America and Germany: An Opportunity to Advance Free and Fair Trade and Strengthen the Transatlantic Relationship
“Free and fair trade brings growth and opportunity and creates jobs.”
— President Ronald Reagan, Radio Address to the Nation on Free and Fair Trade, August 2, 1986
On April 27, 2018, German Chancellor Angela Merkel will meet U.S. President Donald Trump in Washington. This high-level meeting held by the two nation’s top elected leaders provides an opportunity to affirm the significance of the transatlantic economic and security partnership and its common vision on long-term strategic interests. In announcing the official meeting, The White House issued a statement relaying that the leaders would “address a broad range of geopolitical and economic challenges.”
America and Germany’s shared values and principles bring these nations together, founded on the rule of law, the bedrock of free societies, protecting life, liberty and private property. The foundational rule of law advances free enterprise and economic opportunity for all. Some 300 years ago, thirteen families established the first German settlement in the American Colonies. Over the centuries this community shaped American industries and contributed to the arts and sciences. Today, more American citizens claim German ancestry than any other.
The recent issues and points of contention brought forth on the vital economic front ought to encourage both sides to prudently review trade opportunities and investments through candid and open discussion, with an emphasis on advancing sound policy and principled solutions. Going forward, America and Germany’s stakeholders have much to gain or lose depending on the outcome of these important talks.
In recognizing Germany’s dynamic role as the European Union’s economic powerhouse, a trading block of 27 nations and 440 million consumers (taking into consideration Britain’s exit), and America, representing the world’s largest economy with 327 million consumers, both sides should urgently work toward reducing trade barriers and removing burdensome regulations. Principled reforms would benefit companies large and small, leading to higher levels of economic growth.
Germany’s steady growth can be attributed to Chancellor Merkel’s leadership as a champion of free trade and proponent of reforms. Andre Tartar and Sam Dodge in an article via Bloomberg stated, “Merkel’s political longevity is linked inextricably with her credentials: Unemployment is down by half since she first took office in 2005. Growth reached an average of 2 percent in her second term while the rest of Europe limped along at a fraction of that.”
According to last week’s Reuters report, “The International Monetary Fund on Tuesday raised its forecast for German economic growth, predicting a healthy 2.5 percent expansion for Europe’s biggest economy this year.”
Trade protectionism through raised tariffs and archaic trade restrictions would be detrimental for citizens and enterprises on both sides of the Atlantic. It would be prudent to boldly advocate a level playing field, pursue free and fair trade, and increase trade openness which spurs competition and innovation, benefiting consumers. There is empirical evidence that free trade works for the benefit of all parties involved.
President Trump has stated the importance of revitalizing America’s manufacturing base. The newly introduced 21 percent corporate tax rate, reduced from the high 39 percent, has proven to be an incentive for U.S. multinational companies publicly announcing measures to bring back profits to America, rather than storing it abroad.
America’s long-awaited major tax cut on the corporate front, implemented by the Trump administration, is a great incentive for German firms and companies from around the world to invest in America. Germany’s companies are eagerly looking for investment opportunities.
While governments are attracted by large corporations, it is small and medium-size enterprises which are creating a greater percentage of jobs. America’s most recent corporate tax cut provides an incentive for Germany’s medium-size companies, which are global leaders in manufacturing particular products and represent 40 percent of the world’s hidden champions in business, to invest in the United States.
Germany accounted for 4.4 percent of America’s international trade, having been its 6th largest export market, and 5th largest import market in 2017. Last year, the United States reached a $64.3 billion trade deficit with Germany, its largest European trading partner. While trade deficit reflects the larger American imports of goods and services from Germany than exports to Germany, they also point out to the other side of the same coin – the higher German foreign direct investments in America. While U.S. investments in Germany were at 107.71 billion for 2016, German foreign direct investments in America amounted to $291.7 billion for the same year.
One notable investment is German car manufacturer BMW’s largest plant which is located in South Carolina. As German luxury car brands run on America’s highways, American technology fuels Germany’s digital highways.
The successful story of expanding trade and the economic benefits it brings to enterprises and citizens is best shared through North Germany’s unique history when merchants joined together to form the Hanseatic League and spearheaded the 400 years of trading power in the North Sea and Baltic Sea region. The Hanseatic League in the Middle Ages brought together 200 cities in seven countries for the purpose of augmenting private enterprise, advancing trade and fueling economic growth.
Today, the fruits of economic prosperity brought forth by trade provides America and Germany’s stakeholders the necessary resources to invest in the transatlantic military partnership and affirm peace through strength, strongly advocated by Konrad Adenauer and Ronald Reagan.
In 1986, President Ronald Reagan stated, “Our trade policy rests firmly on the foundation of free and open markets. I recognize…the inescapable conclusion that all of history has taught: The freer the flow of world trade, the stronger the tides of human progress and peace among nations.”
The First Chancellor of the Federal Republic of Germany, Konrad Adenauer said, “Of essential and fundamental matter is the preservation of freedom and peace as the highest goods of humankind, which we share equally as policy objectives in the United States and in Europe.”
Chancellor Angela Merkel and President Donald Trump have an opportunity to build on the ideas and legacy of Germany’s First Chancellor Konrad Adenauer and U.S. President Ronald Reagan.
By Natasha Srdoc, MBA, and Joel Anand Samy, Co-Founders of US-based International Leaders Summit and Jerusalem Leaders Summit and Dr. Stefan Gehrold, Head of the Office, Konrad Adenauer Stiftung (KAS), Hermann Ehlers Education Forum Weser-Ems, Germany, and former head of KAS Brussels Office.
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