Sense on Cents

I have always been intrigued by Germany. From the history of the republic, to the wars, the division and reunification, Berlin, Munich, the food, the beer — there is a lot going on there. I had the good fortune of spending a college semester in Freiburg, which is in the southwestern corner of the country. “Wie geht’s,” meaning “how are you,” evokes many pleasant memories.  The education both inside the classroom and out was fabulous.

There is little doubt that Germany carries the most weight within the European Union. Germany suffered massive inflation after the Weimar Republic and the fear of hyperinflation is deeply embedded in their culture. Given my experience and interest, I watch developments there fairly closely.

While China Agrees $10 Billion Trade Deal With Germany, Europe  may seem to be a relatively small trade agreement on its face, I actually believe there are much greater implications, both real and symbolic, of this trade deal. What are they?

First off, the bulk of these trade agreements are in the auto, electronics, and tech industries. While  U.S. companies may not be the world leaders in electronics, I do think we have some automotive and technology companies that may like a piece of this business especially at this time.

The more important signal of this trade agreement is on the political front. While Secretary of State Clinton has embraced China, the messages from President Obama and Treasury Secretary Geithner have been decidedly mixed.  Don’t think for a second that the administration does not see and feel this agreement. I would bet that we see even further overtures made by both China and Russia towards Europe in an attempt to shift the balance of power.    

Lastly, in reviewing this agreement please note that the Germans are exporting products and the Chinese are importing!! Secretary Geithner called on the Chinese to increase consumption and imports, but we did not get the trade!

Just a subtle message under the surface as the Prisoner’s Dilemma between the U.S. and China plays out.  

Although this trade agreement got no coverage here in the United States, do you think if there were a multi-billion dollar trade agreement between the U.S. and China it may have been front page news?

LD

This entry was posted on Thursday, February 26th, 2009 at 4:30 PM and is filed under Auto Industry, China, European Union, General, Germany, Hillary Clinton, Obama Administration, Russia, Technology, Tim Geithner, Trade. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.