export of certain defense and security goods. In future, the licensing authorities involved are likely to make even greater use of their already wide discretionary powers.

However, companies can still hope for some relief. The government is aiming to harmonize European arms export regulations. The focus is on the internal market: common export regulations are to be created for defense equipment and cooperation in development cooperation is to be intensified. Export control licenses are also to be reviewed more quickly and in a better coordinated manner.

Sanctioning of violations

The announced random checks should in no way be taken as an opportunity to neglect export control processes within the company. According to the coalition agreement, violations of foreign trade law will be subject to “severe” penalties. The EU has already issued a corresponding requirement to increase penalties in foreign trade law through the Sanctions Violation Directive (Directive 2024/1226). The directive must be implemented by May 2025, and a corresponding draft law is currently being discussed in the Bundestag.

We reported about the draft in this article

Reduced reporting requirements

The planned reduction in bureaucracy and the shortening of excessively long procedures before the Federal Office for Economic Affairs and Export Control (“BAFA”) are welcome from the perspective of companies. The planned bureaucratic relief may also affect more extensive reporting requirements for capital and payment transactions under the Foreign Trade and Payments Ordinance (AWV). We already reported on simplified reporting obligations that have been in place since 2025:

To the simplified reporting obligations

The coalition agreement provides for the suspension of existing statistical obligations. The Foreign Trade Statistics Act is explicitly mentioned, but not the AWV. Reporting obligations are governed by European and international requirements; therefore, it remains to be seen to what extent relief can actually be implemented in this area. In any case, so-called gold-plating through over-compliance with EU requirements is to be abolished in the field of statistics.

International treaties

The new government wants Germany to push ahead with the EU's trade and foreign trade policy with third countries. This concerns comprehensive trade and investment protection agreements. Agreements that have already been signed but not yet ratified are now to be ratified. Ratification is a prerequisite for international treaties to become legally binding. In addition, further agreements are to be concluded. These include trade agreements between the EU and Chile, Mercosur, Mexico, India, Australia, the ASEAN countries, Ivory Coast, Ghana, Cameroon, the SADC EPA countries, Singapore, and Vietnam.

In the medium term, a free trade agreement is to be concluded with the US and trade conflicts avoided in the short term. This is likely to be a reference to the resumption of negotiations on the TTIP agreement. Discussions in this respect began in 2013 but were suspended during Donald Trump's first presidency.

International treaties are generally to be concluded according to the “EU only” principle, whereby the EU as a whole is supposed to be the contractual partner, not the individual member states. Internationally applicable standards are to be taken into account. With regard to China, the new government pursues a “de-risking” strategy: dependencies in critical areas, such as rare earth, are to be reduced. 

Conclusion

The new government's plans will continue or confirm some of the reforms which have already been initiated. For example, critical foreign investments are still to be prevented in the future. The planned comprehensive reduction of bureaucracy, which will also affect the ESG sector, is to be welcomed from a business perspective. Companies should closely monitor the specific details of these plans. Through interest groups, they can participate in the legislative process and thus help shape a practical reform of foreign trade law.