Ger­many sees U.S. as sore loser in trade com­pe­ti­tion

The Washington Times Weekly - - Geopolitics - BY TIM DE­VANEY

It just recorded the high­est trade sur­plus in its his­tory, but Ger­many may find it dif­fi­cult to cel­e­brate the mile­stone as Ber­lin faces grow­ing crit­i­cism that the coun­try’s pros­per­ity is com­ing at the ex­pense of its Euro­pean neigh­bors and the health of the global econ­omy.

Fresh off a pub­lic scold­ing from the Obama ad­min­is­tra­tion that its trade sur­pluses were slow­ing the re­cov­ery from the Great Re­ces­sion and the EU’s cur­rency cri­sis, Ger­many’s Fed­eral Sta­tis­ti­cal Of­fice re­ported Fri­day that ex­ports in­creased in Septem­ber from the pre­vi­ous month to a new record high. Ex­ports were up 1.7 per­cent to $124 bil­lion on an ad­justed ba­sis, while im­ports fell 1.9 per­cent to $99 bil­lion.

That leaves Ger­many with more than a $25 bil­lion sur­plus, up from $21 bil­lion in Au­gust — a sur­plus that is larger than even that of China’s.

Most coun­tries would con­sider this good news, but in­stead Ger­many faces grow­ing fire in re­cent weeks for its large trade im­bal­ance.

A widely-noted Oc­to­ber re­port from the Obama ad­min­is­tra­tion’s Trea­sury Depart­ment bluntly said Ger­many’s ex­pand­ing trade sur­plus is tak­ing up too big of a piece in the Euro­pean pie, which is hold­ing back the economies of strug­gling fel­low Euro­pean Union coun­tries such as Greece and Por­tu­gal.

The In­ter­na­tional Mone­tary Fund joined the U.S. in crit­i­ciz­ing Ger­many for its large sur­plus. A “sig­nif­i­cantly smaller” trade sur­plus “would be use­ful,” IMF Deputy Man­ag­ing Di­rec­tor David Lip­ton — a for­mer top U.S. Trea­sury of­fi­cial — said in a speech last week in Ber­lin.

And EU of­fi­cials in Brus­sels piled on Mon­day, with Eco­nom­ics and Mone­tary Af­fairs Com­mis­sioner Olli Rehn pen­ning an ed­i­to­rial in a lead­ing Ger­man news­pa­per say­ing the bloc’s ex­ec­u­tive arm will look into Ger­man trade and eco­nomic poli­cies.

“This week the [Euro­pean Com­mis­sion] will have to de­cide whether a deeper anal­y­sis is war­ranted for Ger­many,” Mr. Rehn wrote in the Frank­furter All­ge­meine Zeitung. “Such an ex­am­i­na­tion should be no taboo. That would help nei­ther Ger­many nor Europe.”

For its part, Ger­many has fiercely de­fended its right to ex­port suc­cesses around the world, but Fri­day’s num­bers are bound to add fuel to the ar­gu­ment that what’s good for Ger­many may not nec­es­sar­ily be good for the rest of Europe.

“The Ger­mans are bleed­ing ev­ery­one else dry,” said Jack­son Janes, pres­i­dent of the Amer­i­can In­sti­tute for Con­tem­po­rary Ger­man Stud­ies.

The Trea­sury Depart­ment threw the first stone in its re­port late last month that claimed Ger­many’s ex­port-led strat­egy is in­hibit­ing other Euro­pean coun­tries from grow­ing. But if Ger­many were to lower its trade sur­plus by boost­ing do­mes­tic de­mand and in­creas­ing its ap­petite for im­ports, the ar­gu­ment grows, strug­gling coun­tries such as Greece and Spain would have a bet­ter chance to re­build their economies.

But Ger­man of­fi­cials have shot back. The eco­nom­ics min­is­ter even sug­gested that the U.S. gov­ern­ment, which is more than $16 tril­lion in debt, should try to build its own sur­plus, say­ing his coun­try’s sur­plus is “a sign of the com­pet­i­tive­ness of the Ger­man econ­omy and global de­mand for qual­ity prod­ucts from Ger­many.”

“There are no im­bal­ances in Ger­many which re­quire a cor­rec­tion of our growth­friendly eco­nomic and fis­cal pol­icy,” added Ger­man Fi­nance Min­istry spokesman Martin Kot­thaus.

But crit­ics say Ger­many is tak­ing ad­van­tage of the rigid cur­rency val­ues of the eu­ro­zone to keep its ex­port sec­tors hum­ming. Typ­i­cally, a coun­try’s cur­rency would ap­pre­ci­ate with a large trade sur­plus, mak­ing its ex­ports less com­pet­i­tive and prod­ucts from other coun­tries more price-com­pet­i­tive. But with Greece, Italy and Spain us­ing the same cur­rency as Ger­many, the re­bal­anc­ing isn’t tak­ing place.

Many in Ger­many in­creas­ingly see the U.S. as a sore loser in the global trade game, not­ing that Pres­i­dent Obama has set a goal to dou­ble Amer­i­can ex­ports by 2015. So why shouldn’t they do the same thing?

In Jan­uary 2010, dur­ing his sec­ond State of the Union ad­dress, Pres­i­dent Obama an­nounced his was cre­at­ing the Na­tional Ex­port Ini­tia­tive to “dou­ble our ex­ports over the next five years, an in­crease that will sup­port 2 mil­lion jobs in Amer­ica.”

How­ever, the U.S. seems to be go­ing in the wrong di­rec­tion as of late. The trade deficit in­creased in Au­gust to $38.8 bil­lion, as ex­ports fell by $100 mil­lion.

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