COALITION CRITICIZED Foul Play in Free Trade

German industry is critical of Berlin for failing to push the trans-Atlantic trade deal. Economics minister Sigmar Gabriel has garnered particular disapproval. Once a TTIP supporter, he now seems lukewarm.
Container ships at the Hamburg port. The TTIP deal could be at a tipping point.

 

German business leaders have huge respect for Angela Merkel, especially because she kept her promise not to raise taxes. But recently that respect has faded. That's due to the growing impression that her government is failing to get behind the Transatlantic Trade and Investment Partnership, the proposed bilateral trade agreement between the European Union and the United States, also known as TTIP.

In a series of unusually frank interventions, influential voices from the business community have spoken out against Ms. Merkel’s government on TTIP, criticizing its double-dealing and “foul play.”

Their anger focuses above all on Sigmar Gabriel, the leader of the center-left Social Democratic Party, or SPD, who is also the economics minister and vice-chancellor of Ms. Merkel’s coalition government. As economics minister, Mr. Gabriel carries the primary responsibility for the German government’s policy on TTIP.

Arndt Kirchhoff's frustration is typical of that felt by German business leaders on the matter. He's the managing partner of the Kirchhoff Group, a family-owned industrial corporation specializing in car components and mobility vehicles, employing over 10,000 people worldwide. Speaking about Mr. Gabriel, Mr. Kirchhoff loses his usual calm demeanor.

“As minister for economic affairs, Mr. Gabriel should be helping German small and medium-sized businesses to succeed,” he said. Without TTIP, he added, family-owned businesses would be “hung out to dry.” It was “irresponsible and not in keeping with his office,” for Mr. Gabriel to put party considerations before ministerial responsibilities, he warned: in Britain, this kind of behavior had led to the Brexit.

Without TTIP, family-owned businesses will be hung out to dry. Arndt Kirchhoff, managing partner, Kirchhoff Group

Mr. Kirchhoff’s views are widely shared among German businesspeople. The vast majority of German companies see TTIP as a golden opportunity. For quite a while, they also saw Mr. Gabriel as an ally, as he'd made an alliance with German business to sell the deal to a skeptical German public. But as next year’s general elections approach – in which Mr. Gabriel expects to run as the SPD’s candidate for chancellor – his enthusiasm seems to be waning.

He gives the impression he would be happy to see the trade deal die a quiet death. “After three years of talks, we eventually have to start seeing results, or else we should have a honest reckoning of where negotiations actually stand,” he told Handelsblatt recently. If there was no progress on the key questions, he added, “then the government also has to make an honest assessment.”

Mr. Gabriel has changed his tune. Until earlier this year, he was a solid TTIP supporter. Back then, he argued that the deal was the last chance for Europe and the United States to determine the ground rules for world trade. It would be much better for employers and workers if Europeans and Americans set the rules, rather than Asian governments, he said.

 

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Mr. Gabriel also had a real impact on the details of the negotiations. He pushed hard for highly-controversial “arbitration tribunals” – proposed to decide on disputes between investors and states – to be replaced by a system of investor courts. This has since become the official negotiating position of the European Commission. In the early days of the TTIP negotiations, the SPD leader was also quite prepared to push back against popular opposition, including within the trade unions and his own party. But in recent weeks, his position has changed substantially. The pretext for this seems to have been the end of the 14th round of TTIP negotiations, which made little progress on key issues.

Business leaders worry that Mr. Gabriel’s shift on TTIP is indicative of his wider move to the left ahead of the elections. After the 2013 federal elections, Mr. Gabriel’s party entered government in a “grand coalition” with Ms. Merkel’s center-right Christian Democrats. He seemed keen to shift the party to a more business-friendly direction. But those days may now be over. There are serious doubts about Mr. Gabriel’s reliability, say some senior business figures.

Doubts extend to his advocacy for Germany’s industrial base. Earlier this year the minister joined with business organizations and trade unions to launch the “Future of Industry” initiative. This aimed to keep industry at its current 23 percent level of gross value added in the German economy, and if possible raise that figure. Mr. Gabriel also promised to support industry demands in E.U. negotiations on emissions standards. “It remains to be seen just how seriously that promise was meant,” said one executive.

On TTIP, the impression is that Mr. Gabriel wants to quietly sneak away from earlier commitments. “The government and senior politicians need to keep their nerve, not switch into electoral mode and see who can make the most critical statement on TTIP,” Ulrich Grillo, president of the federation of German industry, or BDI, wrote in an op-ed for Handelsblatt today. “Stand up for TTIP in public,” he appealed to the government, demanding “clear, passionate and ongoing support” for free trade.

The BDI’s position was backed by Lutz Goebel, president of “Family Business,” an organization promoting that sector of the economy. “Sigmar Gabriel is falling victim to his many different jobs. He is SPD leader and that party is looking to reestablish its identity. But he is also supposed to be economics minister for the largest economy in Europe,” he said. Mr. Goebel said that Mr. Gabriel had worked hard for TTIP, and for the E.U.’s trade deal with Canada, known as CETA. But it would all be of no use if Mr. Gabriel “allowed weaker elements in his party to determine its direction. His motto should be: "More competition, more prosperity, less ideology.” He added that “the left-wing tendencies of some Social Democrats should not be allowed to determine Europe’s future trade framework,” saying that Angela Merkel had to show leadership on the question.

The left-wing tendencies of some Social Democrats should not be allowed to determine Europe’s future trade framework. Lutz Goebel, president, Family Business association

The SPD will decide on its stance on CETA on September 19, which may put more pressure on Mr. Gabriel. Michael Vassiliadis, head of Mining Chemistry Energy, also known as BCE, one of Germany’s largest industrial trade unions, spoke out in favor of the trade deal in an interview with German news magazine Der Spiegel. However, the German trade union confederation is one of the main organizers of a large demonstration against both CETA and TTIP, scheduled for September 17.

Although the Canada deal is ready to be signed, TTIP is running short of time. It seems unlikely that it will be finalized during Barack Obama’s term of office, as had been planned. Mr. Obama leaves office in January 2017. In the view of business leaders, this makes it all the more crucial for the government to push on with the deal. And Mr. Gabriel above all.

It is rare for German business leaders to speak so critically of Ms. Merkel’s government. In the longer term, a successful conclusion to TTIP may be the only way to heal the rift.

 

Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage. Klaus Stratmann is the deputy bureau chief of Handelsblatt in Berlin and covers the energy market. Anja Müller writes about family and small- and medium-sized firms. To contact the authors: [email protected], [email protected], [email protected].