Germany: The Geopolitical Uncertainties of a Geo-Economic Power

Dieter Dettke

Georgetown University

Dr. Dieter Dettke is a Non-Resident Fellow at AICGS and Adjunct Professor at Georgetown University.

Dr. Dettke served as the U.S. Representative and Executive Director of the Friedrich Ebert Foundation in Washington from 1985 until 2006 managing a comprehensive program of transatlantic cooperation. In 2006, he joined the German Marshall Fund of the United States as a Transatlantic Fellow and from September 2006 to June 2007, he was a Fellow at the Woodrow Wilson International Center for Scholars. His most recent book is “Germany Says ‘No’: The Iraq War and the Future of German Foreign and Security Policy,” published by theWoodrow Wilson Center Press and The Johns Hopkins University Press, Washington, DC, and Baltimore, 2009.

Dr. Dettke is a foreign and security policy specialist, author and editor of numerous publications on German, European, and U.S. foreign and security issues.

He studied Law and Political Science in Bonn and Berlin, Germany, and Strasbourg, France and was a Fulbright Scholar at the University of Washington in Seattle in 1967/68.

For the first time, “Transatlantic Trends,” a survey of the German Marshall Fund of the United States (GMF) beginning in 2002, showed that a majority of Germans now prefer a more independent approach to transatlantic relations. The NSA scandal—data collection on foreign countries, including America’s ally Germany and its chancellor, as well as collecting huge amounts of communications on American citizens—certainly contributed to the drop in support for American leadership. Even worse was the hiring of a German employee of the Bundesnachrichtendienst (BND), the primary German intelligence agency, to spy on the German government. The most dramatic shift of German public opinion on the United States occurred between 2013 and 2014, the year dominated by the Snowden revelations. The data reflect a development that has been in the making for many years. The election of President Barack Obama in 2008 initially appeared to reverse an existing trend, but the Snowden revelations about the magnitude of NSA spying activities confirmed doubts about the methods of American foreign policy, its emphasis on the use of military force, and specifically about the way America treats its allies.

The Road to Estrangement

Developments in the United States as well as in Germany led to the estrangement of the two alliance partners. One is the American experience of dominance after the collapse of the Soviet empire and the arrival of the “unipolar moment,” in the words of Charles Krauthammer.[1] After 9/11, the George W. Bush administration turned the unique circumstances of the end of the Cold War into a doctrine of top-down leadership. In his address to a Joint Session of Congress on 20 September 2001, Bush declared: “Every nation, in every region, now has a decision to make. Either you are with us or you are with the terrorists.” This claim did not go down well with the newly elected SPD/Green coalition under the leadership of Gerhard Schröder and when the Bush administration decided to invade Iraq in the name of the fight against terrorism and the perceived need to prevent Iraq from obtaining weapons of mass destruction, including nuclear weapons, Germany refused to go along. The Schröder government insisted on making its own independent decisions on a question of war and peace.

Less than a decade later a new German CDU/CSU and FDP coalition government under the leadership of Angela Merkel abstained in a vote of the UN Security Council to impose a no-fly zone over Libya in an effort to prevent Libyan leader Muammar Gaddafi from using his regular forces against the civilian population in Benghazi, the seat of the political opposition. In this case, a conservative German government refused to act in concert with its allies in the UN Security Council, its allies within NATO, and its most important European allies. Even the Arab League and the Islamic Conference supported a no-fly zone in Libya to prevent Gaddafi from using regular military forces against civilians. Although Germany later quietly corrected its policy course in the Libyan crisis by participating in civilian EU programs in Libya, the decision was never officially revoked or recognized as a policy mistake.

The Geo-Economics of the “Gestaltungsmächtekonzept”

What has begun to take hold more visibly is a deliberate German geo-economic strategy.[2] Weak as a military power, Germany did everything to excel as an economic power, competing for as well as seeking influence in Europe and beyond on the basis of its economic strength. The 2012 “Gestaltungsmächtekonzept” is an expression of a strategy to cooperate with major emerging powers in shaping the new world order transcending the traditional European and Atlantic commitments.  The concept is based on the assumption of a new multi-polar or multi-centric world order. In the UN Security Council vote on the establishment of a no-fly zone in Libya, Germany voted with a group of BRICS countries (specifically Russia, India, China, and South Africa) to abstain rather than support the military effort necessary to implement the UN Security Council decision. This was no coincidence. It was a signal of understanding and recognizing their power and importance for the new world order after the Cold War.

Initially articulated by German foreign minister Guido Westerwelle, the concept is the German response to a new megatrend: the rise of new powers in the east and the south and the decline of the United States, Europe, and Japan. “The center of gravity of the world economy and world politics,” a senior German Foreign Service Officer wrote in defense of the Gestaltungsmächtekonzept, “is shifting from the North Atlantic to Asia, from the West and North to the East and South.”[3] It is assumed that an “Asian Century” is in the making as China and India, the two most populous countries in the world, as well as South Korea, Indonesia, the Philippines, Pakistan, Bangladesh, and Vietnam represent both economic growth potential as well as increasing political importance. The assumption is that the “American Century” is coming to an end and with it also the old political order.[4] Much weight is given to the role of the BRICS (Brazil, Russia, India, China, and South Africa), the big ascending countries, now representing 43 percent of the world population and 20 percent of the world GDP.[5]

When this concept was launched in 2012, Angela Merkel was chancellor of the CDU/CSU and FDP coalition. She is now chancellor of a Grand Coalition government of the CDU/CSU and SPD. Although Germany’s new foreign minister, Frank Walter Steinmeier, virtually never refers to the Gestaltungsmächtekonzept, its basic assumptions do reflect foreign policy thinking close to German business circles. The European Union is still the most important market for German products as 59.2 percent of German exports go to EU member states. But the share of German exports to EU member states has fallen significantly, from 64.6 percent in 2007 to 59.2 percent today. The new markets in Asia have become the most attractive prospect for German exports. Without China, for example, Volkswagen and Audi would not be able to become one of the biggest car manufacturers in the world. The same is true for smaller manufacturers of high-performance automobiles such as Mercedes Benz, BMW, and Porsche. The European and American markets are still critical for them, but the most promising future markets appear to be in emerging countries such as Russia, China, and India.

Geo-Economics Driving Geo-Politics

The political consequences are obvious. Whereas in the past the term “strategic partnership” or “special relationship” was used exclusively for Western countries, most notably with the United States, France, and Israel, closer relationships and “strategic partnerships” are now forged with emerging powers such as China (in 2004) and India (in 2000) as well as with Russia, Brazil, Vietnam, South Africa, Australia, Indonesia, and the United Arab Emirates.[6] In the official text launching the Gestaltungsmächtekonzept, Germany’s interest in shaping globalization together with emerging powers took center stage. But the concept also included the issue of peace and security; human rights and the rule of law; economics and finance; resources, nutrition, and energy; work, social affairs, and health; and development and sustainability.[7] This means that Germany is deliberately seeking partnerships that transcend markets and the economy.

Germany’s key partner for its Gestaltungsmächtekonzept is China. China is now Germany’s third largest economic partner after the EU and the United States. Recent growth rates in Germany’s trade with China are staggering. Between 2005 and 2011 German exports to China grew by 206 percent, compared with 24 percent for the European Union and 6.3 percent for the United States.[8] Last July, Angela Merkel finished her seventh trip to China with a high-powered business delegation that included representatives of Siemens, VW, Airbus, Lufthansa, and Deutsche Bank.[9]

Since unification, German chancellors, in cooperation with German business, have intensified relations with China. Beginning with Helmut Kohl and Gerhard Schröder, visits to China accelerated in frequency and not without political overtones. In 1995, Helmut Kohl was the first Western statesman to visit a Chinese military base supposedly involved in quashing the 1989 Tiananmen Square uprising where several hundred demonstrators died.[10] A decade after the uprising, Chancellor Schröder expressed his willingness to lift the arms embargo imposed on China in 1989. He also advocated China’s inclusion in the G-7 meetings and enlarging the G-7 to a G-9 by including Russia as well as China in this global policy process.[11]

Germany plays a key role in China’s trade with Europe. Although most products made in China reach Europe via maritime routes, there is a new “Silk Road” by train from Chongqing to Duisburg, Germany.[12] Faster but smaller in size, the new Silk Road could become more important in the future as Chinese products could reach a well and centrally located hub in Europe fairly quickly. The city of Duisburg has a great distribution potential on the Rhine River, on rails, as well as on Germany’s autobahn net. The geopolitical risk is the passage through Russia, particularly at a time of major European-Russian tensions over Russia’s actions in Ukraine. The only mitigating factor is that the rail route is controlled by Trans-Eurasia Logistics, a joint venture of Deutsche Bahn and Russian Railways.[13] Hostile Russian actions against the German-Chinese railway connection would alienate China and Germany at the same time, something that a more vulnerable Russia would obviously try to avoid.

India, too, will play an increasing role in Germany’s foreign economic policy and as a political partner on the global level. German trade and investment in India are growing fast. Germany is already the third largest foreign investor in India and companies such as SAP and BMW are high technology investors in India. Traditional trade with textiles and leather have been the most important export items for India, whereas Germany historically exported machinery, electronics, plastic products, chemicals, and pharmaceuticals.[14] But this traditional trade pattern begins to change as India increases its investments in Germany and Europe and successfully engages in space technology.

The Pitfalls of Geo-Economic Power

The problem with a geo-economic strategy as it transpires in the Gestaltungsmächtekonzept is that it ties Germany ever deeper into an export-driven economy. As a result, Germany will become increasingly dependent on foreign markets and the shifting winds of the global economy. This strategy has worked so far even through the 2008 financial crisis, but could backfire in Europe where the consequences of Germany’s focus on fiscal rectitude weigh heavily on its European partners whose stunted growth will harm German exports. Germany is now suffering from the decreasing demand for its exports as the result of geo-political tensions and the slowdown in the euro zone and beyond.[15] German industrial output fell by 4 percent between July and August 2014 and a third euro zone recession, including in Germany, can no longer be excluded.[16] Germany’s export-driven economy also begins to show signs of a lack of competitiveness. The country’s research expenditures have been in decline since the 1990s and, with 2.87 percent of GDP, are less than R&D expenditures in Japan (3.48 percent), South Korea (3.45 percent), Sweden (3.62 percent), Israel (4.2 percent), Switzerland (3.00 percent), and Denmark (3.08 percent).[17]

Key industries driving future growth such as bio-chemistry, pharmaceuticals, and computer science—where Germany once even had a leading role—are now lagging behind other countries in Europe and Asia. Germany’s apprehension about Google shows signs of an older problem: Technikfeindlichkeit (technology enmity) in left wing and green circles. But most recently Mathias Döpfner, head of Springer, Germany’s biggest publishing house, declared that he is “afraid of Google.”[18]  Springer’s profits from digital business are 62 percent of its total profits. On Germany’s insistence the EU Commission took a strong restrictive position against Google, putting ever more pressure on the company on behalf of the EU. There is now open talk in Germany and Europe about breaking-up Google and new consumer-friendly innovations such as the car service app Uber have to face court battles and a possible ban.

If the trend toward national control of the internet continues, economic globalization could be at risk. A Balkanization of the internet would do more than harm Germany’s global economic interests. Concerns over the NSA spying activities and efforts to provide protection of individual privacy are now huge hurdles for a positive conclusion of TTIP, the Transatlantic Trade and Investment Partnership. TTIP is not only an important beneficial geo-economic undertaking between Europe and the United States, it is also a geo-political project with mutual benefits. A successful conclusion of TTIP negotiations would contribute to a much needed economic stimulus for job creation and economic growth on both sides of the Atlantic.

Conclusion

Much is at stake for Germany’s economic future, with a gigantic wave of baby boomers entering retirement. Annual growth rates between 1993 and 2013 averaged just 1.3 percent. So far Germany has succeeded in keeping unemployment down from 5 million a decade ago to 3 million today, but this will change soon as baby boomers retire in huge numbers.[19] In large part the so-called jobs miracle has been achieved by adding part-time and “precarious” jobs.[20] Add to that the investment gap that Marcel Fratzscher highlighted as one of Germany’s greatest challenges.[21] Compared with major trade partners in Europe,  German gross investment is below the EU average, lower than in Sweden, France, the Netherlands, Great Britain, Greece, and Italy and on the same level as that of Spain and Portugal.[22]

Instead of engaging in efforts to slow down new dynamic global companies and ultimately globalization, Germany should focus on a transatlantic strategy of developing concepts of internet governance that preserve openness. There is also a need to advance investment strategies strengthening transatlantic partnership as a geo-political base to stand on. This would offer Germany the more promising prospects for innovation, modernization, and competitiveness than a strictly geo-economic approach focusing on export markets. Geo-economics alone will inevitably come at the expense of technological progress and possibly at the expense of European values, too.

 Dr. Dieter Dettke is a Non-Resident Fellow at AGI and an Adjust Professor in the Center for Security Studies at Georgetown University.

[1] See Charles Krauthammer, “The Unipolar Moment,” Foreign Affairs, Vol. 70, No.1 (1990/91),p. 23-33.

[2] See on this point Hans Kundnani, “Germany as a geoeconomic power, European Council on Foreign Relations,” 1 July 2011, http://www.ecfr.eu/content/entry/commentary_germany_as_a_geoeconomic_power

[3] See Heinrich Kreft, “Deutschland, Europa und der Aufstieg der neuen Gestaltungsmaechte,” Aus Politik und Zeitgeschichte, No. 50/51 (2013), p. 13-19.

[4] Ibid., p. 14.

[5] Ibid.

[6] See on this point Felix Heiduk, “What is in a name? Germany’s strategic partnerships with Asia’s rising powers,” Asia Europe Journal, October 2014 (preview only available at http://link.springer.com/journal/10308)

[7] See “Globalisierung gestalten-Partnerschaften ausbauen- Verantwortung teilen” Konzept der Bundesregierung.

[8] See “Europe News,” The Wall Street Journal,  29 August 2012, http://online.wsj.com/news/articles/SB10000872396390444506004577618272934149832

[9] See the report of Deutsche Welle available at http://www.dw.de/trade-tops-agenda-for-germanys-angela-merkel-on-china-trip/a-17761479

[10] The German government denied that the military base the German Chancellor visited was involved in the Tiananmen Square massacre. A report is available at http://www.apnewsarchive.com/1995/Kohl-Criticized-For-Planned-Visit-To-Chinese-Military-Base/id-970c3088c4edc864c68ccfdf06221883

[11] On Chancellor Schroeder’s China policy see Dieter Dettke, Germany Says ‘No’. The Iraq War and the Future of German Foreign and Security Policy (Baltimore: Johns Hopkins University Press, 2009), p. 200.

[12] See “Geopolitics risks derailing new Silk Road,” Financial Times, London,  18/19 October 2014, p. 4.

[13] Ibid.

[14] Ibid., p. 201.

[15] See The Financial Times, 8 October 2014, front page article.

[16] Ibid.

[17] On R&D expenditures in 2012 see the data of the Battelle Institute: http://battelle.org/docs/default-document-library/2012_global_forecast.pdf

[18] See Alison Smale, “In Germany, Strong Words Over Google’s Power,” New York Times, 16 April 2014, http://www.nytimes.com/2014/04/17/business/international/in-germany-strong-words-over-googles-power.html

[19] See Olaf Gersemann, “Why Deutschland is Doomed,” http://one.ozy.com/pov/why-deutschland-is-doomed/33781.article

[20] See “Three illusions,” The Economist, 27 September 2014.

[21] Ibid.

[22] Ibid.