speeches by amb. coats

It's a pleasure to be in Frankfurt again and I thank the American Chamber of Commerce in Germany for organizing this event. AmCham Germany celebrates its 100th anniversary next year, a century of vigorously representing American business interests in Germany. The U.S. Embassy and Consulates work closely with AmCham in that respect and we are at your service for further collaboration in the years to come. AmCham can also take pride in the good corporate citizenship of its members. To mention just one timely project, I understand several of your member companies will provide business recovery advice to entrepreneurs in Saxony who were devastated by the recent floods. I'd like to express my personal appreciation for AmCham's support for this tripartite project also involving the Saxon Economics Minister and the U.S. Mission.

The United States and Germany are the first and third largest economies in the world. We conduct extensive bilateral economic relations and maintain a lively policy dialogue on a wide range of economic and political issues. This cooperation is immensely valuable to the two countries and can be a powerful force for good in the wider world.

U.S.-German cooperation has proved invaluable in events such as securing peace in the Balkans and replacing the terrorist regime in Afghanistan. It is my hope that our governments can continue to cooperate closely in the international challenges that lay ahead, and that the strong and effective alliance we created will remain solid.

With elections at the end of this week, Germany is obviously at a delicate moment in the political calendar. Both international and economic policy issues have been extremely important in this election campaign. It is our hope that we can continue the close and important relationship that has developed between our two countries over the past 57 years. Active bilateral dialogue, and finding common ground, particularly on post 911 issues, is more important than ever before.

Iraq

"To be, or not to be." A dramatic beginning in a recent editorial by former Secretary of State George Schultze. He asked the question of whether Americans were to be the Hamlet of nations, "debating endlessly over when and how to act" to solve the string of crises and dangers to international peace and security posed by Saddam Hussein. That question is, however, applicable to the entire international community.

Last Thursday, in his speech before the United Nations General President Bush moved the debate ahead and created the clarity that is the basis for action.

The United Nations has taken a long series of steps to rein in Saddam and authorize action against his regime. Saddam's regime has systematically violated 16 UN Security Council resolutions over the past 11 years. "We have been patient," the President said, as he called on the U.N. to live up to its founding purpose and confront the "grave and gathering danger" of Saddam Hussein's outlaw regime.

"We want the resolutions of the world's most important multilateral body to be enforced," the President said. "Right now these resolutions are being unilaterally subverted by the Iraq regime."

Economic Impact of Terrorism

Close international and multilateral cooperation in the fight against international terrorism will remain a high priority for my government. Apart from its tragic human costs, terrorism has caused and still threatens massive economic damages. Yes, the world economy survived the attacks of last September, but the costs to important specific sectors, such as aviation, tourism and insurance, have been enormous. Many experts believe public confidence and financial markets are still feeling the effects. Clearly, this is part of the terrorists' intent -- to wreak havoc in open economies.

If you start thinking like a terrorist, there are so many targets that it is hard to list them all. The characteristics of American and European society that we cherish – our freedom, our openness, our great cities and towering skyscrapers, our modern transportation systems – make us vulnerable to terrorism of catastrophic proportions. A city like Frankfurt, Mainhattan, is open to the same risks as New York.

Our failure to act, in other words letting the terrorists have the upper hand, would have major economic costs, and one shudders to think about the economic impact should terrorists be able to deploy weapons of mass destruction.

If it was learned, for example, that terrorists were using a cargo container to smuggle weapons of mass destruction, experts estimate that screening the roughly 6 million cargo containers that are in the U.S. alone on any given day could take up to 6 months. During that half year, global commerce would all but grind to a halt.

Contemplating these risks must strengthen our resolve to do all we can to prevent future terrorist attacks and to bring the perpetrators of past attacks to justice.

Economic Issues

Even apparently domestic policy debates have in fact bilateral and international dimensions. Mutual transatlantic investment has increased enormously. As a result, the two economies are becoming ever more intertwined, and policy areas that were previously seen as “domestic” are now of direct concern to the other party.

So even though this is a delicate moment in your political calendar, I believe it is a good time to review the various economic issues we will be taking up in the coming weeks and months with the next German government, whomever the voters elect on Sunday.

The U.S.-German trade and investment, of course, takes place in private business and financial channels with little or no direct government role. But the two governments need to stay engaged. Governments have a role in establishing the best framework to allow private enterprise to flourish and in ensuring that the two countries maximize the positive potential in their economic interaction and quickly resolve any disputes. Our bilateral economic policy dialogue is a key part of maximizing that positive potential.

Promoting Global Prosperity

Because we are the first and third largest economies, America and Germany have special responsibilities for promoting global prosperity. Along with ensuring global security, there is no greater policy priority today than restoring economic growth. Our countries' ability to foster robust, sustainable economic growth not only determines prosperity and employment levels for our own citizens, but also has a major impact on the economic well-being of other countries, especially developing countries.

Germany is experiencing its second year in a row of economic growth below one percent and has seen average growth of only one and a half percent per year over the past ten years. We are convinced that Germany can and should make a better contribution to global growth. This will be an urgent agenda item in our relations with the next government.

Structural Reform

The United States has our own ideas on the kinds of policies that promote economic growth, but you don't have to take our word for it. Numerous international organizations, German economic institutes, business groups and the German Council of Economic Experts have offered similar advice: Germany needs to implement a range of structural reforms to promote investment, job creation and faster growth. Long-standing recommendations include reforming inflexible labor markets, privatizing state-owned companies, reducing subsidies, liberalizing shop-opening hours, removing the stigma from bankruptcy, and cutting bureaucratic regulation.

U.S. Investment in Germany

We will also continue our dialogue on investment-climate issues in specific sectors. American companies have been attracted to Germany in recent years thanks to reforms in the telecommunications, postal services and energy sectors that opened these markets to foreign investment. However, many American firms have found the reality on the ground more difficult than the reforms appeared on paper. Despite substantial investments, they struggle to make a profit in markets where the government faces a conflict of interest between its roles as industry regulator and part owner of former monopolists. These industries illustrate the urgent need for privatization and enforcement of fair competition rules by independent regulatory agencies so that foreign investors can compete fairly with established German firms and consumers can reap the full benefits of market-opening reforms.

WTO Doha Round, Agriculture

In addition to these domestic issues, we will also continue to work with the next German government on the various international aspects of the effort to promote global prosperity. The main challenge here is to bring the multilateral trade negotiations launched last year in Doha to a successful conclusion by 2005. After an intensive debate, the U.S. Congress this summer approved President Bush's request for Trade Promotion Authority. So the Administration now has the legal authority to match its policy commitment to make rapid progress on multilateral trade liberalization in the WTO.

Liberalizing trade in agriculture and bringing it under normal WTO rules are key challenges in this trade round. The United States and Europe both have work to do in this area. Our European partners have sharply criticized the recent U.S. Farm Bill, which restores some of the agricultural subsidies Congress cut in the last bill, in 1996. This criticism is over-stated, in my view, because even with the new farm bill, U.S. agricultural support levels are within our permitted WTO ceiling and far below the level of EU agricultural support. For example, the EU spent over $2 billion on export subsidies in 2000, while the United States spent only $20 million. But instead of carping at each other while we both spend too much, the United States and Europe should work together in the WTO to eliminate agricultural trade barriers. The success of the Doha round depends on our cooperation in this area.

In recognition of agriculture's pivotal importance, the United States has proposed an ambitious plan on export competition, market access and domestic support. The U.S. plan would result in reductions in trade barriers for agricultural products, greater equity in world agriculture, and expanding growth opportunities for the sale of agricultural products. Unfortunately, the EU's initial reaction to our WTO proposal has not been positive. Germany's role will be critical in this WTO debate and in the related issue of reforming the EU Common Agricultural Policy. Germany has been a leader in pressing for CAP reform, for well-known budgetary reasons, and we hope that whatever government emerges from the elections will continue this leadership role.

Biotechnology

Other trade issues will also command our attention. In clear violation of its WTO commitments, the EU has enforced a de facto moratorium on new biotechnology product approvals since 1998. Meanwhile, the EU is considering a complex and unworkable regime for tracing and labeling of biotech products that would also be highly damaging to U.S.-EU trade relations, as well as damaging to the development of a biotech industry in Europe. Governments tell us it is important that consumers have informed choice. We couldn't agree more.

Unfortunately, the actions of EU governments limit consumer choice and spread misinformation about biotech products. The key fact, demonstrated in countless scientific studies, including some by the European Commission, is that biotech products are just as safe and nutritious as the conventional alternatives. And they offer numerous economic, ecological and developmental advantages.

Despite the urgency of the need for food aid in drought-stricken southern Africa, Mozambique, Zambia and Zimbabwe have all raised concerns about accepting donations of genetically-modified corn. Their concerns are based on EU threats to bar their imports of agricultural products from these countries should they accept food aid from the United States. This corn is the same food that Americans eat daily, is safe and wholesome, and can make the difference between life and death for millions of southern Africa's poorest people.

Steel

I know Europe has its complaints about elements of U.S. trade policy too, for example steel. Following a careful study of the impact of rising imports on American steel manufacturers, the President announced temporary tariffs last March to give U.S. producers some time to restructure and adjust to international competition – to promote the market-based readjustment of the U.S. steel industry. This is the explicit purpose of safeguard remedies under the WTO rules. The EU disagrees, and a WTO dispute settlement panel will decide the case. Meanwhile, to minimize any negative fallout from the U.S. measures, we have announced numerous exceptions to the original tariffs. Germany is the largest recipient of these exceptions worldwide, measured by number, tonnage or value, so the majority of German steel exports to the United States will not be affected by the tariffs.

Some in the EU have argued for immediate retaliation against the U.S. steel tariffs, which absent a dispute panel ruling would clearly violate WTO rules. The German government, while making its opposition to the tariffs clearly known to us, took a more constructive approach. It correctly assessed steel's limited place in our 90 billion dollar trading relationship and recognized the risk of rapid escalation of the dispute to broader trade ties. A key element in our dialogue with the new government will be to energize progress in OECD talks aimed at reducing the subsidies many countries give their steel industries, which distort global steel trade in the first place.

It is important to note that since the safeguard went into effect, the industry has experienced significant consolidation. Consolidation is likely to continue as healthier steel firms, both domestic and foreign, look to acquire bankrupt or troubled steel producers. The U.S. steel industry has a long history of modernization and restructuring. Over the last 20 years, dozens of inefficient mills have been closed and productivity has been raised by more than 300%. The industry has invested over $50 billion in plant modernization – seven billion dollars alone in environmental controls, cutting emissions by 90%.

Conclusion

Ladies and gentlemen, I have tried to give a snapshot of the diverse range of economic issues facing the United States and Germany today and in the immediate future. Given our respective weights in the world economy and the extensive trade and investment ties that join us, we are in some sense "condemned to cooperate" with one another. America does not regard this as a heavy sentence, however. Rather, we approach the task with good will, commitment and optimism. Optimism that we can resolve the economic disputes inevitable in such an extensive relationship and further develop our economic ties to our mutual good and that of the world economy.