A German-American Dialogue of the Next Generation

Geoeconomics Virtual Meeting

As the dialogue around trade and economic cooperation has become increasingly heated over the last few months, participants in the Geoeconomics group of the AICGS project “A German-American Dialogue of the Next Generation” came together for a second virtual meeting to identify and discuss the relevant challenges facing Germany, the United States, and other actors in the global economy. The participants offered a variety of expertise in fields such as security, international trade policy, and economics. During the meeting, the participants expanded upon the implications of transatlantic cooperation issues. Summarized below are some of the key takeaways of the discussion.

U.S.-EU Trade Talks

What is the policy focus and associated risks of the trade talks? Will this have an impact on WTO reform?

  • There is a difference in the ambitions between the two sides. The U.S. is generally looking for a traditional comprehensive agreement with an additional emphasis on reducing the trade deficit. The EU is looking to touch upon a few key issues, and has met the U.S. requests with a more muted response.
  • Some major issues that will impact U.S.-EU trade talks include the possibility of U.S. imposed auto tariffs, and negotiations surrounding WTO reforms. If full scale auto tariffs do come into play in February, how will this change the direction of the talks and motivate ambitions from both parties?
  • The group agreed that EU and the United States should negotiate the new trade deal in stages.
  • S.-EU cooperation is fundamental for handling the WTO reforms. Both parties should be on the same page with regard to the direction of reforms.
  • S.-EU trade talks should focus on building cooperation for a united front so that coordination in dealing with other arising issues is easier. It will be essential to maintain agreements and build a strong core, with the focus being on tariffs and regulatory issues. Germany will play a fundamental role in shaping EU responses.
  • A strong U.S.-EU partnership will be crucial in dealing with the China challenge, and how to regulate unorthodox trade practices in China.

The China Challenge

Will it be possible for the U.S. and Germany to find common ground in dealing with China?

  • The China issue presents a common challenge for the U.S. and Germany, thus it is an opportunity to coordinate efforts. As mentioned, creating a strong core to deal with China will be essential going forward and including the role of trilateral talks among the U.S., EU, and Japan.
  • Does the EU have an interest in U.S.-China talks failing in order to gain access to markets? Short-term deficit and market access solutions on the U.S. side could certainly impact EU markets. If negotiations are about deep reforms, progress could be good for both the U.S. and EU.
  • While there have been discussions between the EU, U.S., and Japan regarding WTO reform, it will be important to focus on the tactics in which the transatlantic relationship can be refocused toward getting China to abide by international trade norms.
  • If the U.S. and the EU can come to a consensus regarding trade agreements, this will create a stable basis for talks with China. Davos reaffirmed the prospect of making ecommerce a topic of discussion between the U.S., EU, and China.
  • A transatlantic dialogue on Chinese investment oversight would be beneficial.
  • Where should China not be allowed to invest in foreign markets? What should the rules be regarding Chinese technology and its role in emerging markets? What are the costs and benefits of having less trade with China?
  • Is there a trade-off between security and prosperity in dealing with the China challenge?
  • When looking for solutions, market to U.S.-German interests such as cybersecurity issues, labor, protecting technology, and fighting subsidies.

Digitalization, Data Privacy, and Artificial Intelligence

What can the U.S. and Germany offer each other for digitalization, data privacy, artificial intelligence, and the regulations surrounding these issues?

  • Germany and the U.S. look at these issues differently. The EU has proposed digital taxes and more regulations. Does regulation hinder innovation or is it the entrepreneur’s job to work around existing regulations? Could regulations instead actually spur innovation?
  • Dealing with these issues will be contingent upon working within the international system. The U.S. and Germany are both working within a global economy, making this a transnational issue.
  • Having said that, what does consensus on privacy and data protection standards look like—is it possible to agree to disagree, should the highest standards that exist in one place be adhered to everywhere? Is it possible to have a consensus on standards but nevertheless have different implementation strategies for regulations?
  • How can standards be created in the most effective way possible? Standards are not just about how high or low the bar is, but also how horizontally similar they are, and the specific issues they are attempting to cover. If regulatory standards are too dissimilar, it also becomes too complicated for companies to abide by them.

Skills, Infrastructure, and Investments

How can the U.S. and Germany future-proof workforces for globalization?

  • A key questions was to what extent this is a transatlantic cooperation issue and not a comparative domestic one?
  • Some argued that the transatlantic angle is important because when either side is struggling to develop skills, infrastructure, or investment projects it undermines the transatlantic relationship as a whole in dealing with a wide range of other strategic economic issues.
  • There is room for agreement between Germany and the U.S. with regard to workforce development, at both micro and macroeconomic levels. For example, the apprenticeship model of developing workforce is an area of interest in the United States, so looking to Germany to develop similar programs suited for the domestic education system could be beneficial. German-American coordination on future-proofing is also more effective financially in the long-run.
  • The transatlantic relationship can be key to creating alliances between educators, employers, and labor unions in order to exchange information and develop best practices for educating the current and future workforce.
  • The issue of immigration overlaps with this focus issue in some regards. How are both the U.S. and Germany dealing with migration in relation to skills, infrastructure, and investment? For example, how has the international race for talent become such a globalized issue?
  • Populists have been successful in capitalizing on debates about immigration that stem from inequality, when in the past centrist parties have been able to win these arguments. Is there any role that transnational corporations could play to ease inequality in the labor market?
  • Although it is difficult to look at a long-term solution amid current economic shortcomings, it will be necessary for both the U.S. and Germany to consider long-term infrastructure investment projects; acting on the current situation will increase prospects for the future.
  • Engendering a healthy competition could motivate particular U.S. states to attract foreign investment, particularly in states like Tennessee, Alabama, and the Carolinas, where German corporate presence already exists.
  • Education shouldn’t be a conversation happening in the capitals; cooperation should happen at the state and local level.
  • The U.S. and Germany could further look to increase their competitive advantages in third markets, where Chinese investment is playing a dominant role.

 

The takeaway from this meeting emphasized the importance of maintaining the transatlantic relationship as a strategy of global economic cooperation, specifically in dealing with the areas of concern mentioned above.

January 29, 2019