Powerful Ally

USA: "Irreplaceable Partnership"

Demands for a stronger orientation on a global cooperation with the United States are being raised in Germany's foreign policy establishment. Even though it needs a "renewal," the "partnership" with the USA is irreplaceable, according to an article by Jochen Bittner, an editor of the weekly "Die Zeit," published in the current issue of the journal "Internationale Politik."[1]

EU: "The Lowest Common Denominator"

Reinforcement of the EU, with the stated intention of becoming independent of the United States, as an alternative to the expansion of German cooperation with the USA, would not lead to success, according to Bittner. "At best," the EU will have "more foreign policy clout," for example "in its trade policy," writes the editor of "Die Zeit." All too often, in Brussels, one must be satisfied with "lowest common denominator policies," particularly in questions of foreign policy. Even if "with an integrated armament policy and a consensual deployment of a European military force," one would succeed in "catching up to US capacities and, thereby, decouple from NATO, ... Germany's options for shaping foreign policy would diminish," due to mandatory consensus. Cooperation with France would not lead further, even if "the 'friendship' between the two countries" is still not considered "merely a conciliatory fiction." Bittner openly shows his disdain for France: "Our neighbor is centralized and state-run, the leadership is solely a network of relationships, the job market and industrial policy, protectionist and the foreign trade policy, opportunist."[2] This is not a sufficient basis for a strong joint foreign policy.

Europe's "Indispensable Nation"

Bittner sees, however, the need for an assertive foreign policy. There are currently many uncertainties in global policy. This means, Berlin must be "prepared for the worst case." Therefore, "alignment with the West," the "partnership with America ... is still indispensable for Germany." New forms of cooperation, such as the TTIP, are "not only in the economic, but also the strategic interests of Europe and Germany." However, the alliance with the USA needs "a renewal," concludes Bittner. "To defend a partnership," one also needs "to defend one's own position." Germany "has become a minor superpower" and it can "assume more self-confidence." After all, "our friends know very well, which nation in Europe is the 'indispensable nation'."[3]

Motor for the German Export Economy

Current developments in the economic sector are providing a new impetus to this foreign policy demand for a "renewal" of the alliance with the USA. Over the past few years, the United States has developed into the primary motor for German exports. German exports to the USA rose from 65.6 billion Euros in 2010 to 73.7 billion in 2011 and still further to 88.4 billion Euros in 2013 - or by more than one-third in the course of 3 years, with expectations of further growth. This has taken place at a time when, as a result of the crisis, German exports to France - traditionally the most important export partner of its mighty economic neighbor - has slumped as well as to other Euro zone core countries, such as Italy and Belgium. Already in 2013, trade had also slumped with Russia. It continues to decrease dramatically, due to current tensions. Even export to China had stagnated in 2013, and - even though it began again to rise - it does not appear to offer a stable guarantee that it will continue with constant growth. However, observers see enormous potential in the USA.

Arizona Instead of China

These hopes are based on the US fracking boom, which has facilitated a tangible re-industrialization. In the USA, the vigorous increase in shale gas production has, since some time, led to gas becoming cheaper in North America than in Europe or in East Asia. US gas prices run currently at about one-third of the EU's average.[4] In addition, since 2009, US industry has successfully depressed the manufacturing unit labor costs by approx. 5 percent. Unit labor costs "are among the lowest of industrialized countries," reports the Euler Hermes credit insurance agency's professional periodical. In the meantime, the effective difference in salaries between the USA and China is noticeably shrinking.[5] In fact, a growing number of US companies, rather than setting up production units abroad, are opening plants in the USA. "One of the most conspicuous examples was Apple Corporation's decision to locate its newest plant in Arizona, rather than in China," notes Euler Hermes. This trend continues.

Number One Market and Production Site

This promises high profits for German industries in two ways. On the one hand, the re-industrialization, now taking place in the USA, provides for numerous delivery contracts, for example, for German mechanical engineering and construction. A study commissioned by the "Wirtschafts Woche" magazine predicts that "between 2013 and 2017, German mechanical engineers, factory furnishers and manufacturing technicians will ship US $29 billion more industrial equipment to the USA" than in the preceding five years - an increase of 29 percent. The study also predicts that German enterprises could profit considerably more from the re-industrialization of the USA than companies from other European countries.[6] German companies - because of the low costs of energy and labor - have also begun opening new plants in the USA. Volkswagen, for example, plans to double the production capacity of its Tennessee plant, where the hourly wage of $14.50 - $19.50, is particularly low. BASF and Bayer have also announced new investments for the United States in the billions. The German Chemical Industry Association (VCI) considers that "the USA is the most important foreign market and production site."[7]

40 Billion Euro Surplus

On the other hand, Germany is highly profiting from the booming business with the US also on a macroeconomic level. The German foreign trade surplus has risen to nearly 40 billion Euros, in relationship to the United States in 2013, and could rise even further this year. The outflow to Germany of US capital has now surpassed that from France to Germany, taking first place in the statistics of German foreign trade surplus countries. From Berlin's perspective, with this prospect of the rapidly growing profit-making opportunities, the development of a political expansion of cooperation with the USA seems even more enticing.

[1], [2], [3] Jochen Bittner: Unverzichtbar, trotz allem. Warum Deutschland und die Vereinigten Staaten Verbündete bleiben müssen. Internationale Politik September/Oktober 2014.
[4] See Energy as a Weapon.
[5] Die Reindustrialisierung der USA (Update). Euler Hermes Economic Research 02.04.2014.
[6], [7] Martin Seiwert: Deutschland profitiert von Amerikas Industrie. www.wiwo.de 20.08.2014.