Economist Slams US Attempts to Curb Germany's Export Strength

Economist Slams US Attempts to Curb Germany's Export Strength

The US would like countries like Germany that export far more than they import to curb those surpluses in a bid to reduce global trade imbalances. But according to American economist Michael Burda, doing that would only be punishing Germany for having put its economic house in order.

SPIEGEL: What do you think of US Treasury Secretary Timothy Geithner's proposal that countries keep their current-account balance under 4 percent of gross domestic product, both for deficits and surpluses?

Michael Burda: I think that interventions of this sort are unreasonable and unworkable. One can not resolve global imbalances by imposing penalties. Such measures are unsuitable for achieving that goal.

SPIEGEL: What does the proposal mean for Germany, which runs a current-account surplus as a result of its strength as an exporter?

Burda: Germany would effectively be punished for its efforts in recent years to regain its competitiveness, which can help explain why German products are selling like hotcakes on the global market. I would also find it strange to see other countries being rewarded for not having put their own house in order.

SPIEGEL: The US treasury secretary is proposing that Germany reduces its reliance on exports, for example by boosting domestic demand with the help of tax breaks.

Burda: But you don't need penalties to do that. Domestic demand will pick up in the near future, entirely by itself. Germany's unions will see to that in the coming rounds of wage negotiations (i.e. by securing pay raises for their members).

SPIEGEL: How can the imbalance between exporting and importing countries be brought back into balance?

Burda: These things cannot be manipulated by governments in the long run, and will ultimately correct themselves over time without outside intervention. The Chinese will ultimately have to focus more on their domestic economy, and small- and medium-sized companies in the US will make an effort to produce goods that they can successfully export -- of that I am optimistic.

Interview conducted by Alexander Jung

It's easy for the US to make such a demand, they're economy is a consumer oriented one, whereas ours is export oriented. Why not just ask Germany to increase the unemployment rate to begin with?

BubbleBliss wrote:The US would like countries like Germany that export far more than they import to curb those surpluses in a bid to reduce global trade imbalances.

So, a free market only so long as it suits the US?

I guess that's another way to put it, Matt.

Geithner is an ass, and the last person on earth I would associate with a free market - which should be obvious by his suggestion to Germany above.

Germany should just flip him the bird and tell him to butt out, until he gets his own house in order.

dblboggie wrote:Geithner is an ass, and the last person on earth I would associate with a free market - which should be obvious by his suggestion to Germany above.

Germany should just flip him the bird and tell him to butt out, until he gets his own house in order.

Geithner... the only tax cheat to become the head of the U.S. Treasury.

dblboggie wrote:Geithner is an ass, and the last person on earth I would associate with a free market - which should be obvious by his suggestion to Germany above.

Germany should just flip him the bird and tell him to butt out, until he gets his own house in order.

Germany tends to do that when the US makes ridiculous requests such as this one.