A New Agenda for Transatlantic Relations

Times Square, New York City © timdavidcollection/Fotolia

The United States and the European Union are both close political and economic partners – despite the political tensions with the administration of President Trump. In order to maintain this partnership, Berlin and Washington have to uphold their dialogue. This does not only apply on their mutual relations, but also on the cooperation within the WTO and the dealing with China.

The United States of America is not only an important political partner of the Federal Republic of Germany; economic relations with the United States are also of substantial significance. According to the Federal Statistics Office of Germany, since 2015 the United States has been the biggest market for German goods exports, while German and U.S. companies are among the most important foreign investors in their respective market. Thus, relations with the United States are one of the cornerstones of job creation and prosperity in Germany.

Transatlantic Trade: Facts and Figures

  • In 2017, the total value of German goods exports to the United States was 111.5 billion Euro, accounting for 8.7 percent of all German exports (Federal Statistics Office of Germany).
  • In 2017, the United States was Germany’s fourth most important partner regarding goods imports, after China, the Netherlands and France. Germany imported goods worth 61.1 billion Euro from the United States.
  • German investors have invested a total of 406 billion U.S. dollars in the United States (U.S. data on investment as of 2016). In the rankings of the most important foreign investors in the United States, Germany occupies fourth place.
  • German companies employ some 692,000 people in the United States. That makes Germany the fourth most important foreign employer in the United States, after the United Kingdom, Japan and France.
  • U.S. companies like Ford, General Electric and McDonald’s have a strong presence on the German market. In 2017, Germany was the sixth largest market for U.S. goods exports. In 2016, U.S. investors acquired stakes in 2,810 companies in Germany and thereby assumed responsibility for 645,000 jobs in Germany (Bundesbank data).
  • In 2017, the EU and the United States combined generated 45 percent of global GDP (World Bank) and accounted for 60 percent of global outward stock (UNCTAD).

Distortions in the Transatlantic Economic Relations

These strong economic relations benefit both sides. But since U.S. President Donald Trump took office, the transatlantic partnership has had to navigate choppy waters. Trump has repeatedly criticized Germany for its export surplus. Whereas the EU initially had been exempted from tariffs on steel and aluminum, those tariffs have been enforced since June 2018 for U.S. imports from the EU. The EU has responded with rebalancing duties.

Most recently, President Trump threatened to impose further tariffs. He has currently ordered to assess whether car imports endanger the national security of the United States. Thus, the trade conflict threatens to escalate. Such escalation would not only harm the United States and the European Union massively. The worldwide economic output, trade and revenues threaten to be affected as well.

Towards a Transatlantic Trade Agreement?

At the end of July 2018, U.S. President Donald Trump and European Commission President Jean-Claude Juncker unexpectedly agreed on the reduction of transatlantic trade barriers. The meeting in Washington was an important sign of easing tensions. Trump and Junker noted their intention to reduce tariffs of all industrial goods and additionally planned to negotiate on non-tariff trade barriers which is strongly supported by the BDI. Nonetheless, negotiations must also cover tariffs on automobiles. As long as negotiations are being conducted, tariffs are put aside. The threat of 232 auto tariffs seemed to have been temporarily averted. However, the signs are growing that this political truce will not last long.

Upholding the Dialogue

Despite and even because of these tensions, the German government and the EU should uphold the dialogue with the United States. They should underline the siginificance of transatlantic relations with special regard to trade. In order to support the dialogue, the BDI proposes the following eight-point-plan for the transatlantic economic relations:

  1. The EU and United States must maintain a dialogue.
  2. Tariffs must not be imposed under the guise of national security.
  3. Every step must be taken in accordance with the WTO rules book.
  4. Barriers to transatlantic trade should be removed.
  5. The EU and the United States should examine whether there is a common basis for negotiations on a trade agreement.
  6. A new agreement should meet the requirements of a modern trading partnership. An agreement should liberalize substantially all trade. Tariffs alone say little about actual market access. A mere tariff agreement with the United States would therefore not suffice. Non-tariff barriers to trade (NTBs) should be an integral part of talks and public procurement should be considered.
  7. EU and the United States should agree on a positive WTO agenda in order to modernise its rules and to strengthen its mechanisms for monitoring and enforcement.
  8. The United States, the EU and Japan should take joint action for a new agenda of dealing with China.

The Deutschlandjahr Promotes Exchange

For the sake of promoting transatlantic exchange – not only on the governmental level, but between the German and the American societies – a Deutschlandjahr (Year of German-American Friendship) is taking place in the United States from October 2018 to October 2019, focusing on the motto “Wunderbar together”. The Deutschlandjahr is an initiative funded by the Federal Foreign Office, implemented by the Goethe-Institute and supported by the Federation of German Industries.