Press Releases

June 12, 2008

Partners in the Era of Globalization

Please find below a working translation of an article by Federal Chancelor Angela Merkel that appeared in the daily German newspaper Sueddeutsche Zeitung on Monday, June 9, 2008 with the view to the German- US summit meeting on June 10 and 11.

Europe and the United States must work even better together on trade and investments

By Federal Chancellor Angela Merkel

U.S. President George Bush is expected this week for his farewell visit to Berlin and Europe. One topic to be discussed is the transatlantic partnership, and in particular economic exchange. In April 2007, the EU and the United States had established the Transatlantic Economic Council.

The close and intensive economic exchange between Europe and the United States has always proved its worth as a fundamental pillar of transatlantic partnership. Back in the 19th century, German capital contributed decisively to the development of the American railway. In the postwar period, it was the generous aid provided through the Marshall Plan that made European reconstruction possible. Today, the two partners together produce 60 per cent of global GDP; together, we account for 40 per cent of global trade. Transatlantic direct investment comes to more than 1.6 trillion euros.

If we ask about the actual cause of our economic success, the answer is clear: It is our shared value system. A stabile democratic order based on the rule of law, the principle of competition, free enterprise, responsibility for the vulnerable – we should cling to these roots. They feed our prosperity, also in an era of continuing globalization.

We are facing growing competition by new emerging economies such as China, India, and Brazil. That is why it would be the wrong course to escape into a blind alley of isolation, for only we would ultimately suffer by shutting ourselves off. Instead, the United States and Europe must summon up their own strengths, including, above all, consistent economic reforms and bold innovations.

We are also well advised not to block each other in trade and investment, where it is not so much about already relatively low tariffs but rather about considerable non-tariff trade and investment barriers. These result from differing standards and regulations in Europe and the United States. In automobile production, these differences are especially significant: harmonization of safety regulations could reduce auto production costs by up to 7 per cent.

The balance overall shows that we by no means have exhausted all our possibilities. For example, numerous counterproductive rules, for the most part, place an unnecessary burden on companies operating in the transatlantic region – with the respective consequences for jobs and higher product prices also for customers. According to the OECD, Europe and the U.S. could increase growth by up to 3 per cent by reducing trade and investment barriers. It would be virtually irresponsible to let this possibility go unused.

That is why during my tenure as EU Council President, I agreed with Commission President Barroso and President Bush in spring 2007 to press for broader opening of our economic regions. The centerpiece of our cooperation should be harmonization and mutual recognition of standards, as well as a reduction in dispensable regulations.

To implement this strategy, the Transatlantic Economic Council was established at the EU-U.S. summit on April 30, 2007. One year later, the newly institutionalized cooperation is now clearly already bearing fruit. For example, the IFRS accounting standards preferred in Europe have been recognized by the American Securities and Exchange Commission. We have also advanced well in liberalizing air transportation and hope for further progress during this year. We are continuing to come closer on the issue of how to handle cross-border investments. Moreover, we have found a common basis with Brazil to be able to clarify the question of technical standards in the use of biofuels.

The development in cooperation on protecting intellectual property rights is certainly also positive. Europe and the United States have succeeded in markedly raising sensitivity to this important concern, also in other regions of the world. Of course, we cannot yet be satisfied with that. We still have a long way to go until protection of intellectual property rights can be guaranteed in as much of the world as possible and as extensively as possible.

Yet some individual issues are still the subject of controversy between the Europeans and their transatlantic partner. For example, the dispute over import standards for American poultry shows how difficult it can be, on an individual basis, to develop mutual understanding for the different courses taken in the pursuit of what are essentially the similarly oriented goals of consumer and environmental protection. Solutions can, however, also always be achieved when both sides are prepared to compromise.

Particularly with a view to plans to have all containers screened before being transported to the United States, we Europeans would like more accommodation because we fear that transatlantic trade could otherwise be considerably harmed. In the spirit of our agreement to eliminate trade barriers, we should therefore reflect on how we could guarantee the same level of security with more efficient use of resources.

The political will to engage in give-and-take is the principle for success of the new transatlantic cooperation – a success that benefits us equally on both sides of the Atlantic. In this way, Europe and the United States will become stronger in global competition without becoming less open to third countries and regions. On the contrary, our economic cooperation with other partners will thus also gain fruitful momentum. The Transatlantic Economic Council points the way to a strong transatlantic economic region – a trademark of our solid and reliable partnership.

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