Merkel’s Twin Mission with Trump: NATO and Trade

When German Chancellor Angela Merkel has her first face-to-face meeting with President Trump in Washington on March 17,* she will have two key tests. Can she take the sting out of the burden sharing debate between the United States and Europe in NATO? And can the U.S. and Germany find common ground on trade policy, an issue that has become an irritant in the bilateral relationship because of the U.S. trade deficit with Germany?

When Vice President Mike Pence and Defense Secretary Jim Mattis attended last month’s Munich Security Conference, they came with a message of support for NATO—but one mixed with a warning. As Mattis put it, Washington would “moderate its commitment” if the European allies do not soon meet their pledge to devote 2 percent of GDP to defense.

While some U.S. frustration is understandable given that the Europeans have made only slow progress toward the 2 percent goal, it is not U.S. exhortation that will lead Germany and other European allies to lift their defense outlays. Instead, they need to find homegrown reasons for doing so, and there are plenty, ranging from terrorism to Russian meddling in eastern Europe to cybersecurity. Merkel needs to find a way to convince Trump that European leaders possess the political commitment and communication skills to build the necessary domestic support to reach the target once and for all.

At the same time, the Chancellor should remind the President that, apart from France and the United Kingdom, the European members of NATO are regional powers. That means that the overwhelming portion of their defense spending goes to defending Europe, NATO’s core focus. While the U.S. spends above 2 percent on defense, much of this goes to worldwide commitments in Asia, the Middle East, and elsewhere. These help Europe, too, but not as much as spending within Europe itself.

Defense and national security, however, were not a major factor in Trump’s victory. What mattered to his working-class supporters were job losses in traditional manufacturing sectors. Although technological change (automation, robots) and not trade has been responsible for the vast majority of this dislocation, Trump was able to exploit it by condemning China’s accession to the World Trade Organization and trade agreements like NAFTA or the Trans-Pacific Partnership (which the U.S. withdrew from shortly after Trump took office).

Given Trump’s campaign rhetoric, there are reasons to be vigilant about the direction of U.S. trade policy, just as there are reasons to welcome European support for the 70-year-old international economic order, which brought peace and prosperity after the self-defeating protectionism of the 1930s.

But the fact is that the administration is still working to define its trade policy. Yes, it has withdrawn from the TPP. But the President’s 2017 Trade Policy Agenda issued earlier this month states that “The Trump Administration is currently evaluating the status” of the Transatlantic Trade and Investment Partnership (TTIP)—an ambitious trade negotiation launched in 2013 between the U.S. and the EU.

One open issue for the administration appears to be whether TTIP should be considered a bilateral negotiation—a framework the White House favors—or rather a multilateral deal like TPP. As the European Commission is the single negotiator on behalf of the 28 members of the EU—a role it has played since its founding in 1957—it is clear a transatlantic trade agreement would be a one-on-one, bilateral affair.

Merkel’s trip to Washington comes as Germany is grappling with the impact of increased Chinese investment, particularly takeovers of local high-tech firms. The challenge from China’s state-owned and state-directed companies is too big for either the U.S. or Germany to manage alone. New rule-making between the U.S. and a unified EU through TTIP would be a far more constructive response to the challenge posed by China’s state-capitalist economic model than Trump’s mooted punitive tariffs, which would end in a self-destructive trade war.

As for the trade balance, Merkel needs to find a way to explain to Trump that it takes two to tango. Yes, Germany is running a high trade surplus, and for the benefit of more balanced growth within the euro zone it would be helpful if it came down. But unless the value of the dollar falls, or the U.S. can raise its domestic savings rate, its trade deficit will simply shift from Germany and the euro zone to other trading partners.

A commitment to greater European defense spending, and some common ground on trade policy—perhaps aided by a bit of White House bonding over Trump’s family roots in Germany’s western wine-growing region—could go a long way toward cementing one of the world’s most consequential political and economic partnerships.

* Due to a winter storm on the East Coast, the visit has been postponed.

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

Jackson Janes

President of AICGS

Jackson Janes is the President of the American Institute for Contemporary German Studies at the Johns Hopkins University in Washington, DC, where he has been affiliated since 1989.

Dr. Janes has been engaged in German-American affairs in numerous capacities over many years. He has studied and taught in German universities in Freiburg, Giessen and Tübingen. He was the Director of the German-American Institute in Tübingen (1977-1980) and then directed the European office of The German Marshall Fund of the United States in Bonn (1980-1985). Before joining AICGS, he served as Director of Program Development at the University Center for International Studies at the University of Pittsburgh (1986-1988). He was also Chair of the German Speaking Areas in Europe Program at the Foreign Service Institute in Washington, DC, from 1999-2000 and President of the International Association for the Study of German Politics from 2005-2010.

Dr. Janes is a member of the Council on Foreign Relations, the International Institute for Strategic Studies, and the Atlantic Council of the United States. He serves on the advisory boards of the Berlin office of the American Jewish Committee , Beirat der Zeitschrift für Außen- und Sicherheitspolitik (ZfAS), the Robert Bosch Foundation Alumni Association, and the American Bundestag Intern Network (ABIN) in Washington, DC. He is a member of the Board of the German American Fulbright Commission and serves on the Selection Committee for the Bundeskanzler Fellowships for the Alexander von Humboldt Foundation. He is a member of the Cosmos Club in Washington DC.

Dr. Janes has lectured throughout Europe and the United States and has published extensively on issues dealing with Germany, German-American relations, and transatlantic affairs. In addition to regular commentary given to European and American news radio, he has appeared on CBS, CNN, C-SPAN, PBS, CBC, and is a frequent commentator on German television. Dr. Janes is listed in Who’s Who in America and Who’s Who in Education.

In 2005, Dr. Janes was awarded the Officer’s Cross of the Order of Merit of the Federal Republic of Germany, Germany’s highest civilian award.

Ph.D., International Relations, Claremont Graduate School, Claremont, California
M.A., Divinity School, University of Chicago
B.A., Sociology, Colgate University

Transatlantic relations, German-American relations, domestic German politics, German-EU relations, transatlantic affairs.

Peter S. Rashish

Senior Fellow; Director, Geoeconomics Program

Peter S. Rashish, who counts over 25 years of experience counseling corporations, think tanks, foundations, and international organizations on transatlantic trade and economic strategy, is a Senior Fellow and Director of the Geoeconomics Program at AICGS. He also writes The Wider Atlantic blog.

Mr. Rashish serves as a Senior Advisor to Transnational Strategy Group LLC, a Washington-based international business and government affairs consultancy, and to the Brussels-based European Policy Centre. He has served as Vice President for Europe and Eurasia at the U.S. Chamber of Commerce, where he spearheaded the Chamber’s advocacy for an ambitious and comprehensive trade agreement between the United States and the European Union, which was officially launched as the “Transatlantic Trade and Investment Partnership,” and developed new engagements in the continent’s emerging markets.

Previously, Mr. Rashish was a Senior Advisor for Europe at McLarty Associates, and has held positions as Executive Vice President of the European Institute, on the Paris-based staff of the International Energy Agency, and as a consultant to the World Bank, the German Marshall Fund of the United States, the Atlantic Council, the Bertelsmann Foundation, and the United Nations Conference on Trade and Development. Mr. Rashish has testified on the euro zone and U.S.-European economic relations before the House Financial Services Subcommittee on International Monetary Policy and Trade and the House Foreign Affairs Subcommittee on Europe and Eurasia and has advised two U.S. presidential campaigns.

He earned his B.A. from Harvard College and an M.Phil. in international relations from Oxford University. He speaks French, German, Italian, and Spanish.