LDN - Business

Merkel ally warns protectionism would hurt U.S. consumers

[March 09, 2017] By Andreas Rinke

BERLIN (Reuters) - It is as hard to imagine how the U.S. government could force American consumers to stop buying German cars as it is to conceive of the German government persuading Germans to buy U.S.-made cars, a key ally of Chancellor Angela Merkel said.

Juergen Hardt, the German government's coordinator for transatlantic policies, said in an interview with Reuters that it was not possible for the government to try to intervene to reduce Germany's trade surpluses and that economies perform better thanks to competition - rather than isolation.

"I don't see any possibility of artificially reducing German trade surpluses," said Hardt, the foreign policy expert in parliament for Merkel's conservative Christian Democrats ahead of Merkel's trip to meet U.S. President Donald Trump on Tuesday.

"Do we really want to try to force German citizens to buy American cars?" Hardt added. "Does the American president want to force Americans to stop buying German cars in the future? Do we want to artificially make German cars more expensive with taxes so that consumers buy more foreign products?"

The United States is Germany's biggest single export destination and U.S. President Donald Trump has warned that his administration will impose a border tax of 35 percent on cars that German carmaker BMW BMWG.DE plans to build at a new plant in Mexico and export to the U.S.

Germany's trade surplus climbed to a record high in 2016, rising to 252.9 billion euros ($270.05 billion), surpassing the previous high of 244.3 billion euros in 2015.

Dismissing criticism from Trump administration trade adviser Peter Navarro that Germany was exploiting a weak euro to gain a trade advantage, Hardt said the quality of German exports was the key to their success, not exchange rates.

As well as being foreign policy spokesman for Merkel's conservative Christian Democratic Union, Hardt is also Germany's senior parliamentarian on transatlantic relations and knows the direction of German government thinking.

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German Chancellor Angela Merkel addresses the German lower house of parliament Bundestag in Berlin, Germany, March 9, 2017. REUTERS/Axel Schmidt

Navarro, head of Trump's new National Trade Council, had accused Germany of using a "grossly undervalued" euro to gain a competitive advantage.

Navarro said on Monday the $65 billion U.S. trade deficit with Germany was "one of the most difficult" trade issues, and bilateral discussions were needed to reduce it outside of European Union restrictions.

On Monday he depicted chronic trade deficits as a threat to national security and said the Trump administration would seek to "reclaim" parts supply chains that had moved overseas.

German Finance Minister Wolfgang Schaeuble on Tuesday firmly rejected the U.S. criticism, setting the stage for a heated debate on trade when G20 policymakers meet next week in the German spa town of Baden-Baden.

Hardt also defended Germany's strong trade performance as the result of the competitiveness of the country's industry.

"German products are almost always the most expensive in any given segment," said Hardt. "German companies are competing with quality as their argument and not any kind of price dumping."

He added that if the United States wants to become truly "great" again, then it should stand up to the global competition and not allow it to be weakened through isolation.

"That's actually an economic truism which one needs to remind some people in Washington about," added Hardt.

(Writing by Erik Kirschbaum)

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