The Big Two-- China and Germany

Posted by scapozzola on 05/17/2012

The U.S. trade deficit with Germany in 2011: $49 billion.  (And through the first three months of 2012: $13.2 billion.)

The U.S. trade deficit with China in 2011: $295 billion.  

Not only is the U.S. lagging far behind the two countries when it comes to achieving balanced trade, but the gap seems to be widening.

Now comes news that these two export powerhouses may be consolidating their position.  As Didi Kirsten Tatlow reports in the International Herald Tribune, China and Germany may be building a "special relationship":

As global power shifts eastward, Germany and China are building a “special relationship” that risks undermining Europe’s overall position with the rising Asian giant and may have serious consequences for the balance of power between Europe and China, according to a hard-hitting new report from a European Union think tank.

On a deeper level, business, along with frustration at the European Union’s lack of coordinated policies, is driving the relationship, Mr. Kundnani and Jonas Parello-Plesner, analysts at the European Council on Foreign Relations, say in their report, “China and Germany: Why the Emerging Special Relationship Matters for Europe.”

“At present, there is an almost perfect symbiosis between the Chinese and German economies: China needs technology and Germany needs markets,” they wrote.

Tatlow says the two countries have "fast-deepening ties," though they already share a similar, export-focused drive.

Both countries enjoy the benefits of an undervalued currency.  But Germany also employs specialized, niche manufacturing while favoring a flexible workforce that adjusts to changing market conditions.

China goes much further, though, boosting its industrial sector via preferential loans, energy rebates, and massive state subsidies.

It bears watching, then, this growing alliance between two key export-driven economies.

Read more.

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