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Looking at Europe: New Challenges in the European-American Alliance
AGA Unternehmensverband Großhandel, Außenhandel, Dienstleistung e.V.
Ambassador William R. Timken, Jr.
Hamburg, November 1, 2006



As prepared for delivery.

Good evening and thank you for the kind introduction and invitation to speak with you this evening. It is a pleasure to return to Hamburg.

Long ago, Hamburg's citizens recognized that the best way to prosperity and innovation was the free flow of goods and ideas. That is probably why it was here in Hamburg that President George Washington established one of the first American Consulates General. That was back in 1793.

Millions of people passed through Hamburg to start a new life in America. In honor of those immigrants, Hamburg's mayor, Ole von Beust was Mayor Bloomberg’s special guest at this year's Steuben Parade in New York City in September.

Germany and America have been connected for over three centuries; and we look to keep building on those relations in the future.

American companies have long taken advantage of the facilities and pro-commerce attitude that prevails in this great port city. In 2005, 4.7 billion euros of U.S. products were exported to Hamburg and the U.S. imported almost 2 billion euros through this city. Those figures suggest the trade between the U.S. and Hamburg was about the same as the total trade that year between the U.S. and Austria.

The City of Hamburg has been extremely supportive of the Hamburg-America-Center in the Hafen City. This Center will serve as a forum for the further development of both commercial and cultural ties.

It is about the future that I want to talk with you today – about the opportunities we, Americans and Germans, will have in the coming months when Germany takes over the Presidency of the European Union. I see an exciting time for all of us in the first six months of next year. It will be a time when we can build on the great relationship between Chancellor Merkel and President Bush and on the strong traditions of friendship between our two peoples.

Chancellor Merkel has been talking about where she sees Germany focusing during its EU Presidency: advancing the Lisbon agenda to build a more prosperous EU, fostering innovation, an initiative for better regulation, redeveloping the neighborhood policy and increasing the EU’s global engagement. The U.S. agrees with and supports these objectives. The United States has and continues to support European integration. Since the days of George Marshall, we have recognized that a strong, free, and prosperous Europe was not only good for this side of the Atlantic; it was – and is – profoundly good for America too.

I want to talk about how we can work together to achieve great results in three areas: in the international political arena, in better protecting people around the world from terrorism, and in boosting economic prosperity.

The U.S and the EU – International Political Partners

The United States and Germany have long been active partners in confronting authoritarian regimes and fostering democratic values in Europe and the rest of the world.

During the German EU presidency, Chancellor Merkel plans to encourage states in eastern Europe and the Caucasus, especially Ukraine and Georgia, to pursue the reforms that are a prerequisite for eventual membership.
These initiatives are, too, in line with our thinking. Like Germany, we see greater pro-democratic involvement in the region as a means to resolve conflicts peacefully.

We are also glad Chancellor Merkel is looking at leading the EU in to a new era of EU-Russian relations. She understands the importance of shared values, including democracy, rule of law, and allowing markets to work. I think many of us see this sort of interaction as an important contribution to the continued effort to strengthen economic and political liberalization in Russia.

I am certain as well that we will work closely with the German presidency on other international political issues, including our continued efforts to convince Iran to stop enriching uranium.

Fighting Terrorism

There is an important second area where I see the U.S. and Germany working closely together during the upcoming presidency and that is strengthening cooperation to fight terrorism.

As I am sure all here are acutely aware, this beautiful city, so open to the world for centuries, was where Mohammed Atta and others planned the September 11 attacks on the civilian population of the U.S. Since then we have made great progress in the fight against terrorism. We are sharing more information.

There is better cooperation between the authorities in our two countries.

Americans and Europeans alike have seen benefits. For example, we found out about plans to blow up planes between the U.S. and London before anything happened. When terrorists planted bombs in German trains this summer, international cooperation brought swift arrests. Germany ensured the safety of millions of people during the World Cup. That was no coincidence. It was the result of excellent planning – and extensive cooperation with participating, neighboring, and transit countries.

We will need to work together in Germany’s EU presidency to identify and pursue additional ways to expand this cooperation, stop terrorists and protect our people.

A Partnership for Greater Global Economic Prosperity

Finally, I want to talk about the area on which many of you here tonight focus: the economic relationship between the United States and the European Union and its members.

As the people of Hamburg know, the economic ties between the U.S. and the members of the European Union both drive and anchor transatlantic relations. By the driver, I mean the continued and ever-increasing level of investment and trade between the EU and United States. Forty percent of world GDP and over one-third of global trade take place between the EU and the U.S.

Our transatlantic economic ties also anchor our relationship. In 2003 when the U.S. and a number of EU members were disagreeing over Iraq, U.S. companies still poured $7 billion in investments into Germany. It was also a record year for transatlantic trade flows, which grew by 7% over the previous year. Today over 3,250 German companies operate in the U.S. with an annual turnover of $429 billion. There are over 1,250 U.S. companies in Germany with a turnover of $214 billion. All together, these firms provided over 1.25 million jobs in our two countries – over half of those jobs are in Germany. The companies making these investments are harnessing the benefits of markets opened by global economic integration. In doing so, they increase the prosperity of our respective countries further deepening the most important trade relationship in the world, a relationship that fuels the world's economy.

You may know that until one year ago, I would have been on the other side of this podium – with you. The private sector was my life for 43 years until President Bush asked me to do this job. I have a bit of experience with running a company that benefited greatly from the transatlantic relationship. At the Timken Company, we realized that if markets were opening and the global economy was changing, we needed to change right along with it. This required serious thinking about how to run the company more efficiently. Defending the status quo was a losing strategy. We couldn't allow the habits of the past to be the greatest hindrance to competing successfully in new markets.

This transition from private to government gives me some unique perspectives. I remain convinced that the private sector is where wealth is created – where ideas are transformed into innovations that increase productivity and support the wonderful standard of living we enjoy in America and most parts of Europe. In the future, I believe growth of the world economy will be even greater than we expect. Demand for goods will increase. People want to be more prosperous and to enjoy a higher standard of living. Increasing the size of the pie, not cutting the pie into smaller pieces, is the only way to satisfy mankind's desire for a better life.

For that reason, I am pleased that Chancellor Merkel also plans to promote innovation and emphasize economic competitiveness during Germany’s presidency year.

Though wealthy today, Europe faces some long-term risks to its prosperity. Growth in Europe's large economies is tepid at best, although countries such as Ireland and the new Central European EU states are more vigorous. Some countries are struggling to respond to the rise of China and India as economic successes. Unemployment remains high. Labor market flexibility is low. And a rapidly aging population means fewer workers and higher overall cost for social benefits. Insufficient progress and half-hearted measures toward reform has left Europe's large economies with lagging competitiveness, stagnant productivity, and anemic growth.

The only answer is reform. Recognizing this, the EU committed itself to a ten-year reform plan in 2000. The Lisbon Agenda aims to transform the EU into a faster-growing, competitive, knowledge-based economy. Weak economic growth in the EU means lost opportunities for transatlantic trade. As Daimler-Chrysler's study on the transatlantic economy highlights, annual growth of just 3% each year in Europe would create annually a new market the size of Argentina.

For all these reasons, we look forward to German leadership in advancing the Lisbon agenda for a dynamic EU. Governments need to unleash the potential of businesses -- through tax cuts, less restrictive labor regulations, and education systems that allow their citizens to be part of this dynamic global economy.

It is essential the EU and its members act. According to a recent survey, 60 percent of the German population under 29 worry about ending up in poverty. This reflects extraordinary pessimism on the part of young people about their economic future and underscores the need for the government to undertake the necessary reforms.

Governments need to support education and encourage innovation. This is a point where government and business interests intersect. As the world becomes more integrated, companies need employees who can adapt to this new world -- who have the necessary skill sets to compete. We learned that at the Timken Company. Companies must empower their employees so they can exploit the advantages of globalization.

Globalization is creating another reality. Companies are moving closer to their markets, suppliers and decision-makers, rather than focusing solely on low-cost production. That means Americans and Europeans are still well-placed not only to compete in today’s global economy, but to succeed.
Our large and open markets offer opportunities to sell our goods, but it is our people’s ability to remain competitive in these open markets that is our biggest advantage.

As I have mentioned, the transatlantic economic relationship has allowed Germans and Americans to prosper. At the heart of this prosperity is the relative openness of our markets. We have seen the benefits of lowering tariffs and custom duties and increasing market access. Frankly, the United States has been disappointed in the failure of the world to realize the promise of trade liberalization, which could be realized through a successful Doha round of trade negotiations.

Since the Second World War, opening markets for trade has been the single greatest engine of global economic growth. Germany has been the biggest beneficiary. Germany is the world's largest exporter and, as a result, the world's third largest economy. Nevertheless, German companies are exerting minimal pressure on your government to conclude Doha successfully. To me, this is incomprehensible. For 40 years I criticized American government and worked to get it to do more things that helped the private sector and fewer things to hurt it. Today I am part of government and I can tell you the need to push governments to act in support of business is greater than ever.

At the G-8 summit last summer in St. Petersburg, President Bush and other world leaders urged negotiators to keep working beyond the July 31 deadline to come up with the outlines of a final agreement in the WTO trade talks. One of the good things about trade policy is that you can in fact have a win/win situation. There are going to be segments in our economies that are hurt but you can grow that economic pie I referred to earlier. Doha is not just about agriculture. The United States has also been bold in terms of access proposals in the manufacturing sector. Unfortunately, discussions have focused on loopholes rather than on steps to deliver the kind of market opening needed to spur new trade flows. The question is at what point are you moving beyond reasonable discussion and using loopholes to block market access. I hope that Chancellor Merkel will push the EU forward in the Doha talks.

There is a third economic area where we hope Germany can lead the EU in taking steps to reform and boost its economy: better regulation. Eliminating out-dated legislation, simplifying other rules and procedures, and systematic use of impact assessments and public consultation all helped the U.S. revitalize its economy. These steps made it possible to take advantage of the opportunities that new information technology and other innovations have brought. I urge all of you to look at whether they might also help Germany and the other EU states to become the vital, innovative economies so many seek.


I have sketched out only some of the areas where the United States will work with the EU during Germany’s presidency. But I think you have a sense of the tremendous scope of the transatlantic relationship and the benefits it brings to all of us. I think too that in the upcoming year, Germany will have a golden opportunity to make a difference.

Let that golden opportunity be a golden bridge. That’s how Baden-Württemberg’s Minister-President, Günther Oettinger, described the spirit of vision, optimism and promise that helped Germany transcend the challenges faced by a Europe laid in ashes by World War II. At the 60th anniversary of the “Speech of Hope” a few weeks ago, Minister-President Oettinger paid tribute to the contributions America made to German and European reconstruction. The resulting partnership is one of the success stories of all time. At the start of this new century, let America and Europe -- working together -- build a golden bridge for peace and prosperity around the world.

Thank you.

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