Imperial Life in the Merkel Republic

October 24, 2013 Topic: Politics Region: GermanyEurope

Imperial Life in the Merkel Republic

A domesticized foreign policy.

Most European states tend to toggle between their Atlanticist and European identities. This is certainly the case with Poland, the Czech Republic, and the United Kingdom. Germany, in contrast, tends to express its Atlanticist and European identities simultaneously. History is replete with examples of this, such as Germany’s accession to NATO and establishment of the Treaty of Rome (1955-58), signing of the Plaza Accord and the Single European Act (1985-86), reunification within NATO, the adoption of the Maastricht Treaty (1989-92), post-Iraq War rehabilitation of German-American relations, and recovery of the EU constitution through the Lisbon Treaty (2007-09). If smartly managed, TTIP negotiations, once again, could provide the bridge through which both of these identities could be fully expressed.

The infusion of the Snowden NSA leaks into the TTIP talks, however, has become a concern for negotiators. While Merkel was able to deflect the electoral fallout of the leaks when they were most acute, discussion around data protection and privacy continues to simmer among Germans. Merkel has stated that Europe should see the Internet sector as a strategic economic industry, similar to its views of Airbus and Galileo. Germany is also sympathetic to calls for the creation of a European cloud-computing network wholly separate from existing U.S. cloud services and the use of European R&D funds to create an indigenous industrial base.

Germany has demonstrated itself capable of abrupt policy U-turns. A rapid alignment of interests and actors triggered by unforeseen circumstances can lead to punctuated equilibrium with sweeping, perhaps even destabilizing, policy outcomes. The 2011 Energiewende, the intention to phase out all domestic nuclear-energy production in the aftermath of the Fukushima crisis, is one example of this. Combined with the fervor in Brussels—particularly in the European Parliament—for corrective action on previous e-commerce and information-sharing agreements, the potential for a Datenwende in Europe or the derailment of TTIP remain real.

Two Middle Kingdoms

In its relations with emerging powers, Germany has been more consistent in its role as an accomodationist player attempting to avoid or defuse politically sensitive issues in favor of stability that maintains economic ties. This is true for Germany’s relations with East Asia, and affects the type of partner that Berlin can be for the US in that region. Unlike some of the vocal states of Central Europe, Germany is sanguine about the US “pivot to Asia,” seeing it as a means to stabilize trade routes on which Germany will increasingly rely, with little political or economic cost to Germany itself. But its willingness to expend political capital in the region on issues that could impact its overriding economic interest has thus far proved limited.

China, the Asia-Pacific region’s most consequential actor, perceives Germany as a kindred spirit in the international system. In certain ways, both countries are rising powers. Like two Middle Kingdoms, both states occupy unique positions in the international system and are centers around which dynamic, often turbulent regional state-systems revolve. Both are current-account surplus countries whose growth have been export-driven. But they are looking to slowly move towards greater consumption-driven growth. Both harbor deep ambivalence about calls made by the U.S. and others to assume a greater stake in global governance.

While the German political elite does not share the view of China as a kindred spirit, they are willing to capitalize on this perception, both as a means of building commercial ties with China and as a means of advancing their interests more broadly. At times, this has meant aligning with Chinese interests on trade issues, to the disadvantage of EU partners, and undermining Europe’s strategic goal of pivoting with the U.S. to Asia. This was certainly the case during the recent intra-European clash over imposing countervailing duties on Chinese solar-panel imports that threaten to eviscerate indigenous European solar-panel production. While the European Commission favored the imposition of tariffs, Germany—worried about economic retribution in other export sectors—sided with the Chinese.

The incident demonstrates the role that economic interest alignment and accommodation play in informing Germany’s relations with global great powers. Again, the TTIP could be subject to pitfalls here. Such behavior calls into question the credibility of Europe’s—and particularly Germany’s—commitment to use the TTIP as an a Western geoeconomic caucus through which the US and Europe can leverage their combined economic heft to pressure the Chinese and other rising economic powers to adhere to commercial norms, thereby underpinning the global trading order. This “economic NATO” argument has been the geostrategic rationale driving negotiations for the transatlantic mega-FTA. Germany’s defection from the EU stance on the solar-panel anti-dumping dispute is an ominous sign.

Renewal Begins at Home

As Merkel takes office for her third term as chancellor, Germany sits in the sweet spot of the international system. The center-right establishment made a determined effort to capitalize on this in 2013, creating an anesthetized electoral environment. But this belies the internal tectonic shifts in Germany that could dramatically transform its economy. The complacency that has defined Merkel-era foreign policy also extends inward. Neglected infrastructure, from highways to broadband, is increasingly burdensome for the country’s advanced manufacturing industrial base. Rising energy prices are gradually wiping away competitive wage-productivity ratios and gains from the Agenda 2010 reform. And Germany’s demographic time bomb is fast approaching and, with it, a dramatic reduction of the labor force and concurrent increases in retirement and healthcare requirements on the state. This, too, puts a drag on Germany’s competitiveness, as the country’s diminishing bench of younger workers affects its ability to innovate.

Crafting a vision for Germany will be Merkel’s greatest challenge and, ultimately, her most lasting legacy. When deflecting criticism of those who argued more than two decades ago for a slower reunification, Helmut Kohl pointed to Ludwig Erhard, the founder of the social-market economy that has since become the foundation of the German social contract: “If Erhard had thought like that, then today we would still be buying shoes with rationing coupons.” Merkel, herself known for a penchant for coupons, should heed that lesson.

Tyson Barker is director of trans-Atlantic relations at the Washington, DC-based Bertelsmann Foundation.