Companies Say Berlin-Washington Ties 'Business as Usual'

COLOGNE (DW) -- As Donald Rumsfeld lumped Germany together with Libya and Cuba in its refusal to support a war against Iraq this week, two different institutions reported that the sparring hasn't spilled over into the business realm.The news is likely to come as a slight relief for Chancellor Gerhard Schröder's beleaguered Social Democrat government.

On Wednesday, the American Chamber of Commerce in Germany issued a report showing that U.S. companies are the greatest single investor in Germany and that there are currently no signs tensions between Berlin and Washington has had any impact on business ties.

"The German-American economic relationship is very deep and very good," said Chamber of Commerce President Fred Irwin. "There have always been tensions, but in economic terms, it's always been 'business as usual.'"

The following day, Germany's federal commissioner for foreign investment, Hilmar Kopper (photo), concurred, saying there was no evidence the Berlin-Washington political tangle has made had any impact on trade. "In no way have I seen any indication that the discord has crossed over into the thoughts of investors," he said.

Nonetheless, Kopper, who also serves as chairmen of DaimlerChrysler's supervisory board, said he is forecasting direct foreign investment in Germany will drop by 50 percent this year to a total of €20 billion due to the weak global economy.

A hardening relationship

Meanwhile, German businesses fear that political discord between U.S. President George W. Bush and Schröder's government could begin to adversely affect the economic transatlantic relationship. The head of the Federation of German Wholesale and Foreign Trade, Anton Börner, admonished Schröder's government Thursday to do everything it can to end the diplomatic crisis. If the animosities continue to grow, he cautioned, bilateral trade between the U.S. and Germany could fall by as much as 10 percent and reduce economic growth in Germany by 0.3 percent.

"More and more German companies are starting to feel the hardening of the relationship and are concerned about their business commitments," in the U.S., he warned. "Any development that speeds up the erosion (of the relationship) needs to be avoided."

U.S. companies in Germany twice as profitable

The American Chamber of Commerce report, conducted in cooperation with the consulting firm Droege, offered a rosier account of German-American business ties.

The report found that close to 1,800 subsidiaries of American companies in Germany employ about 800,000 people and pull in revenues of around €540 billion ($585 billion). Of the subsidiaries surveyed, 38 percent said their Germany revenues accounted for more than 10 percent of their mother company's worldwide sales. On average, the American companies also said they enjoyed market shares of about 22 percent in their respective sectors. According to the latest figures, compiled in 1999, U.S. companies have invested more than €40 billion in Germany.

Tax hikes worse than Rumsfeld rift?

Still, Irwin warned that the current tax plans the German government has on the table could be more devastating for U.S.-German business relations than Schröder's Iraq position. "The most important issue facing investors is not the political tensions, but the investment climate," Irwin said. "The problem here is a lack of any real tax policy," he explained. "Without reforms, we can't move forward," he said in response to current plans by the government to reduce the levels of write-offs for losses.

Compiled with material from wires.