More cooperation leads to growth in Europe and the USA

01/29/2013

from left: Thomas Zielke, Adam Posen, Volker Treier, Dan Hamilton, Hiddo Houben

Germany and the United States are not in a competition. At the RGIT Business Breakfast on January 29th in Washington, DC, the president of the Peterson Institute for International Economics, Dr. Adam Posen said that “the better Germany does, the better the U.S. does, the better we do together”. The topic of the morning’s event “Creating Value after an Economic Downturn: New Perspectives for Doing Business in Germany, Europe and the U.S.” was discussed by Dr. Posen as well as Dr. Volker Treier, DIHK deputy CEO; Prof. Dan Hamilton, Director of the Center for Transatlantic Relations at the Johns Hopkins University, and Hiddo Houben, head of the trade department at the Washington EU delegation. RGIT’s President Dr. Thomas Zielke moderated the panel.

Citing articles by The Economist, Treier explained how the perception of Germany’s economy has shifted over the years: the “sick man of Europe” in 2005 became “Europe’s engine” in 2010. In 2012 commentators were asking what Germanys economic model could offer the world. “The positive mood in German industry is back”, said Treier. He cited three reasons for the positivity: structural improvements stemming from the “Agenda 2010” measures of the Schroeder era in the early 2000s, the internationalization process as well as the single market within the European Union. Treier stated that most German companies have always maintained their headquarters in Germany and shifted only parts of their manufacturing to other EU member states to reduce costs. Moreover, Germany has an export quota of 50 % and within this rate is not dependent on one market only. Treier also said, the EU was on the right track with its improved economic coordination. The two Americans on the panel were not equally optimistic: Posen predicted a weak year for Germany and Europe as the reforms might not pay off immediately. Hamilton pointed out the deep linkages between trade and investment and claimed that Europe had to reposition itself concerning investment flows. However, he also conceded that Americans always see the problems in Europe whereas the Europeans see the challenges in the USA. Both economies should reposition themselves and work together.

With regard to a possible EU-US trade agreement, Hiddo Houben explained that both parties were major champions on the multilateral field, and that the outcomes had to move beyond existing agreements and tariffs. According to Houben, areas such as chemicals and pharmaceuticals have been identified most promising for trade and investments. Some regulatory issues are going to be easier and could therefore be faster to solve. Possible negotiations should follow the idea of a “living agreement.” Houben expressed his hopes for the final High Level Working Group report to be available within weeks.