Prospects Of US–German Relations Under Trump – Analysis

By Gautam Sen*

Chancellor Angela Merkel will be engaging in her first substantive summit discussions with President Donald Trump shortly. Both countries are at a sensitive stage in their bilateral relationship. Merkel, a popular, liberal-minded and detail-oriented leader of a cautious and controlled demeanour, has had skirmishes in the recent past with Trump who has a contrasting disposition in the public domain on policy issues and values. It will be noteworthy to observe whether the outcome of the Trump-Merkel summit leads to a realistic appraisal of the prospects and limitations of the US-German relationship, and a modicum of parallelism if not convergence can be achieved as during the Bush and Obama years. Except for the dissonance in US-German relations consequent on Chancellor Schroeder criticizing America’s intervention in Iraq, bilateral relations have been on a balanced and mutually sustaining path. And historically, US-German relations have been a significant factor in the trans-Atlantic partnership both in the economic and security realms.

Trump’s posture during the campaign and even thereafter has struck discordant notes to an extent, especially his demand for higher financial commitment from European partners and concomitantly lesser US involvement in European defence and security matters. But his Defence Secretary George Mattis has provided a corrective by stating that NATO remains the cornerstone of the West’s defence vis-à-vis Russia and in the international strategic milieu. In respect of trade and commerce, however, some uncertainties are looming over both US-German relations as well as US-EU relations.

As far as reducing the US financial contribution to NATO and consequently pressing for an increase in German and other NATO members’ contribution to the trans-Atlantic alliance is concerned, the matter may not be susceptible to an easy resolution. Merkel is likely to resist US pressures in this regard. The fact of the matter is that, the respective shares of USA and Germany to NATO`s budget are 22 and 15 per cent, respectively. At Euro 36 billion in 2015, the German share has not been unreasonably low. According to NATO Secretary General’s report of 2015, the per capita contribution of USA and Germany stood at USD 1865 and 521, respectively. While Merkel may be willing to increase Germany`s financial contribution to NATO, and perhaps augment its commitment on personnel (as on 7 January 2017, Germany fielded 180,000 troops vis-à-vis 1,311,000 by USA, 201,700 by France and 182,000 by Italy), she and the leaders of other major alliance partners may not accept a reduction in US commitment on finances and personnel.

It is to be seen how Trump balances out USA`s global interests and commitments to European security through NATO with Germany playing a more dominant part strategically. A greater German role may be inevitable given the strength of the German economy and Britain`s prospective exit from the European Union and the possibility of a reduction in London`s financial support to NATO. Trump may be realistic enough to appreciate the force multiplier effect of NATO assets and their dispositions vis-à-vis USA`s strategic interests in unstable regions like the Middle East and even in the Balkans.

Trump and Merkel hold substantively differing views on immigration, protection of refugees, deportation of Muslims from USA, and their rehabilitation under special circumstances in Europe, etc. Without directly criticising the latest ban imposed by the Trump administration on the entry of Muslims from select countries, Merkel has continued to express her views espousing support for providing succour and rehabilitation to Muslims fleeing conflict zones such as Syria. While Trump had observed that Merkel`s decision is a catastrophic mistake, Merkel had called for adherence to the UN Convention on Refugees.

In the economic realm, reckoning the fundamentals of their relationship, Trump may find it difficult to alter its present content. His `make America great again` slogan, if implemented to the extent of restricting German investments and exports to USA, with the objective of promoting American domestic industry and employment, may only be counterproductive. German investment in USA is significant amounting to USD 255 billion, and generates nearly 700,000 jobs through US affiliates of German firms. Any disincentive by way of additional fiscal measures by USA on repatriation of profits, higher taxation on German investments, etc. will attract countervailing action by Germany and may adversely impact US exports to Germany valued at approximately USD 50 billion as well as the US domestic industry and the employment scenario. Impediments on German investments in USA may also induce diversion in the flow of German capital and enterprises to Latin America and Africa where Berlin may have long-term economic interests and compete with US interests.

Notwithstanding the above, Trump will try to redress the continuing adverse US-German trade balance on commodities, which reached nearly USD 50 billion by January 2017. Trump has been able to drum up domestic support on the premise that the trade deficit is a threat to US security and prosperity. It is to be seen how Trump manages to increase the prospects of USA`s domestic manufacturing industry and enhance exports to Germany within the framework of an open and expanding world economy. He may also not be naïve to forego the benefits such as the provision of national treatment to US investors in Germany under the existing USA-Germany Treaty of Friendship, Commerce and Navigation by forcing its modification and resorting to restrictive fiscal and trade measures. An accusation levelled by Trump and his business associates to the effect that manipulation of the value of the Euro has boosted German exports may be strongly rebutted by Merkel. German Finance Minister Wolfgang Schauble has already attributed the changes in the value of the Euro to economic factors outside Berlin’s control. A prudent alternative for Trump would be to work to make major US exports such as civilian aircraft and their engines as well as automobiles more competitive instead of distorting or altering the existing framework of cooperation pertaining to US-German investment and trade.

Merkel has been more true to her liberal democratic credentials than many European leaders. These have been borne out by her stance on issues like countering political extremism at home and abroad, offering protection to refugees fleeing from terror, and opposing Russia’s annexation of Crimea. The exception has been the Greek financial liquidity crises since 2010, in regard to which Merkel`s government has been insisting on the implementation of a stiff International Monetary Fund (IMF) imposed economic bailout package which has only served to undermine various progressive socio-economic measures.

It is unlikely that Trump and Merkel would have a complete convergence of views and postures particularly over refugee rehabilitation in Europe, international efforts to regulate environmental pollution, and reform of the United Nations and especially the Security Council, to flag a few such issues. While agreement may be achieved on countering the sources of extremism such as ISIS in the Middle-East, it is likely that differences would remain on promoting Palestinian statehood. It has been reported that Trump is likely to probe Merkel on the most effective policy for dealing with Putin over a range of issues without entailing a higher economic burden on USA or extended military force deployments. Shades of differences may persist in their respective approaches to dealing with Putin, the Crimea issue and appraisal of sanctions on Russia imposed after the latter`s annexation of Crimea. Nonetheless, the bilateral dialogue may initiate the process of a better understanding of Trump`s inclinations and German compulsions at the strategic level in relation to central and eastern Europe and Russia. Trump may also appreciate the benefit of incremental changes to the existing USA-Germany bilateral trade and commerce-related institutions for mutual benefit.

A realistic dialogue process may also ensue on a reappraisal of the sharing mechanism for financial support to NATO including a cost-effective implementation of the force Readiness Action Plan formulated after the NATO Wales summit in 2015. It is also possible that Germany`s geostrategic position in Europe apropos Russia, its economic growth and resilience, as well as diverse and accommodative relations with an array of middle powers like India, Japan and some of the African and western hemispheric countries will influence Trump to give due weightage to Merkel, particularly when she is expected to lead her Christian Democratic Union and Christian Socialist Party coalition to victory in the September 2017 national elections.

*The author, a retired IDAS officer, has served in senior positions in the Governments of India and a State Government. The views expressed are the author’s own.

Originally published by Institute for Defence Studies and Analyses (www.idsa.in) at http://idsa.in/idsacomments/prospects-of-us-german-relations-under-trump_gsen_150317

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