Address by German Chancellor Gerhard Schröder at the U.S. Chamber of Commerce in Washington, D.C., on Monday June 27, 2005

Address: Chancellor Schröder at the U.S. Chamber of Commerce in Washington, D.C.

President Donohue, Mr. Irwin, ladies and gentlemen.
In our meeting this morning, President Bush and I had a rather intense discussion of bilateral issues. We addressed topics such as the European Union and the difficulties, or not, that this European Union is grappling with at the moment, but also the upcoming G-8 summit, and, of course, some other international topics as well.

I have to say -- and I'm pleased about this as well -- in many areas there was agreement, and this agreement I think testifies to a friendship that has united Germany and the United States for quite some time. It is based upon, I think, common fundamental values, and those values I think are the bedrock of our transatlantic partnership. And that bedrock is one that we stand on normally discussing things in full agreement, occasionally there is the odd controversy, but amongst good friends that's a natural thing. Freedom and democracy, the rule of law, and respect for human rights are the heritage we all share. And just by the way, it is a piece of heritage we have got from the period of European Enlightenment, and it's also a heritage that finds its strongest reflection in the U.S. -- American constitution. Together we stand up for the right of self-determination for each and every individual, the protection of all against violence and the arbitrary rule of gov! ernments, and for the right to equal participation in society, but also in political decision-making.

Ladies and gentlemen, the partnership between our two nations has created lots of jobs and has brought prosperity for many, many people through our very deep and wide-ranging economic ties. It is true for the U.S., but even more so for Germany. It's brought many jobs and has made us wealthy. Last year the trade volume between our two countries rose to 135 billion U.S. dollars. There are numerous investments that German companies have placed in the United States of America, and, of course, American companies have gone to Germany and have invested massively over there. Our national economies, thus, have not just become wealthier economies, but we have become ever more closely intertwined as economic systems too.

This is also a reason why Germany and the United States have a common interest in expanding the multilateral international trade system.

Germany, in this respect, has actively supported the successful conclusion of the Doha round of international trade negotiations. Just like the United States of America, we expect the liberalization of markets for goods and services to spur growth -- sustainably, ideally -- spur growth across the world economy. And I think this could mean new opportunities for all WTO members in export markets. Therefore, I think it is encouraging to see that the noticeable progress in the core areas of the negotiations have gathered momentum.

The European Union have actually made an important contribution to this effect as well, because they have gone in and have implemented far-reaching reforms in their agricultural sector. I am quite certain that the United States of America is able to offer something similar.

This is important not only for developing countries, but it is also a prerequisite for successfully reducing tariffs for business and industry and for the liberalization of markets for services, too.

Now, ladies and gentlemen, many a foreign investor has known for a long time that Germany is indeed an excellent location for placing investments. We want to go in and ensure that this remains to be the case. And that is why foreign investors -- and I'm emphasizing, including all financial investors -- are and continue to be highly welcome in Germany.

Nevertheless, let me say, it is essential that all participants adopt a commonly agreed set of fair rules. We must also keep an eye on this, not just as a general thing, but also on behalf of the many businessmen and businesswomen who abide by this rule as a matter-of- course, because an infringement upon the rules is not just an infringement upon the rules, but it also damages all the ones that have abided by the rules -- basically through the back door, as it were.

Now, in Germany, the activities of certain hedge funds, some that are primarily focused on the very short term, have in fact lead, and I think quite rightly, to a few questions being raised recently. Those are questions, I think, that have to be answered. We want stable financial markets. To achieve this, what we need an effective form of international supervision of these financial markets. The most important objective of a supervisory regime need not be supervision as such, but what we're trying to achieve is a considerable improvement on the degree of transparency of the hedge fund market.

Now actually, just by the way calling for greater transparency in the hedge fund market, we are in strong agreement with important members of this U.S. administration. And that is one reason, just by the way, that at the upcoming G-8 Summit in Gleneagles, I will propose to come up with a definition of a set of internationally acceptable minimum standards for the activities of hedge funds.

Now the goal is to establish a degree of transparency that is already rather common practice in many areas across the United States. But by the way transparency, I certainly think we need much more transparency in the oil markets, because that is the only way how we can go in and contain the degree of speculation that is growing rife, because I think it is more important than ever, because the price these days doesn't just reflect the effort in the price of the countries that the oil originates from. But there is a lot of speculation bubble in there.

I will re-introduce my corresponding initiative from last year at Gleneagle once more. And I think it is receiving increasing support internationally, too. And just by the way, a particularly important area, when we're talking about safeguarding the global economy and what we can do to improve things for ourselves, the protection of intellectual is a vital issue.

Now, as regards to this matter, there are very worrisome developments that we see particularly in Asian countries, in particular in China. Now, intellectual property -- what does that mean? I mean, it does mean we protect things that, well, intelligent brains have developed and put to market. I don't think it is acceptable that the public and private sectors invest enormous amount into research and development and innovation only to then be robbed of the fruits of their labor by all those who have never invested into them in the first place. The protection of intellectual property, but also, rules guiding the transfer of technology must be implemented much more effectively than has been the case to date. This is another topic that I shall emphasize at the G-8 summit at Gleneagle.

Now, I certainly would like to make sure that the protection of intellectual property rights is not going to just be tabled at the G-8 in Gleneagle. I would also like to lay special emphasis on this very topic at the world economic summit in Germany in 2007.

Now, ladies and gentlemen, I very much hope that at the G-8 in Gleneagle we will be looking at economic matters predominantly again, because that is, if you rightly remember, the reason why we introduced those summits in the first place. Now, in this upcoming G-8 in Gleneagle we'll agree on a complete cancellation of debts for highly indebted developing countries. Now, that means that we are both continuing the debt relief initiative that began at the world economic summit in Cologne in 1999 at the time. You know it was in Cologne upon the River Rhine. In total, an additional $56 billion in debt will be cancelled for developing countries, and that will obviously create the long-term capacity and scope for maneuver in terms of investment in the educational and social systems that those countries so very urgently need. They will hopefully also use it for water supplies, for health, for all these purposes, because those countries really do, indeed, need this debt ! relief. But, the requisite for this debt relief is good governance. And I have to emphasize this because only then will it achieve the right targets that we would like to see the money pledged to. We will not waiver on this issue, and I think we certainly have to work hand-in-hand with the affected countries to make sure that this will happen. Now, ladies and gentlemen, I'm very pleased that the president of the American Chamber of Commerce in Germany, Fred Irwin, is on the panel here with us. Fred Irwin is an outstanding expert on German business and industry. He's a connoisseur of our industrial structures. And he therefore, I'm sure, knows how flexible and how innovative Germany as a business location has become by now. It is no coincidence that Germany was once again the world champion in the field of exports of goods in 2004. One important reason for our success in the field of exports is that our competitiveness in terms of price is constantly improving. This! favorable development of unit labor costs has been a particu! larly important contribution to this fact. Our productivity is increasing much more rapidly than on average across the whole of the euro zone.

Now, these successes are ultimately the result of the German federal government's reform policies targeting jobs and growth, specifically an initiative called Agenda 2010.

Now, it includes, among other things, a considerable reduction of taxes and surcharges for individuals and companies. Now, our reform, or let's say with the several reform steps that we have taken, we have reduced the tax burden on business, industry and individuals by just under 60 billion euro, compared to 1998. Now, last year we had the lowest public sector share in GNP since reunification, and amongst the OECD countries, we are one of the countries with the lowest tax rates.

Moreover, we have gone in and modernized crucial aspects of our job market and the social insurance systems. We have eased rules governing the protection of employment. We made it easier to hire new workers. And we have increased incentives for the acceptance of low- paying jobs. Now, in the field of pensions and health insurance, we had to respond to two problems, and those are problems that all of the developed nations, industrial nations, at least in Europe, are grappling with, and that is, firstly, a completely changed demographic trend; many more old people in our societies. And the other phenomenon described with the word "globalization," which basically means nothing other than a hotly increasing competitive environment, internationally speaking.

Now, we have reacted to this. We have gone in and made sure that we added to our worker -- (inaudible) -- pay-as-you-go-along system by adding a capital coverage leg to the system.

Through our labor market reforms, we have made sure that the workforce in Germany is very flexible by now. This is something that companies noticed, U.S. companies, for example, that have decided to produce in Germany.

Now let me just mention one example. Motorola, for example, produces cell phones in northern Germany. Now, to be able to flexibly adjust production to the flow of incoming orders, Motorola introduced a work schedule with completely flexible shifts. With a 24-hour advance notice, employees can be called in to work a special shift at any time, even on weekends.

Or another example; let's look at AMD. AMD will open its second chip-production facility in Dresden in Germany this year. Dresden, actually a beautiful city in Saxony, that is to say in one of our new federal states, has really developed into the leading electronics production location in Europe, basically, as it were. It's taken 10, 15 years, but they really have got there. And AMD's factories in eastern Germany are its most productive worldwide. The construction of another production facility is already being considered. Now, this not only testifies to the strength of innovation of eastern Germany, but is also without doubt an expression of the willingness of their workforce to work very hard.

Ladies and gentlemen, it is not only in trade and commerce, but also in the political arena that we really can only manage the great global challenges of the 21st century, if the close relations between Europe and the United States of America, including Canada, remain firm and solid. It still holds true, and it is my firm conviction that very close transatlantic ties are in the interest of Germany, and thereby automatically in the European, but also in the America interest.

In February, some of you might remember I strongly stated my support for a deepening of the transatlantic strategic dialogue, so that we can adapt our cooperation more closely to these challenges.

I have said this regarding NATO, but I would also like to see it used for other areas. We have already seen initial progress here, but the NATO foreign ministers agree that the political dialogue across the alliance needs to be expanded.

The EU-U.S. summit in Washington last week underscored once more impressively the political importance that lies within transatlantic cooperation. The summit thus sent a clear signal to the world: Europe and America will continue to advance peace, democracy and freedom in the world.

Of course, this is also a guiding principle of cooperation between Germany and the United States. It applies especially in the case of the G-8 initiative for the broader Middle East and North Africa. It applies equally to securing the Middle East peace process and the building of democracy and freedom in Iraq. But it also applies to the prevention of the proliferation of weapons of mass destruction, just for example, important issues such as fighting against international terrorism, but also -- and let me emphasize this once more -- fighting against poverty and the huge epidemics and pandemics of our day.

Now, in this context let me emphasize that German security policy is and will remain first and foremost a policy towards peace and the prevention of conflicts around the globe. However, we do assume -- and we have shown evidence of this -- we assume military responsibility where it is essential to secure peace and protect individuals through that way. German soldiers, just for example, are working very closely with our American allies in Afghanistan, for example. In the Balkans, we can look back on many years of close and efficient cooperation between German and American military forces. This is especially true of Bosnia and Kosovo.

Now, as to the most important international issues, close cooperation between America and the European Union is crucial. It is decisive, in fact. Building a viable European security and defense policy is indispensable for us. It is an absolute necessity, even when and if -- (inaudible) -- it is coming along with a few difficulties. In the future as well, it will still hold true; a strong Europe will continue to be a strong partner for America. We Europeans must create the prerequisites for this. We must do this together.

It's, of course, for sure that the problems that we have as Europeans at the moment, the Europeans have to solve themselves. Now, we have to overcome the dead end the financial negotiations have got into. We have to continue with the financial preview project. I think we have to, further, continue to drive the great European project of unification forward.

It means that for the first time for centuries, this continent, Europe, has had a long-lasting phase of peace and wealth and prosperity, and there must be nothing that can stop us. Nothing must keep us from making sure that the whole of Europe is tied together in a political union because we won't lose sight of this target. If we were not to pursue it with the utmost degree of tenacity, then our children and grandchildren would very rightly criticize us ferociously because it is only through a united Europe, only through true cooperation and joint action Europe can become the safe haven of peace, of a protected life that Europe is. And Germany's going to stand up for this time and again. Germany certainly will work for a solution constructively and with the necessary willingness to compromise.

Ladies and gentlemen, together with our transatlantic and European partners, we have been advocating effective multilateralism, and we've done so for a long time. We, therefore, support Kofi Annan's plan for a comprehensive reform of the United Nations, and this is particularly true for a lasting reform of the U.N. Security Council. We are prepared to assume even more international responsibility. We're doing so, and when we're saying so, then we're doing it as well. We are not ones who just talk about it and then not let action follow suit.

And that is also why we are saying what we're saying. What we say is basically that he who does as much -- he who works on the ground as much then would hope that he also have the right to be involved in the decision-making on the Security Council. I very much know about the concern that people have: whether a Security Council of 25 members would still be able to take action at all. I think it can work very well. I think being responsible -- being responsive to the needs of its members, I think are crucially important tools for the efficiency of the Security Council, but also when it comes to the legitimacy -- the legitimization of this body.

Now, ladies and gentlemen, if we want to cement our ties for the future, then our economic relations are also a means to consolidate our close transatlantic partnership for the future. Our bilateral business and trade relations are stable and excellent, but they can still be expanded upon. On the basis of our common values and convictions, we can thus create the best conditions for growth, for jobs, and therefore, it goes hand in hand, as well as for the security in our two countries. I would like to thank you very much indeed for having listened to me, having invited me to address you. I was very pleased to come here, and thank you very much for your friendly attention.

June 27, 2005

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