speeches
Partners in the Global Economy: U.S. and Germany
Verein Berliner Kaufleute und Industrieller
Ambassador William R. Timken, Jr.
Berlin
November 7, 2006
As prepared for delivery.
Thank you, Mr. von der Hyde for the introduction and thank you VBKI for the invitation to speak here tonight.
VBKI’s long and distinguished history in Berlin’s business community – and its historical connections to the U.S. – reflects the important role business needs to take in dealing with governments. It is also an example of the enduring relationship that exists between Germany and the United States. VBKI’s connection to the transatlantic business community has helped maintain this important economic relationship, particularly as the ties between our countries have grown, transformed and deepened over the past fifteen years.
What I would like to do tonight is talk about the transatlantic relationship in the context of globalization – what it means for the U.S. and Germany – and ways we can help deepen our partnership. I also want to have an opportunity to discuss some of these points afterwards.
Since the end of the Cold War, no two parts of the world have experienced economic integration faster and more intensely than the U.S. and EU. Increased investment, deeper economic integration, and more corporate partnerships all tie our business, people, consumers, workers, and farmers together. Despite constant talk of the rise of Asia and other emerging markets, the EU and the U.S. are still each other’s most important commercial partner and number one investment location.
The transatlantic economic relationship between Germany and the United States provides a perfect example. Foreign direct investment flows between the U.S. and Germany total over $290 billion.
There are over 3,250 German companies in the U.S. with an annual turnover of $429 billion and more than 1,250 U.S. companies in Germany with a turnover of $214 billion. All together, these firms provide over 1.25 million jobs in our two countries. Companies on both sides of the Atlantic daily harness the benefits of opened markets brought about by global economic integration. In doing so, they increase the prosperity of our respective countries and further deepen the most important trade relationship in the world.
Taking a closer look regionally in Germany, some of the most dynamic investment is happening in "neuen Laendern" in eastern Germany. Over one-third of all U.S. companies which have invested in Germany have operations in the eastern region with investments totaling over $20 billion. Just look here in Berlin and Brandenburg. The transatlantic relationship is working right before us. New and traditional economy companies like Oracle, Goodyear, Gillette, e-Bay, IBM, Cisco Systems, and Motorola have invested over $7 billion and account for 25,000 jobs.
These companies have seen the benefits of investing in "Standort Deutschland." They have used the benefits of the transatlantic relationship to bring U.S. investment to an area of Germany that less than two decades ago was shut off behind the Iron Curtain.
Cut off no longer, the new Länder are now part of the EU, the U.S.’s most important market. The economic relationship has, in effect, become both driver and anchor of the overall transatlantic relationship. By the driver I mean the continued and ever-increasing level of investment and trade between the EU and United States. Forty percent of world GDP and over one-third of global trade take place between the EU and the U.S. In Germany alone, U.S. company assets – over $351 billion worth – are greater than the total U.S. assets in all of South America.
Transatlantic economic ties have also anchored our relationship. They helped us maintain our purpose and direction when disagreements over the Iraq War made other parts of the relationship difficult.
As a DaimlerChrysler-supported study on the transatlantic economy notes, even though U.S.-German political relations suffered during the IraqWar, U.S. companies still poured $7 billion in investments into Germany in 2003. 2003 was also a record year for transatlantic trade flows, growing by 7% year-on-year. The political relationship might experience ups and downs, but it is the deeper, mutually reinforcing economic relationship that will maintain the course. And helping integrate this relationship even further is the catalyst known as globalization.
There is perhaps no other term that is so thrown around or misunderstood than globalization. I want to make a point I think is crucial. Globalization is consumer-driven and something that existed long before the fall of the wall that separated this city. Globalization is about choice, about seeing things changing elsewhere in the world and wanting to be part of that change. These things – whether they are ideas, new manufacturing techniques, services or consumer goods – have been made accessible through the opening of markets and revolutions in technology and communication.
Globalization has transformed the way people see the world. It has spurred competition and innovation and created opportunities not for an elite few, but for the global population. It removes foreign relations from chancelleries and legislatures and makes it part of the lives of individuals around the world. The benefits of this economic phenomenon – greater market access and increased investment and information flows – give companies and their employees a real stake in the global economy. And in turn, this interest helps ensure the continued success of the transatlantic relationship.
As most of you know, I have a bit of experience with running a company that benefited greatly from the transatlantic relationship. At the Timken Company, we realized that if markets were opening and the global economy changing, we needed to change as well. This required thinking about how to run a company more efficiently, to empower the individual to make decisions – from the lowest to the highest level. It meant breaking down barriers within the company – collapsing management silos and eliminating stove-piping.
We couldn’t allow ourselves to be the greatest hindrance to competing in these new markets.
What I always thought important was our company’s ability to form a connection between our employees around the world. We used worldwide company news letters to report on events or developments happening within all our plants. Information-sharing had to begin within the company itself, to show that the mission of the Timken Company transcended continents. We all had a part to play in its success. Information empowers individuals. While it may sound simple to post a company newsletter or have an electronic bulletin board, the dissemination of information about the happenings in the company and community makes it quite clear that we are all in this together and each employee’s efforts – whether in Lower Saxony or Ohio – plays a role in the company’s bottom line. In effect it makes a difference in the prosperity and well-being of every employee and family. Those workers can also carry that information to their friends and neighbors, helping to further international understanding.
But companies that are reaping the benefits of globalization today cannot rest on their laurels. The global economy is not a spectator sport. One cannot get too comfortable with today’s success. It’s like the old saying – which I think is pretty applicable here in Berlin, “if you don’t like the weather, stick around fifteen minutes.” The global economy is ever changing. What it takes to compete today might not be what is needed tomorrow. As we learned in the U.S. in the 1980s with the automotive industry, if you do not keep pace with what the consumer wants, you will cease to be competitive. Businesses need to remain innovative and flexible to confront the challenges of the future.
But businesses don’t run by themselves – they are made up of people. You need to empower your employees so they can exploit the advantages of globalization. As the world becomes more integrated, the importance of having employees who can adapt to this world -- who have the necessary skill sets to compete -- is essential.
Without a competitive workforce, economic growth and employment will suffer, as businesses lose market share to more competitive companies with more productive workers. The challenge of producing and maintaining a competitive workforce marks an important intersection where government and business interests meet.
President Bush has stated on more than one occasion that the most effective method for generating new, high-quality jobs, and higher living standards, is to develop the skills and technologies that promote economic competitiveness. Business and government both have a responsibility to provide education and training opportunities to keep the workforce competitive. Governments around the world must also continue to open their markets and support education systems that will allow their citizens to be part of this dynamic global economy and share in its prosperity. The challenge to do so brings into further focus the importance economic growth plays on foreign policy.
Here in the EU – and I think we particularly see this in Germany -- weak economic growth means lost opportunities for transatlantic trade. Growth in Europe's large economies is tepid at best, although countries such as Ireland and the new Central European EU states are more vigorous. Some countries are struggling to respond to the rise of China and India as economic successes and to meet other challenges of globalization. Unemployment remains high. Labor market flexibility is low. And a rapidly aging population means fewer workers and higher overall cost for social benefits. Insufficient progress and half-hearted measures toward reform have left Europe's large economies with lagging competitiveness, stagnant productivity, and anemic growth. As Daimler-Chrysler’s study on the transatlantic economy highlights, annual growth of just 3% in Europe would create a new market the size of Argentina.
The only answer is reform. Recognizing this, the EU committed itself to a ten-year reform plan in 2000. The Lisbon Agenda aims to transform the EU into a faster-growing, competitive, knowledge-based economy. Successful reform is vital for the EU and global prosperity, since the EU is and will remain a key engine of world economic growth. Member state governments need to unleash the potential of businesses -- through tax cuts and less restrictive labor regulations. These actions will be just as essential to ensuring U.S. and European prosperity in the future, as they are today. For all these reasons, we look forward to German leadership in advancing the Lisbon agenda for a dynamic EU.
One problem we need to recognize is that countries that can’t compete will be tempted to turn to the false elixir of protectionism. This is an example of a bad policy decision. It does not work and the collateral damage can be high. By closing off competition and blocking the forces of change, protectionism reduces the losses of the present by sacrificing the opportunities of the future. Jobs saved in the short term are offset by the longer term consequences of allowing inefficient production to continue -- future job losses and a decline in the standard of living.
In the U.S., we learned this lesson the hard way when some tried to protect our steel industry. This made our steel less competitive abroad and delayed the necessary restructuring that would have enabled U.S. steel to compete in the global market. The mills that compete best on the world market and adjust to changes in world demand are the mini-mills, which use innovative, faster and cheaper production methods. They stand in stark contrast to the steel mills of old, which, because of industry protection, were slow to exploit new, consolidated production methods.
To continue encouraging economic growth – and halt protectionism – we must make a serious effort to save the WTO’s Doha Round. A successful Round is critical to companies, farmers, workers, and consumers around the world. Free trade is at the center of President Bush's vision of a world of expanding economic opportunity, prosperity, and freedom. While bilateral or regional free trade agreements can be helpful, they can in no way replace the benefits of a comprehensive global, multilateral free trade system.
The opportunities that a successfully concluded Doha Round would provide are too great to let slip away. Let’s not let this once-in-a-generation chance pass us by. There is still time to reach a conclusion to the current Round, but your voices must be heard. European business must tell their politicians that failure in the current trade negotiations is unacceptable, that it is time for all WTO members to seize this last chance to make the right choice about our common futures.
Let me be clear -- the U.S. wants the current Round to conclude successfully. President Bush has stated several times that concluding the Doha Round is his most important international economic priority. I believe the offer we have put forth on agriculture -- and subsequent statements by the President and U.S. Trade Representative Susan Schwab – show we are serious about Doha; to suggest otherwise is unfair. We now expect other countries, which share a similar interest in completing a successful trade round, to – as we say in the U.S. – step up to the plate.
In conclusion, the transatlantic relationship has undergone a significant, positive transformation over the last decade – with the economic relationship becoming a more visible, driving force. A cornerstone of this relationship is the U.S.-German relationship, which continues to contribute to the economic prosperity enjoyed by both countries. Globalization challenges us to be more competitive and innovative. Still, at the end of the day we can only fully enjoy the opportunities and prosperity an integrated world economy brings if we have the tools to take advantage of them. As Thomas Friedman says of the world we live in, "The world is being flattened. I didn’t start it and you can’t stop it, except at great human cost to human development and your own future. You can flourish in this flat world, but it does take the right imagination and the right motivation."
We see the successes of companies in both of our countries that are a result of this flattened world. I would close by asking you to think about what you and your company can do to make the public aware of and supportive of this deeper relationship and the benefits it brings. An even deeper transatlantic relationship will ensure that this success continues, as we build on our strong partnership for the future. Thank you.
