Charm offensive

German ministers on the road to avert all-out trade war

Altmaier und Scholz
Handy negotatiors: Economy Minister Peter Altmaier (left) and Finance Minister Olaf Scholz. Source: DPA [M]

This week, Germany’s newly-appointed economics and finance ministers are flying out on separate two-day missions to win support for Berlin’s pro-globalisation position. Economy Minister Peter Altmaier headed for Washington Sunday night, hoping to find some basis for compromise on US threats of tariffs, while Finance Minister Olaf Scholz seeks to rally support at the G20 conference of central bankers and finance ministers in Buenos Aires.

Berlin faces a tricky diplomatic challenge: Germany needs to make clear its readiness to take counter measures against the United States, while not exacerbating tensions. And it must leave much of the diplomacy to the European Union, which has the final say on members’ trade policy.

Any escalation of the dispute would have grave consequences, Mr. Altmaier told Handelsblatt in an exclusive interview before leaving for the US capital. “If Europe and the US end up in a trade war, businesses and consumers on both sides will pay a high price,” he said. A trade war would only please “third parties,” who would like to use dumping price as a trade policy. “There is an awful lot at stake,” he added.

“It is not in America’s interest to try to divide Europe.”

Peter Altmaier, minister, economic affairs

The new German economy minister praised the EU, saying it had been wise to outline counter-measures but even smarter to hold off on actually implementing them. This had created space for negotiation and reflection, he said: “We have a window of opportunity to find a solution.”

The proposed tolls on steel and aluminum, coupled with Mr. Trump’s threat to impose similar tariffs on imported German cars, has thrust the trans-Atlantic partnership into crisis. But Mr. Altmaier insists that Europe will act as one. There is no way that Germany would pay a tariff and France not, Mr. Altmaier said, warning that the US should not try to split the 28-member organization: “We are a customs union and we act together. It is not in America’s interest to try to divide Europe, and anyway, that could not succeed.”

Still, Mr. Altmaier also said he was open to compromise: “Free trade is certainly not perfect,” he acknowledged. But if countries feel disadvantaged, they should seek talks rather than taking unilateral action. He would “focus on the doable” during talks in Washington, he said, building trust with the US government, and ultimately “smoothing the way for a good, realistic solution.”

Mr. Altmaier’s cabinet colleague, Finance Minister Olaf Scholz, has meanwhile flown to Buenos Aires for a meeting of the finance ministers and central bankers of the G20 group of industrialized and emerging nations. Mr. Scholz will use the occasion to rally opposition to protectionism. On Tuesday, Mr. Scholz will meet his US counterpart, Treasury Secretary Steven Mnuchin.

 

16 p60 Bilateral trade-01

The meeting may be a difficult one. Last year’s gathering of G20 finance ministers saw Mr. Mnuchin prevent an affirmation of global free trade from being included in the final communiqué. Two months later, at the G20 heads of government summit, Berlin succeeded in re-inserting a clause supporting the rules of the World Trade Organization, or WTO.

Mr. Trump says his new tariffs do not contravene WTO rules: He claims steel imports are a threat to national security, a justification that the WTO allows but which is rarely used. Germany and others have cried foul and threatened to challenge that justification before the WTO. Given the legal spat, it is unclear whether the US will support a general affirmation of the WTO’s rules on global trade at the G20 this time around. The US government has flagged the clause for further discussion at the Buenos Aires summit, but that could also mean it wants it eliminated entirely.

Agreement on a summit communiqué must be reached by Monday evening. The question is which concessions, if any, will be made to the United States to get them to agree to a single declaration. A compromise could be worked out, or the meeting may end up with the United States isolated 19 to 1, as happened on climate policy at last year’s Hamburg summit.

Mr. Scholz is keen to defend free trade but he will not want to alienate Washington too much, for fear of dividing the G20 nations. After all, Canada and Mexico have already been granted exemptions from the steel tariffs.

Another source of contention: The United States would like Europe to join in a more critical stance on China’s trade policies. However, this seems unlikely. Germany prefers to resolve tensions through negotiation. Since Mr. Trump’s announcement of protectionist measures two weeks ago, Angela Merkel has taken a largely conciliatory tone, seeking dialogue with other world leaders. On Saturday, she telephoned Chinese President Xi Jinping to discuss the situation.

China plays a dominant role in the world’s changing economy, Mr. Altmaier told Handelsblatt. As do disruptive new technologies, he added, referring to what many see as the root cause of labor market problems in the future. “A lot of jobs will be lost, but a lot of new jobs will also evolve,” Mr. Altmaier said. “But we cannot know if those new jobs will be located in the same country as before. Rules around the fight for prosperity are getting tougher. Europe must learn how to deal with these changed circumstances and Germany is ready to take on a leadership role in this arena.”

Sven Afhüppe is Handelsblatt’s editor in chief. Thomas Sigmund is bureau chief in Berlin, where he directs political coverage. Klaus Stratmann covers energy policy and politics for Handelsblatt in Berlin. Jan Hildebrand leads Handelsblatt’s financial policy coverage and is in Buenos Aires for the G20 this week. Brían Hanrahan adapted this story into English for Handelsblatt Global. To contact the authors: afhueppe@handelsblatt.com, sigmund@handelsblatt.com, stratmann@handelsblatt.com

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