Germany And The U.S.: A Strong Working Relationship

Monday, May 2, 2011 - 10:04

Editor: What are the key contributing factors to Germany's extraordinary economic growth and employment levels?

Scharioth: The buzzword is competitiveness! Germany's competitiveness stems from deep structural reforms, increased flexibility of the labor market, a strong role of small and medium-sized enterprises in our economy and from a relatively high level of specialization in industrial manufacturing. Compared with other countries, Germany's manufacturing sector is a key factor in its macroeconomic performance. Manufacturing accounted for 23.7 percent of the gross value added in Germany in 2010.

Thanks to its competitive manufacturing sector, Germany can benefit from the mega-trends that have been emerging for some time now. These trends include environmental and climate protection, future-oriented mobility and energy solutions, state-of-the art medical technology, and everyday goods geared towards an aging population.

Here, let me point out that Germany's economy contributes to the American and global economies in no small measure: German companies had invested a total of $218 billion in the United States as of the end of 2009, and German enterprises created about 675,000 jobs in the U.S.

Editor: Germany has been characterized as the engine driving recovery in the EU generally. Is this true? Can you provide some examples?

Scharioth: Given the size of Germany and its economy, it is not surprising that the country has a large impact on the EU economy as a whole. Since the German economy is currently doing well, it contributes positively to the overall performance of the European economy.

It is increasingly recognized that a strong and broadly diversified manufacturing base remains crucial to the future success of Europe. Even EU member states that no longer focus on industrial production are realizing that industry leads the European value chain and greatly benefits other stages within that chain. So, not surprisingly, industrial policy is a priority in "Europe 2020," the new European growth strategy for the coming decade.

Editor: What are the key initiatives in German-U.S. relations to manage the aftermath of the financial crisis and create jobs?

Scharioth: Germany and the U.S. have joined forces to manage the aftermath of the financial crisis through various multilateral initiatives.

Germany puts a great deal of faith in the ability of the G-20 finance ministers and central bank governors to address the economic challenges at hand. At their recent meeting here in Washington in April, the G-20 finance ministers and central bank heads reaffirmed their commitment to progress towards external sustainability and towards strengthening the international monetary system.

Germany and the U.S. further cooperate in the negotiations on what is known as the Basel III accord, within the Framework for Growth, and on steps to reform the international monetary system.

The global recovery is expanding and becoming more sustainable. Nevertheless, our two countries agreed in the recent G-20 meetings to remain vigilant and to take the actions we deem necessary to strengthen the recovery and reduce risks. Germany is firmly convinced that this includes ensuring the sustainability of public finances and, for example, continued enhanced investment in education and research.

Editor: Concern has been expressed about the future of the EU, given the financial circumstances of Portugal, Ireland, Greece and Spain. What are your views about the impact of their rescue or a failure to rescue on the German economy?

Scharioth: One thing is clear: With the introduction of the euro, a large portion of the EU population gained a common currency. The euro has proved to be a stable currency and provides planning certainty for both consumers and businesses. It ensures price transparency among eurozone countries. The stability of the euro is the basis for growth and employment. The euro has been a huge success story.

There is no doubt that the eurozone countries are sending a clear signal that they are fully committed to ensuring the stability of the euro, both over the long term and on a sustainable basis. The countries you mentioned have committed themselves to extensive additional savings measures and structural reforms in order to increase their competitiveness and potential for future growth.

Editor: What factors contribute to Germany's being an attractive business location for U.S. global businesses?

Scharioth: You are right: many surveys show that U.S. companies consider Germany to be a particularly attractive location for investment; most of them want to further increase their engagement there.

Germany imports a lot of high-value-added products from the United States, including telecom goods and IT products. Decades-long trade relationships between German and American companies have created an atmosphere of trust and mutual high regard.

The reasons for this strong American business engagement lie in Germany's overall growth-oriented and secure business environment. We have a robust economy in Germany, fueled by the export of machinery, cars, and other equipment and increasingly by consumer spending. Germany has a growth-oriented and low-risk business environment. It is a financially stable country with a low national debt and low unemployment. The relatively strong euro results in bigger profit margins for U.S. manufacturers and their German subsidiaries. Germany boasts a well-educated workforce across the board - not just engineers - and world-class R&D capabilities. And last but not least, Germany is the largest European market, a member of the eurozone, and it is centrally located within continental Europe. It has an excellent infrastructure, a highly efficient workforce and work processes, virtually no labor disputes in terms of strikes, and a reliable and independent legal system.

Editor: What are the key industries that represent opportunities for U.S. business collaboration with German companies? (For instance, where do renewable and efficient energy companies fit into this picture?)

Scharioth: The renewable energy industry is one of the most important growth industries in Germany. It has become clear that sustainable, reliable, and affordable sources of energy are crucial to our economies and to our security, both in Germany and the United States. By working together on climate and energy policy, Germans and Americans can be a powerful engine for transatlantic cooperation and progress. In this respect, companies that deal with renewable energy, energy storage, and energy efficiency can count on a political environment in Germany that is strongly committed to renewables.

Germany is by far the largest solar market in the world and a key market for wind energy - especially upcoming off-shore wind projects - a leader in biomass, and a pioneer in hydrogen and fuel cell technology. Renewable energy sources already account for 17 percent of German electricity generation, and there is no slowing down of this trend towards renewables in sight. Further growth requires energy storage solutions and investment in the power grid. Any solution provider that allows industrial and commercial customers and private consumers to become more efficient - to save energy, reduce other scarce resources, and save time - will do well in Germany.

IT, software and electronics are all sectors where the U.S. is very strong, and there is strong demand from German industry and other businesses.

Health care, pharma products, and medical devices are in growing demand due to an aging population.

A variety of business services, machinery and equipment, and the automotive industry are all strong sectors in Germany that are lucrative for providers with cutting-edge technology and services.

Venture capital and private equity financing are still underrepresented in Germany. There are many opportunities offered by the large number of world-leading small and medium-sized enterprises serving particular niches and an increasing number of companies that need to solve successor issues because they are family-owned businesses.

Editor: How can Germany and the U.S. facilitate trade between our countries?

Scharioth: We are not yet realizing the full potential of the transatlantic economic space. And don't forget, investment is as important as trade. We must continue to refrain from any form of protectionism. Especially in economically difficult times, the adoption of protectionist measures might be tempting; it is, however, counterproductive - as all economic data suggest.

Free trade is not only the most effective, but also the cheapest means to stimulate worldwide economic growth and prosperity. A conclusion of the WTO Doha Round of trade talks would lock in the gains and benefits of the global economy's liberalization over the last decade and lay the framework for another decade of world trade liberalization - the basis and prerequisite for strong and sustainable economic growth. For this reason, Germany strongly urges that Doha be concluded this year. Furthermore, we must concentrate on harmonizing different standards and reduce bureaucratic hurdles, which continue to hamper unlimited trade in goods and services as well as direct investments.

Editor: What are the elements in German-U.S. relations that further the principles and goals of the New Transatlantic Agenda?

Scharioth: The transatlantic relationship remains one of the cornerstones of Germany's foreign policy, and the United States is Germany's essential political and economic partner. We share the same values, which remain the bedrock of our enduring, close relationship. Transatlantic ties come in many shapes and forms - from the political and economic relationship, to the memories of U.S. service men and women and their families posted in Germany, to the unforgettable experiences young Germans and Americans take back with them after spending time at a high school or university in each other's country. Personal links and friendships add an essential dimension to our bilateral relationship.

Clearly, our relationship has evolved since the end of the Cold War. Still, Germany highly appreciates the security umbrella that the United States continues to extend through NATO and its engagement in Europe. Politically, the Transatlantic Agenda of the 21st century differs significantly from the agenda of past decades. Fighting nuclear proliferation, promoting global disarmament, preventing failed states, settling regional conflicts, reforming the international financial markets, addressing climate change, strengthening global trade, defending our open societies - all these topics are of a global nature. Germany and the U.S. are tackling these challenges together and in unison with likeminded partners worldwide. For example, Germany is one of the main contributors to multilateral military, police, and humanitarian relief missions - in Afghanistan, where Germany's troop contingent is the third largest; in the Balkans, where it is the largest; or in the Gulf of Aden, where Germans and Americans have joined forces to foster stability and security. Our countries work hand in hand to coordinate our policies on Iran's nuclear program, and we closely coordinate our strategic partnership with Russia. Our partnership remains as vital as ever, while adapting to this new agenda while defending the values that bind us together.

Editor: How are Germany and the United States cooperating to ensure transatlantic security?

Scharioth: Germany and the U.S. are very close partners in all policy areas. Our security policies are very closely coordinated. Our militaries work closely together in NATO's integrated structures, in frequent exchange programs, and also in our missions. For example, Germans and Americans are fighting side by side in Afghanistan. Germany and the U.S. are also very close partners in the fight against the proliferation of weapons of mass destruction. Together with France, Great Britain, Russia, and China, we are working tirelessly in what is known as the E3+3 format to prevent Iran from developing nuclear weapons. Last year, we succeeded in building international support for UN sanctions.

Both Germany and the U.S. have also made disarmament and arms control one of their foreign policy priorities. This has resulted in closely coordinated policies in many forums. If you just look back on the last year, you will see many milestones, from the President's speech on disarmament at the UN Security Council, to the Non-Profileration Treaty Review Conference, to the Nuclear Security Summit. The United States has also led the way in its bilateral talks with Russia, resulting in the New START agreement. Germany has, together with others, brought arms control back onto NATO's agenda.

Editor: Please discuss the highlights of the NATO foreign ministers meeting in Berlin. What was the tenor of discussions on NATO's deterrent and defense posture?

Scharioth: The NATO foreign ministers just concluded their very successful spring meeting in Berlin. I believe this meeting illustrates very well the kind of alliance NATO has become. And it also illustrates how closely intertwined transatlantic relations are: More than 60 delegations, partners and allies, discussed the security matters that move us today - like Libya, like Afghanistan - in an open and friendly atmosphere.

With our partners, we not only debated the future course of action in our military engagements but also reaffirmed the great importance the Alliance attaches to its partnerships. The initiative known as the "Berlin Package" deepens existing links and opens NATO to new forms of dialogue.

Among the allies, we continued our very fruitful conversation on the future of NATO's deterrence. We are adapting the Alliance's capabilities to today's - and tomorrow's - threats and challenges. To do this, we have to find the right mix that combines all of our assets.

In this context, Germany, together with our Polish, Norwegian, and Dutch friends, has also advocated concrete steps to promote transparency and to build confidence with Russia in the area of nuclear weapons. These ideas have found wide support among our allies.

It was also in Berlin that week that Secretary Clinton was honored with the Rathenau Award, which recognizes her as an unwavering friend of Germany, a dedicated transatlanticist, and a true worldwide problem solver.