US to Bully Germany on Trade Surplus at the G-20

[pampango]

Source: Der Spiegel

The US thinks it knows who is to blame for its struggling economy: Germany and other countries with a trade surplus. In desperation over the grim economic situation, the administration of US President Barack Obama is embarking on a diplomatic offensive intended to pillory countries with chronic trade surpluses. This puts China, Japan and Germany in the line of fire. Washington wants to see new rules that would punish such imbalances, but Germany says it shouldn't be blamed for having more competitive companies than the US. Germany's export surplus ... is not the result of the country having ample natural resources or a deliberate devaluation of its currency. Instead, it is based on the diligence and ingenuity of its companies and workers. For this reason, they say, Germany should not be pilloried.

The G-20 will meet this week in the South Korean capital Seoul to discuss the condition of the global economy once again. Currency wars and trade imbalances are at the top of the agenda. Much is at stake for Germany, which is currently experiencing an unexpected employment and growth spurt, due in large part to the substantial competitiveness of its companies in global markets. The German economy is expected to grow by about 3.5 percent this year, perhaps even more.

This success has sparked resentment, particularly among countries that are having a hard time pulling themselves out of the crisis, most of all the United States. The government in Washington sees the success of others as the source of its own troubles. Treasury Secretary Timothy Geithner has long complained that China's and Germany's trade surpluses indicate that these countries haven't developed enough domestic demand to help weaker countries.

Two weeks ago, Geithner followed up on his complaints with action when he proposed a mechanism that would require countries with trade surpluses to modify their fiscal and economic policies in ways that would stimulate domestic demand. This would enable these countries to import more, said Geithner. In other words, countries with a trade surplus should voluntarily give up their competitive advantages for the benefit of the United States.



Read more: http://www.spiegel.de/international/world/0,1518,727970,00.html

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I hadn't heard that Obama and Geithner were going after Germany and Japan for their trade surpluses instead of just China. Neither Germany nor Japan are resource rich (much less resource exporters like oil-exporting countries) nor are they low-wage economies. They both are highly unionized with strong social safety nets and progressive taxation.

[HereSince1628]

1. But the Germans eat cheese in an old Europe sort of way...

Obama's still looking for something to bring in the Cheneyians. Maybe he can get them on German trade imbalance and get the 'bipartisanship' for which he's been searching

[xchrom]

2. so germans have economically protected their own interests

and we're mad because we haven't and it's their fault?

wow -- how about we just start looking at our own trade agreements with a mind to look after americans?

who would do such a thing though?

[pampango]

3. Not sure what you mean by "germans have economically protected their own interests".

They belong to the WTO and have the same tariffs as we have. Also the German version of NAFTA (the EU) is a "free trade" zone with 27 countries and 500 million people.

Germany (and the rest of the EU) has FTAs with Mexico, South Korea and many others and is negotiating with Canada (which may include easier immigration rules, too) and India.

Germany prospers because it makes good stuff and sells it in other countries, not because it restricts imports.

Germany imported $930 billion worth of goods in 2009 equal to about 25% of their $3.67 trillion economy. The US imported $1.6 trillion equal to about 11% of its $14.2 economy. German exports in 2009 were $1.12 trillion (about 30% of their economy) while US exports were $1.06 trillion (about 7.5% of our economy).

http://en.wikipedia.org/wiki/Economy_of_Germany
http://en.wikipedia.org/wiki/Economy_of_the_United_States

[dipsydoodle]

5. Well composed and sound reasoning

:thumbsup:

[InvisibleTouch]

10. German manufacturers have been willing to think of the long-term...

...rather than going for the instant gratification. That is, they've decided to keep factories and businesses open in Germany and keep their own people employed, rather than sending those jobs overseas for monstrously inflated profits. They're still making a profit, just not as huge of one - but with the benefit that employed people are in a position to spend money at home and keep the economy humming along.

I imagine there are businesses here that see the logic and want to do the same, but they'd be outcompeted by those that are making everything in China for pennies. It has to be an across-the-board shift, or it won't work. Some laws targeting those companies that send jobs overseas and lay off thousands at home, would be a good start.

[girl gone mad]

18. You're leaving out the Maastricht Straitjacket..

whereby the EMU locked Germany’s main export competitors into the monetary union at extremely uncompetitive exchange rates. This is why Greece has collapsed under the weight of its debts. These same insurmountable debts, which all of the PIIGS economies are drowning in, have been largely responsible for Germany's shining success story.

[DetlefK]

4. I think, the recent weakness of the industrial sector has cultural reasons.

Let's see: In the 80's the big enemy, the USSR, was philosophically focused on socialism, on equality and spreading wealth. The US was focused on the individual, on personal victory, on the notion that personal success is good for society. If you put too much emphasis on money-making, you put too much emphasis on banking and the high-wage-segment of the population.

I think, the middle-class was simply neglected for too long. You can't reverse that course within a few years, especially not with the lackeys of Wall Street in influental positions.

[CJvR]

6. Ghost of the DM...

While Germany havn't devalued it's currency the Euro, with the participation of several weak currencies, probably have had a simmilar effect. Without the Euro the old German Deutsch Mark would have stood alone on German economic merits and been much stronger today than the Euro (representing Germany + France, Greece, Italy, Spain etc) is.

[radhika]

7. Problem: the USA doesn't make things ....

that other countries want to buy. Solution: complain about countries that do?

[dipsydoodle]

8. It does actually

but doesn't make them in the USA.

Part of Germanys strength lies in their automobile industry, German cars are popular worldwide as opposed to US cars which broadly speaking are popular only inside the USA.

[nunyabidness]

17. Because German cars don`t suck. US needs to make good things.(make things good.)

[BeyondGeography]

9. Germans don't migrate production to China as quickly as we do

The Obama Adminstration should start shaming American companies and their morally-bankrupt shareholder values style of investing before turning the heat on other countries. This is embarrassing, quite frankly.

[Thav]

11. Well that's bad.

"They both are highly unionized with strong social safety nets and progressive taxation."

And that's bad, mmkay? It just is, they need to stop that and get with the rest of the world (or just us), and drown themselves in debt.

[pampango]

14. To the contrary. "highly unionized with strong social safety nets and progressive taxation" is great

Those characteristics are key to Germany being an economic success and the lack of them a key to our economic problems.

Bad is the absence of strong unions, an effective social safety net and progressive taxation, which describes the US, not Germany.

It would make more sense if Germany (a country with strong unions, a good safety net and progressive taxation) was complaining about imports from the US (with its weak unions and ineffective safety net and regressive taxation system) as being unfair (as we do about imports from China-with its even weaker unions and safety net), but it is the other way around. We are complaining about the trade surplus of a progressive country.

[Thav]

16. I forgot the sarcasm tag.

I lived in Germany for a year. It was nice to be able to get around with public transportation very easily. It was nice seeing 70+ year old grandmas zipping around on bikes. I was impressed by my (third party, just went with someone) experience at a doctor's office. I had to laugh when my 68 year old house mom asked me "what's the big deal about that?" referring to the whole clinton-lewinsky blow-job scandal.

I wish we had some of the things Germany has: unions, effective social programs, progressive taxation, and a good passenger rail system. That'd be awesome.

[Hubert Flottz]

12. BullyShit

We need to "Bully" American world traitors, who put money ahead of everything else.

[Demeter]

13. Lots of Luck with That!

:rofl: Barry against the Iron Lady of Europe. :popcorn:

[Guy Whitey Corngood]

15. I don't think we're in a position to "bully" anyone. nt