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 2018, the total value of German goods exports to the United States was 113.5 billion Euro, accounting for 8.6 percent of all German exports (according to preliminary figures by the Federal Statistics Office of Germany).
  • In 2018, the United States was Germany’s fourth most important partner regarding goods imports, after China, the Netherlands and France. Germany imported goods worth 64.6 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 2017). 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 (numbers as of 2016).
  • U.S. companies like Ford, General Electric and McDonald’s have a strong presence on the German market. In 2018, 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.

In addition, President Trump ordered the U.S. Department of Commerce (DOC) to assess whether car imports endanger the national security of the United States. The DOC submitted its report to the White House in February, but the report has not been made public so far. President Trump could decide to impose additional tariffs on car imports. 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 on 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.

In January, the Office of the United States Trade Representative published the U.S. negotiating objectives for a trade agreement with the EU. The United States is thus formally ready to enter into negotiations. The EU, in turn, published drafts for two negotiating mandates: one on industrial goods and one on conformity assessments. The EU, however, can only start negotiations after the Council of the European Union has adopted the mandates. The EU Commission is hoping to also avoid additional tariffs on car imports through negotiations.

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 significance of transatlantic relations with special regard to trade. German industry regrets that it is not possible at the present time to conduct negotiations with the United States on a comprehensive and ambitious trade agreement comparable to the Transatlantic Trade and Investment Partnership (TTIP). In view of today’s difficult situation, we can understand why the European Commission wishes to enter into talks with the United States about a lean agreement on trade. We support the efforts to defuse the trade conflict and normalize relations with the United States. For this reason, we also support the plans of the EU to negotiate a transatlantic agreement on industrial goods. This agreement must be compatible with WTO requirements and must liberalize “substantially all the trade”.

German industry expressly welcomes that regulatory cooperation is to be part of a transatlantic liberalisation agenda and that the Commission is seeking a negotiating mandate on conformity assessments. These adds to the commitment of both negotiating partners with regard to regulatory cooperation.

The national security of the United States is not endangered by U.S. imports of steel, aluminium, and cars and car parts from the EU. Therefore, the United States should rapidly and unconditionally remove the tariffs imposed on steel and aluminium in June 2018. Moreover, it should absolutely refrain from imposing tariffs on cars and car parts.

Furthermore, the EU and the United States should undertake joint efforts to modernise the WTO rulebook and to strengthen the WTO’s mechanisms for monitoring and enforcement. Together with Japan, the transatlantic partners should cooperate closely on how to deal 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.