An Economic Agenda for Berlin and Washington
By John Starrels

The agenda for President Bush's forthcoming meeting with Chancellor Gerhard Schröder in Mainz, Germany on February 23, 2005, will likely focus attention on key political and international security issues, such as NATO's future, developments in Iraq, combating terrorism, nuclear proliferation, and Israeli-Palestinian matters. If economic issues are raised--such as the ongoing Boeing/Airbus controversy--they will likely not play a dominant role in the discussions. And why should they? This is one of the few realms where U.S.-German relations remain largely intact. Nearly 60 percent of all U.S. foreign corporate assets are located in Europe, while EU countries provide nearly 75 percent of all foreign investment in the United States. And according to Monique Julian from the EU business association UNICE, more than 90 percent of transatlantic trade is transacted with relative ease. As the largest single member of the European Union, robust U.S.-EU economic ties have benefited Germany as well as the United States. So why rock the boat?

And yet there is a growing perception on both sides of the Atlantic that Bush and Schröder, and their top advisers, should be encouraged to engage in a more intensive dialogue on the common economic challenges that will confront them in the future. As former U.S. Ambassador to Germany, John C. Kornblum, noted in these pages some time ago: "Americans and Europeans will prosper through economic, cultural, and technological integration. Our political dialogue has not yet adjusted to this fact." Two obvious rationales justify a more active U.S.-German effort to elevate the importance of high-level economic dialogue:

First, the time has come to rebalance a bilateral agenda that has become dangerously tilted toward hot button diplomatic, foreign policy, and international security issues. One may hope that over time the United States and Germany will be able to compose their differences in these areas; or agree to disagree and move on to less contentious areas where there is a potentially stronger consensus supporting joint action at the highest political level. A tacit agreement to soft pedal these controversial matters might also create needed space to address neglected areas for potential cooperation.

And what better place to begin than economic policy making? There are precedents for this. The initial post-World War II stimulus to strong political relations between the United States and Germany stemmed as much, if not more, from economic support provided by the U.S., such as the Berlin Airlift (whose rationale, among other things, was to maintain the economic viability of West Berlin), the Marshall Plan, and Point 4. To be sure, economic policy dialogue between Washington and Bonn/Berlin has not always been characterized by comity and good will. Recall, for one example, the incoming Carter administration's fruitless efforts to encourage Helmut Schmidt to "jump start" the German economy! But even then, and during subsequent periods, there appeared to be a stronger consensus within respective capitols on the political importance of high-level economic policy dialogue than there is today.

Second, and more concretely, as two of the world's richest and technologically most advanced economies, America and Germany cannot--even if they wanted to--escape the need to consult and, where possible, collaborate, in addressing matters involving entitlement reform, generational equity, and the onerous fiscal burdens posed by aging, politically articulate, populations. But a Bush-Schröder economic dialogue, of course, need not be confined to bilateral issues. Washington and Berlin also play a major role in setting the global economic agenda, from combating AIDS; completing the DOHA round; liberalizing trade in services; and reducing poverty. Washington and Berlin will not always see eye-to-eye on these matters either. But incorporating--and implicitly 'upgrading'--these issues into the fabric of high-level, personal, diplomacy between the two countries could play a major role in enhancing those areas where German and American political leaders can most fruitfully direct their attentions, with a reasonable possibility of success today.

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John Starrels is an AICGS Senior Fellow with direct responsibility for expanding the Institute's economic studies programs. Prior to joining AICGS, Dr. Starrels was a Senior Member of the International Monetary Fund's External Relations Department, in charge of organizing the IMF's "Economic Forum" and public outreach initiatives.

This essay appeared in the January 27, 2005 AICGS Advisor.

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The views expressed in this article are those of the author(s) alone. They do not necessarily reflect the views of the American Institute for Contemporary German Studies.