U.S.-German Leadership on the Global Economic Agenda

It is a pleasure to be in Berlin. This is a magnificent city, a symbol of the new, dynamic, and unified Germany. It is amazing to think that we are approaching 20th anniversary of the fall of the Berlin Wall.

It may be easy to lose sight of how much has changed for those of you who were part of this transformation. But as a visitor, I would like to reiterate how impressive things look here in this capital city. Berlin today is clearly a symbol of dynamism, freedom and integration.

This is my second trip to Germany in as many weeks. I was in Bavaria last week as the American representative to a G8 meeting. Germany was a gracious and highly effective host for this year’s G8 Summit in Heiligendamm.

Germany’s G8 chairmanship coincided with an intensification of cooperation between Berlin and Washington. Chancellor Merkel and President Bush have put forth a clear vision for partnership. This partnership has a wide scope – from cooperation on regulatory reforms and trade, to fighting terrorism and pushing for development in Africa.

And it is a partnership that relies not only on the work we do at a governmental level, but more importantly, on the work that goes on every day between the citizens in our countries. You here in this room are at the forefront of this partnership. We very much value your insight and appreciate the role you play in building good relations between our countries.

When President Bush welcomed the German Chancellor to the United States, he said: “When Germany and America work together, the world is a better place.”

This is a sentiment we should keep in mind when looking at our relations. Our countries have not always seen eye to eye on a range of global issues, from Iraq to climate change. Many of these differences arise from different approaches to achieve goals we often agree on. But, looking at the larger picture, it is normal for countries adjusting to new roles and new global political realities to have differences.

The good news is that we’ve turned a corner. These bumps in the road are past, and we are looking ahead to a constructive partnership between our nations. A key part of this has been the German EU Presidency, which put the transatlantic partnership back on solid footing. Our task now is to build on that foundation.

The Transatlantic Partnership: Shaping Globalization to Promote Prosperity

The German-American partnership is built on deep, longstanding ties. It is also a relationship strengthened by a shared commitment to democracy and free trade and investment across borders. We've seen that these values help nations live in peace, turning military confrontation into economic competition. And open markets help spur innovation, growth and opportunity for our people.

The United States and Germany share an interest in standing for these values as the world becomes more interconnected. Market economies and free societies help globalization deliver on its promise of a better and more prosperous future, while helping to stem the disruptions that occur as economies adjust to competition from other countries.

Globalization can be difficult. It calls on states to re-think the social compact between the state and its citizens. Business models that worked at home have to be adjusted to capture new markets. Innovation must be sustained each and every day by companies large and small in order to remain competitive.

Our citizens used to be able to achieve middle class status with a minimal educational background. Today, our young people need a strong education – especially in math and science – to compete for jobs with people around the world. And established workers often have to be re-trained so they can take on new occupations as sectors of the economy rise and fall.

What makes this all worthwhile is that globalization has the greatest promise for a better economic future. For our children to be assured of comparable or better living standards than we had, they have to compete with others around the world.

And in poor countries – especially in Africa – the promise of a better future rests squarely on their nation’s ability to tap into the global system in a way that unleashes the potential of their people.

Chancellor Merkel put it very well in her speech to the World Economic Forum this past January. She said: “…globalization today provides the world with many more opportunities than risks. It offers people the chance of more peace, more freedom, and more prosperity.” She is right.

And ensuring the benefits of globalization are dispersed broadly is a challenge. We see anxiety from these challenges at home in growing protectionist sentiments in both our countries. And we see this sentiment in developing countries as well.

I will briefly outline three areas that are at the forefront of our joint efforts to shape globalization in a way that supports democracy and open and competitive markets. These areas of cooperation can help ensure the benefits of globalization are spread widely at home as well as in developing countries.

Open Trade and Investment Across Borders

The first are is the need to continue the progress towards open trade and investment across borders. Open trade and investment is of course a vital part of the German-American relationship.

As the people in this room know, Germany and the United States have a stake in the continued growth in each others’ countries, and we need to work to further our economic relations by removing unnecessary barriers to trade and investment.

Our two countries have a significant bilateral trading and investment relationship. Bilateral trade in 2006 was on the order of $135 billion.

Yet, despite these numbers, there are impediments to trade and investment between the United States and Germany, and between the United States and the EU member states. Our leadership recognizes this, and officials on both sides of the Atlantic are taking steps to reduce and remove these barriers through sustained dialogue.

Perhaps it is a mark of success, as well as a challenge for our deeper economic integration, that traditional tariff barriers no longer pose the primary impediment to transatlantic business. Rather, our bilateral challenges generally involve regulatory standards and practices.

The Transatlantic Economic Council, chaired by high-level U.S. and EU officials, is perhaps the best example. The result of an initiative spearheaded by Chancellor Merkel during the German EU Presidency, it oversees negotiations on a wide range of issues.

It focuses on improving cooperation to reduce non-tariff barriers and regulatory obstacles between Europe and the U.S. and to promote transatlantic economic integration in intellectual property rights, investment, secure trade, financial markets, and innovation.

For example, in the area if intellectual property, the EU and U.S. agreed to establish an exchange of information on infringements, and to conduct joint technical assistance and enforcement missions as well as to seek progress in the harmonization of the different patent regimes.

Another area is the U.S.-EU Financial Markets Regulatory Dialogue. This is an informal forum for independent regulatory agencies in the EU and U.S. come together to find ways to promote strong cooperation on financial markets, convergence, and best practices for their sectors.

Yet another is the Transatlantic Investment Dialogue. The dialogue has been formed to reduce barriers to transatlantic trade and investment, to keep investment regimes open, and to build on existing investment flows to boost growth and create jobs.

Although many of these initiatives are very detail-oriented, collectively they have the potential to enhance openness, accountability, and cross-border investment.

Furthermore, greater openness in trade and investment between the U.S. and Europe will have significance beyond our borders. Strengthening our cooperation will show the way to other regions to boost transparency and rule of law.

This in turn can help unleash the potential of open markets on a level economic playing field. These efforts can help ensure globalization is a catalyst for economic growth and increased opportunities for people to work and earn a decent living.

Energy Security and Environmental Stewardship

The second area of cooperation is energy security and environmental stewardship.

First, let me address energy security. For the foreseeable future, importing countries like the United States, Germany, and other EU members need to work to diversify energy sources, routes to market, refining capability, and the mix of fuels we use. A key way to do this is to pursue efficient energy markets.

Monopolies, anti-competitive practices, and the lack of transparency are all barriers to efficient energy markets. Together, they can degrade our energy security and make us reliant upon too few sources and too few routes to move energy to consumers.

We often find that ‘national champions’ lobby against competitive markets, arguing that a sector such as energy is too important to be left to the market, or that a single large firm can be more efficient. History, as well as economic theory, demonstrate the fallacy of that call. In fact, efficiency and security of supply are best achieved through competition and diversity of supply.

We believe open and competitive energy markets can benefit not just net consuming nations, but energy producing nations. Efficient markets enable nations rich in energy resources to foster transparency, the rule of law, and to ensure the benefits of the resource are enjoyed widely. It helps countries avoid the so-called "paradox of plenty," where the resource works to inhibit the political and economic development of a country.

Environmental stewardship is a critical component of energy security. The United States has been proactive on this front for some time. Since taking office, President Bush’s Administration has spent some $37 billion on programs to advance science and technology related to climate change, including $18 billion to develop and bring to market technologies for clean and efficient energy.

Technology holds much promise to increase the mix of sources from renewables like biofuels, wind, solar and water, as well as getting more efficiency and less pollution out of non-renewables like coal and petroleum.

The President has set a goal of reducing greenhouse gas intensity by 18 percent by 2012. The U.S. is ahead of schedule to meet that goal. From 2000 to 2005, the U.S. reduced its greenhouse gas intensity by 8.5 percent, while the population grew over 5 percent, and the economy grew 12 percent. And, last year, CO2 emissions declined modestly, even as the economy grew nearly 3 percent.

This is an impressive record, and one that is too often overlooked on this side of the Atlantic.

We recognize that progress on climate change needs to be done in cooperation with our friends and allies around the world. President Bush said last May that the U.S. and other nations will set a long term goal for reducing greenhouse gases.

This task was taken up by Chancellor Merkel and other leaders at the G8 summit in Germany, by the APEC leaders in Sydney under the leadership of John Howard, and at the recent Major Economies Meeting in Washington under the leadership of President Bush.

We look forward to the UN-sponsored meeting in Bali this December, which is an opportunity to bring countries together to work for a way forward on climate change.

The meetings in Germany, Sydney, and Washington support the efforts at the UN. The agenda for the UN Bali meeting is dense – there are literally hundreds of issues to consider by a wide range of countries, from small nations, to large industrialized countries, to the new and fast growing economies.

With so many items to cover and so many countries participating, we saw that meeting with smaller groups of countries – for example, the world's major economies who are also the major emitters – would be a good way to reinforce and compliment the UN process. That's where the G8, APEC and major economies meetings came into play. All of these are aimed at contributing to a successful session in Bali and beyond.

As these efforts attest, German and American leadership and willingness to work together for a common cause has been essential.

Pro-growth policies to encourage economic development in poor countries

The third element of our cooperation that can help shape globalization is to encourage developing countries to adopt growth-oriented policies. Our leaders at the G8 called for greater involvement in African development, pointing specifically to boosting basic health and promoting the role of the private sector in development.

To ensure this, under Chancellor Merkel's leadership, they founded the Heiligendamm Process, a dialogue between G8 members and important emerging economies, that is designed to deal with the biggest challenges the global economy is facing.

These challenges – encouraging open investment, promoting innovation, encouraging joint responsibility for development assistance, and providing access to the latest know-how to combat climate change are the basis for sustainable growth in emerging economies.

One of the best ways to help developing countries is to encourage them to open up to the world economy. The research on this is clear – more integration with the world economy brings about reductions in poverty and more hope for the future.

A key part of this effort is achieving a successful Doha round at the World Trade Organization in Geneva. Doha represents a historic opportunity to fight poverty in the one tried and tested way – by opening markets for trade and investment. A fair and open trading regime – which is what Doha strives for – far exceeds any other form of development assistance in its ability to lift people out of poverty.

Doha is a high priority for both Germany and the United States. Chancellor Merkel and President Bush addressed the need to move forward on Doha in their addresses at the United Nations General Assembly last month in New York, underscoring the importance of this for global security and poverty reduction. We believe we can succeed, and it is our hope that the negotiations are complete soon.

Conclusion

The President George H.W. Bush, in remarks with Chancellor Kohl here in Germany nearly two decades ago, said that leadership’s constant companion is responsibility. That theme was prescient in regards to the post-Cold War U.S.-German relationship. As the leaders who oversaw the reunification of Germany, it seems that they both saw that as our countries started to have a more global outlook, the relationship would be tested by the tasks before us.

Today, one of the great challenges and opportunities before us is globalization. The key is to unlock the transformational powers of the market, both for our own people, and for people in developing countries. To do this right, globalization needs to be shaped to ensure transparency, accountability, rule of law, and most of all, that opportunities and hope are there for the next generation.

Germany and the United States are in a position to do just that. The foundation of our leadership is the values we share – a commitment to free and open societies and market-based economies.

By cooperating on open trade and investment, energy security, environmental stewardship, and economic development, we can achieve much. It is my hope that our relations continue to be honest and forthright, but focused on the important leadership role we have before us on the world stage.

Thank you for listening.