As prepared for delivery.
The German-American Partnership: Benchmarking Economic Success
Ambassador William R. Timken, Jr.
Hamburg, November 25, 2008
Mr. Horch,
Ms. Gentilozzi,
Mr. Zeller,
Consul General Johnson,
Ladies and gentlemen,
After almost 3 ½ years here, Sue and I will be heading home next week. We are very thankful for the friends we have made over these years, especially in the five northern Germany states that make up the Hamburg U.S. Consular District. It has been our pleasure to witness the close relationships that thrive between Germans and Americans. Whether between Chancellor Merkel and President Bush,, or ministers, mayors, CEOs, researchers, teachers, students or simply person to person -- the daily exchanges among citizens of our two countries, both personally and through modern electronic communications, are the strongest and most varied in history. Most important -- and a fact that seems to go almost unmentioned, both here and in the United States -- is that millions, note that I said millions, of German and American families depend upon a strong bilateral relationship for their jobs, their standard of living and their economic well being.
Sue and I have spent at least a third of our time in Germany on the road. Given the deep and historic ties between this city and the United States, it is appropriate that my final trip as Ambassador be to Hamburg, the site of America’s oldest Consulate General in Germany and a city that has long been imbued with a spirit of openness to the rest of the world. In 1828 the United States signed a shipping, friendship, and trade agreement with the Hanseatic League under the auspices of the “Commerce Deputation” or forerunner of today’s Hamburg Chamber of Commerce.
Hamburg was not only a city where financial dreams were realized, it was also a port of embarkation for many of the five million northern Europeans who immigrated between 1850 and 1934 to the United States seeking to fulfill their dreams in the new world. As a result of successive waves of immigration, America today has nearly 60 million people of German extraction – including my family. This is an integral part of the history of our two nations and one reason that we share such strong cultural ties.
In January 2005, when President Bush asked me to serve as Ambassador to Germany, he charged me with improving the relationship between our two countries as we forge an effective global partnership between our nations and between the U.S. and the European Union. I believe that today the German-American partnership is stronger, more mature and better balanced than it has ever been before.
We are already deep into our transition work with the new Obama administration. President Bush has ordered that the transition will be the best ever, and it will be.
As part of my transition reporting back to Washington, I have confirmed that we are indeed truly operating on the basis of a global partnership, a partnership that recognizes both the burdens and opportunities of global citizenship.
In the past 20 years, the transatlantic partnership has become richer, more diverse and more productive than at any time in the past. The most important consequence of this strong partnership has been freedom, prosperity and peace for millions of people in Europe – and the potential and the momentum to bring these advantages to people around the world. This is due in large part to the intense economic integration between the U.S. and EU. Transatlantic investment and trade shape our relationship as much as, if not more, than any diplomatic demarches or military exercises.
As a former businessman, some may ask whether in my focus on job creation, economic growth and opportunity, and standards of living that I undervalue the many other ways we as two great nations are attached. Of course we still share security concerns – obviously of a much different nature than during the Cold War. They still significantly continue to require military cooperation as part of our partnership. In this regard, Germany is to be commended for its leadership in the EU, NATO, and other major multilateral organizations.
In the 21st century, however, I am convinced that private initiative is the glue for our partnership. I am certain that each positive step in the future will carry a special German-American imprint – in large part because of the levels of connectivity that link our two countries through trade and investment. Unfortunately these economic and business connections are the least understood, most underestimated, and unrealized part of our relationship. They are so broad and deep, and in some cases so seamless, that they are indeed often taken for granted.
We want to shine a light on these fundamental links between our two countries – and I would ask you all to join us in this endeavor. Over the course of the past year, we have been documenting the breadth and depth of the connections between Germany, Europe’s largest economy, and the United States, the world’s largest economy. We have gone to everyone and every place to assemble these facts – the federal governments of Germany and the U.S.; the German and American states, the Lord Mayors, the NGOs, local and national chambers of commerce, and on and on. The Hamburg Handelskammer and the American Chamber of Commerce were very helpful. I would like to mention that I have been involved with business organizations all over the world and have never seen a more effective AmCham organization than here in Germany.
Earlier this month we released a 34-page report, which summarizes much of the data that we have collected. We have also set up a website as a platform where people can get more facts on this subject. We hope still more data will flow to that site. What we have found has been quite astonishing. I urge you at a minimum to read the report. I am sending it to leaders in every field and we have copies here tonight. These facts should come to bear on all they do. We invite reflection on these facts.
Let me review a few of the major findings:
First, it is clear that foreign direct investment between our two economies fuels two-way growth. It is the most significant factor influencing our economic relationship. U.S. foreign direct investment in Germany has more than quadrupled since the Berlin Wall fell, while German direct investment in the U.S. has grown roughly seven times. The combined assets held by German firms in the U.S. and by American firms in Germany total over one trillion dollars.
The most recent Bundesbank data indicate that the U.S. was the largest investor in Germany in 2006 and accounts for 11.5 percent of Germany's foreign direct investment. To put this in an international context, U.S. assets in Germany are in fact greater than total U.S. assets in all of South America.
The United States is also German businesses' #1 investment destination. German investment in the American Southeast alone is greater than all of European investment in China.
There has been a similar and perhaps even more dramatic growth in capital markets. The U.S.-based investors’ share of German DAX equities grew rapidly from just over 2 % in 2001 to almost 18 % by the end of 2006. During 2007, that figure surged to over 22 % of the DAX. German investors held $266 billion in overall U.S. securities as of June 2007.
On the trade side, German-U.S. trade represents almost a quarter of total U.S. trade with all 27 EU member states. Germany sends approximately 60 percent more exports to the U.S. than the second largest European exporter. The United States is Germany’s largest export market outside the EU. Overall Germany trades more with the United States than it does with China and India put together.
This decade-long export success in the U.S. market is reflected by its substantial export surplus of $45 billion in 2007. Think how many German jobs are created by that surplus. Here in this region, the ports of Hamburg and Bremerhaven are important employers. Combined these two ports handled 330,000 U.S.-bound containers during fiscal year 2007. That translates directly into jobs.
My underlying message is this: the greater the trade and investment between the United States and Germany, the greater the level of foreign affiliate sales and profits. That translates into increased prosperity and, most important, more jobs and more wealth in both of our countries. American companies in Germany today provide jobs for nearly 800,000 Germans. This is the equivalent of 1 in every 35 German private sector employees. Direct investment is, however, only the most visible part of the jobs analysis. All told, through multiplier effects, these jobs support up to an estimated two million additional jobs for German citizens
Of course, increased economic integration allows opportunities, as well as financial difficulties, to spread rapidly across borders – as we have seen in recent weeks. When we emerge from this period – and we will emerge from it – the task for policymakers at central banks and elsewhere will be to ensure that a balance is restored between risk and reward in the marketplace. A balance must also be struck between smart regulation and market discipline.
The recent G20 summit in Washington was very successful. Very few would have thought four or five weeks ago that leaders from 20 different countries would be able to come together and reach agreement on a plan of action. There was universal recognition by all leaders that reform efforts would only be successful if grounded in, and I quote, "a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial markets." Unquote. It is these very principles that are essential to economic growth and prosperity. They have been responsible for lifting millions out of poverty.
Collectively, we need to rebuild confidence in our markets so that capital can flow again to help spur global growth. Both the American and German economies have proven resilient in the face of other economic shocks. They will remain as leading engines of global economic growth – and the best places in the world to do business.
During these times of economic stress and job loss, we need each other more, not less.
When people say the United States and Germany are drifting apart, they ignore the fact that millions of us are actually drawing closer together economically at a rapid rate. Pundits and politicians ignore these facts at their peril. Investments, trade and jobs is the glue that binds us together. But we have also found that there are numerous multiplier and spin-off effects. Economic indicators alone do not tell the full story.
Ernst & Young’s 2008 study found the United States and Germany rated as the first and third most dynamic countries in terms of innovation. German firms conduct more R&D in the U.S. than those from any other country – over $ 6.3 billion dollars in 2005 alone. American firms are also active in Germany. In the last months alone, Microsoft, Google and GE have announced new research centers here.
The public and private technology connections between Germany and the U.S. are also astonishing. The German national research center for particle accelerators and detectors is located here in Hamburg. It exchanges scientists with not only the U.S. Department of Energy but also numerous universities in the United States. The results of this kind of research in high technology fields are new products and solutions to global problems. American and German scientists, researchers and graduate students are working side by side in laboratories on both sides of the Atlantic.
In addition, some 30,000 students at both undergraduate university and high school levels spend an academic year in each of our countries. Both the German Fulbright Commission and the German American Partnership Program are the largest government-supported exchange programs of their type worldwide.
These government supported exchanges are important, but the number, variety and impact of privately run programs are far greater. Here in Hamburg, the Bucerius Law School, one of Germany’s first private universities, is setting new benchmarks for professional education.
One of my priorities during the past 3 ½ years has been to develop opportunities for young people and minority students who are often underrepresented in traditional exchange programs. My wife Sue has put a lot of energy and commitment into making this vision come true. We would both like to thank the corporate sponsors of the new Windows on America program. A German foundation has been established for this initiative. But to be sustainable, Windows on America will need ongoing private support.
The Körber Foundation has been an excellent partner in the development of Windows on America and related projects. The U.S. Department of State donated $250,000 toward an exchange program for professionals in the field of integration and immigration called “IntegrationXchange.” In workshops and through on-site professional training in New York and Hamburg, participants examined local strategies implemented to integrate immigrants in their communities and societies. I am sure that many of the best practices that were developed will be useful nation-wide.
Apart from formal educational and exchange programs, there are purely economic aspects to people-to-people connections. Businesses thrive by sending employees and their families back and forth between Germany and the U.S.
Millions of tourists also cross the Atlantic Ocean each year – in both directions. Germans are the largest group of visitors from Continental Europe to the United States. The United States ranks # 2 in total overnight stays by foreign visitors to Germany and # 1 for visitors from overseas. In 2007 U.S. visitors spent 6 billion U.S. dollars in Germany.
I shall stop at this point. By now my point should have been made.
Too often I have heard politicians make the case that politics is separate and distinct from the world of commerce and business, with the implication that we can sustain a gap in our political relationship while maintaining our economic relationship. For a short while, perhaps, but in the long run no. This is especially true when the welfare of so many families is at risk, as is the case in the German-U.S. relationship.
We all need to speak up louder and more forcefully in public fora to promote the real and lasting value of our bilateral partnership for the well-being of both the German and American people. It is not well understood.
Because the levels of connectivity that link our two countries, particularly through trade and investment, are so broad and deep, and in some cases so seamless, they are indeed often taken for granted. We want to shine a light on these fundamental links between our two countries – and I would ask you all to join us in this endeavor.
As I return to the United States you can be sure I will carry this message to Americans as well.
