Time to Get Over the ‘Atlantic Divide’
President Bush this week will visit wounded soldiers at the U.S. military hospital in Wiesbaden, Germany, and then go on to the nearby 13th century city of Mainz to meet Chancellor Gerhard Schroeder.
Many view Schroeder as wounded too -- a casualty of what used to be called the Atlantic Alliance.
When it comes to Europe, all reports from the diplomatic front stress disagreements with the United States -- over the war in Iraq, the future of NATO, arms sales to China and many other issues. American officials, their eyes seemingly fixed on Asia these days, have talked dismissively of “old Europe.”
But the story that nearly never gets told is that of growing economic ties across the Atlantic.
Not only have European and U.S. companies grown closer in recent years, but they are also picking up the pace with new waves of business.
“The economic relationship between the United States and Europe is by a wide margin the deepest and broadest between any two continents in history,” concludes a new report from Johns Hopkins University.
The nexus goes well beyond traditional trade in goods and services, which amounts to a mere $450 billion or so annually.
Far more significant are the levels of investment by European and U.S. companies across the continents. European firms have more than $2 trillion in assets in the United States; American firms have a comparable amount in factories and business operations in Europe.
And the rate of investment is accelerating, said Daniel Hamilton and Joseph Quinlan, the economists who wrote the Johns Hopkins report, titled “Partners in Prosperity.” In 2003, the latest year surveyed, U.S. firms invested $87 billion in Europe, while European companies plunked $37 billion into the U.S.
Investment makes jobs. European firms employ 4.2 million in the U.S., and American multinationals boast a collective payroll of 3.2 million in Europe.
Consider, for instance, Novartis, the Swiss pharmaceutical company. It has shifted its entire biotechnological research operation to Boston to benefit from local scientific brainpower. Meanwhile, General Electric Co. has opened a research facility in Munich, Germany, which has become a center for electronic innovation.
Driving the trend is a broad restructuring of industry, particularly on the European side of the drink.
For generations, European companies have been heavily regulated and taxed -- and the cost has been huge. Germany, France and Italy (the largest of the European Union’s economies) have seen very slow growth and very high unemployment over the last decade.
But change is underway.
Schroeder, for one, “is acting as boldly as Ronald Reagan on the German economy,” revamping labor policies to make them more market-oriented, says Stephan-Gotz Richter, who runs the Globalist, a Washington newsletter and consulting firm.
The Danes also have reformed their unemployment system. And France is abandoning a decade-old experiment of limiting the workweek to 35 hours as a way to spread employment. The powers in Paris have now concluded that more work, not less, is the key to reducing the country’s 10% jobless rate.
To be sure, evidence of a pickup in these national economies remains scant; Germany and Italy have just reported slowing growth again. In all, the EU -- with 450 million people in 25 countries -- is projected to grow at less than half the rate of the U.S. economy this year.
But among individual businesses, progress is more tangible.
A large number of companies in Europe “are under pressure to adapt to globalization,” says Michael Tennenbaum, senior partner of Tennenbaum Capital Partners in Santa Monica, an investment firm that is backing a venture in Sweden.
To cite one notable example, Siemens, the Munich-based company that competes in electric power, medical electronics, telecommunications, automotive equipment, financial services and water treatment, has become a truly worldwide enterprise in the last dozen years.
In 1992, Siemens had more than 60% of its 404,000 employees in Germany. Today 62% of its 430,000 employees are in other countries, including 70,000 in the United States. During the same span, sales have soared to $100 billion from $53 billion, and profit has more than doubled.
That’s no mere coincidence. Siemens’ just-retired chief executive, Heinrich von Pierer, explains that the model of “American society’s attention to the bottom line” prompted the global push.
“Under the influence of financial markets, the profit orientation in Europe is growing,” Von Pierer told the Harvard Business Review.
In fact, with business investment and collaboration on such a grand scale, the real wonder is that talk of the “Atlantic divide” goes on at all.
A European shrugs at the paradox. “We are so close,” says Noel Fahey, Ireland’s ambassador to the U.S., “that both sides take each other for granted economically.”
Perhaps they should continue to do so. If the silent revolution of transatlantic business is creating jobs, while the loud talk focuses on division and mistrust, maybe it’s best to remain quiet about the whole thing.
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James Flanigan can be reached at jim.flanigan@latimes.com.
