Time for Trump to turn on the charm to win over Germany's Merkel
© Getty Images

German Chancellor Angel Merkel's trip to Washington, D.C. was pushed back to Friday due to the recent snowstorm that hit the East Coast. When she arrives, President Trump should throw some wood on the fire, break out the glühwein and make the White House as warm and inviting as possible.  

Now is the right time for the president to use his famous personal charm to begin a cordial relationship with the leader of a country that holds great economic and strategic importance to the United States.  

ADVERTISEMENT

With the Transatlantic Trade and Investment Partnership (T-TIP) tabled indefinitely, Germany’s current trade objectives for the meeting are mostly defensive. Merkel wants to avoid a trade conflict with the United States.

  

Her interest is to shore up the economic relationship between the United States and Germany, as well as the European Union. She wants to prevent U.S. trade measures against German imports, but she will not be an easy mark for even the most skilled negotiator.

The Trump White House is concerned about Germany’s $65 billion bilateral merchandise goods trade surplus. In 2016, U.S. merchandise goods exports to Germany totaled $49 billion while imports totaled $114 billion.

The United States also has a relatively small $2 billion services deficit with Germany from a healthy total services trade of $64 trillion. For perspective, the United States had a trade deficit of $93 billion with the EU and a total trade deficit of almost $500 billion in 2016.

White House staffers have accused Germany of manipulating the Euro and using a tax rebate on its exports to give its manufacturers an advantage.

While U.S. companies do face the challenges of a strong dollar, accommodative monetary policy from the European Central Bank and an outdated U.S. tax code, the more convincing reasons for the bilateral trade deficit are the high quality and strong market position of German industrial machinery, automobiles and electronic equipment.  

There is robust market demand for German products, mostly made by “Mittelstand” companies — small and medium-sized enterprises that employ 60 percent of German manufacturing workers. Germany boasts of its “hidden champions,” little-known, mostly family-owned companies that have had enormous success in supplying specialized products and services to industrial companies around the world. 

Yes, Germany is an export-based economy. Nearly 47 percent of the German GDP comes from exports of goods and services; compare that to just 12.6 percent for United States' exports.

The government actively works to provide the technology, financing and other conditions that help the Mittelstand remain so competitive. One area of special success has been the vocational training and apprenticeship system in which the government plays a vital role.

A focus on the merchandise goods trade deficit is myopic. Germany is one of the most important investors in the U.S. economy, with a total foreign direct investment (FDI) stock of $319 billion through 2015. Germany is the fourth-largest source of corporate investment in America, injecting over 10 percent of total FDI here, behind only the United Kingdom, Japan and Canada.

Siemens CEO Joe Kaeser and BMW head Harald Krüger will join Merkel on her U.S. visit. Employing roughly 50,000 Americans and reporting U.S. revenue of about $24 billion, including $5.4 billion in exports from the United States, Siemens is the best example of Germany's successful U.S. operations. 

For President Trump, a smaller, more striking example of German FDI may be the Connecticut-based (and ironically named) Trumpf, Inc., a wholly-owned subsidiary of Germany-based Trumpf Group.  

According to its website, Trumpf is “currently the largest manufacturer of fabricating equipment and industrial lasers in North America.”  The North American company directly employs 696 people, exports to 40 countries and invests heavily in research and development here.

It is counterproductive to be too vocal about trade deficits. The principle shared goal of the Trump-Merkel meeting is to start working together across many issues of shared critical importance. The political relationship has had strains during Merkel’s tenure as chancellor.

Many Germans disagree with American foreign policy and intelligence-gathering practices. In addition, they disapprove of the tax-avoidance practices of American companies. If Germany is to assume a larger financial burden in NATO and continue as the bulwark of EU stability, a Trump-Merkel relationship must start on firm ground. 

German commitment to the EU is fundamental to understanding any future policies. Merkel and Germany are the champions of European integration. This meeting will not be the time for any platform of “economic nationalism” or criticism of the “flawed construct of the European Union.”

A strategy of bilateral trade deals with individual nations does not apply with Germany. Although upcoming elections in France and the Netherlands are expected to show the strength of EU opponents, it is also expected that pro-EU parties will prevail.

Last Friday, I visited the European Parliament in Brussels along with 24 Georgetown University students to help them understand the historic, democratic roots of European economic and political integration. The EU rose from the ashes of destruction and tragedy to foster peace and prosperity in a continent with a history of recurrent wars.

Despite Brexit, the commitment to make the EU work should not be discounted. Trump has negotiating room with Merkel but she will be formidable and resolute.

Let us hope for a cordial start to the Trump-Merkel relationship. Both sides should be willing to accept compromises for the greater benefit of cooperation. At the same time, if glühwein is a problem with the protectionist wing of the administration, we can find an alternative solution.  

To warm up the chancellor, the White House can serve a nice mulled wine made with an American Cabernet Sauvignon and of course, good American apple cider, oranges, and honey. 

 

Charles J. Skuba is a professor of the practice in international business and marketing at Georgetown University’s McDonough School of Business. He previously served as an official in the International Trade Administration under President George W. Bush.


The views expressed by contributors are their own and not the views of The Hill.