Goods, Not Servicemen, Now Bind US, Germany

Last week's announcement of a mega-merger between Daimler-Benz and Chrysler Corp. can serve as a metaphor for the evolving relationship between the United States and Germany at the close of the 20th century.

With the thaw of the cold war, the partnership is steadily becoming a truer economic alliance, in which the world's No. 1 and No. 3 economies team up in ever greater transatlantic trade and investment. President Clinton's trip to Germany, which starts May13, will highlight this evolution.

It hasn't always been this way. During the cold war, the trend to watch was the number of American soldiers, tanks, and missiles deployed in Germany. But today, with US troops in Germany about a third of what they once were, the most telling numbers have to do with business deals - German media giant Bertelsmann AG, for one, is reportedly spending $1 billion to buy Random House, America's biggest book publisher.

"It's not that security is not still important. It is," says a White House official. "Let's just say that the relationship has broadened."

The importance of economic ties is not lost on Mr. Clinton, who is visiting Germany enroute to this weekend's economic summit of industrial nations in England. After commemorating the 50th anniversary of the Berlin airlift, in which the United States and its allies delivered more than 2 million tons of food and supplies to blockaded Berlin, Clinton will tour General Motors' Opel automobile assembly plant May 14. The Opel plant in Eisenach, the Detroit of the former communist regime, was built with an investment that exceeded $600 million.

Marks and dollars: ties that bind

Like the Opel plant, a stream of superlatives characterize the US-German economic relationship:

* US businesses are the biggest group of foreign investors in the former East Germany, pouring about $7.5 billion into chemicals, computer chips, autos, and other products since reunification in 1990.

* German investment in the US, however, dwarfs that figure. In 1997 alone, direct investment by German companies was nearly $7 billion, eight times the level of just five years ago. More Americans work for companies at least partially owned by Germans than for those of any other foreign nation, according to a recent report by the Associated Press.

* Trade between the two countries is leaping head, growing last year by 24 percent over 1996, though Germany still exports more to America than the other way around. (Some of that gain is attributed to exchange-rate fluctuations.)

Germans: 'Keep it coming'

As far as the Germans are concerned, they can use even more foreign investment in their country. Still digesting the massively inefficient economy of the communists, Germany as a whole endures 12 percent joblessness - and a whopping 20.6 percent in eastern Germany.

"It's very important that the president is going to east Germany. We need the investment," says a German diplomat here.

The diplomat says that in the years since reunification, Germany has become a more attractive place to invest. The worldwide reputation of Germany as a rigid, regulated, expensive place to do business simply doesn't hold anymore. "We have flexibility we haven't had in 20 years," he says.

As proof, he points to a newly deregulated telecommunications industry and an energy sector on the verge of deregulation. Labor unions, which through collective bargaining have traditionally held a firm grip on companies across regions and industries, are losing some clout. In 1997, wages actually decreased slightly.

Add to this the massive investment in a state-of-the-art telecommunications system in east Germany, and you have the kind of business changes "that made the Chrysler-Daimler marriage possible," says Mike Van Dusen, a senior staff aide on the House International Relations Committee.

The increase in US-Germany business activity has reached such a level, according to the German diplomat, that economics now serve as a "new basis" for relations between the two countries. This basis mirrors a pattern found in America's relations with other countries, where economics increasingly is the foundation on which everything else is built.

Still, he adds, Germany and Europe need Washington's leadership on security issues, especially in the Balkans and specifically in the Kosovo region of the former Yugoslavia. "As long as the Europeans aren't able to solve their own crises in their area, we need the US," the diplomat says.

In a major speech in Berlin May13, Clinton is expected to reiterate his view of US-European relations, which embraces an enlarged NATO and European Union and strong economic ties between Europe and the US.