By David Born and Christian Krys
In the face of global threats like climate change, geopolitical tension and pandemics, cooperation between the European Union and the United States is more important than ever. Indeed, it is the only way to overcome the many problems and to maintain stability, security and peace in the world. Despite frictions in recent years, such as the trade dispute or the recent discussions over the Inflation Reduction Act and the European Net Zero Industry Act, Europe and the U.S. continue to maintain close links both politically and economically.
German and U.S. companies are keen to see a further strengthening of the transatlantic partnership and business relations. This is one of the key findings of the Transatlantic Business Barometer 2023, produced jointly by the American Chamber of Commerce (AmCham) and Roland Berger. The study, conducted in January and February 2023, polled the views of U.S. companies operating in Germany and German companies with business operations in the United States.
The study yields a sobering result on the question of current transatlantic trade and business relations: Only a minority of the companies surveyed consider these to be good or very good. German companies in the U.S. are even more critical of relations than their U.S. counterparts in Germany. In particular, companies on both sides of the Atlantic rate coordination with multilateral institutions like the WTO and progress in transatlantic trade liberalization as insufficient. They also see room for improvement in cooperation on digital policy. These findings can be viewed as a mandate for policymakers in Europe and the U.S. to renew the push for a trade agreement.
There are questions over how dependent Western economies are on strategic relevant imports in the wake of the pandemic-induced supply chain problems and the suspension of trade relations with Russia. The Business Barometer 2023 survey therefore asked which areas companies consider most relevant in the context of strengthening transatlantic sovereignty.
In both Germany and the U.S., companies see stronger joint positioning on economic policy issues as the most important area for transatlantic action. Companies on both sides of the Atlantic agree that greater cooperation on strategic security issues should be prioritized here.
The distortion of trade relations with Russia was most keenly felt last year, particularly in the context of Germany's energy supplies. Electricity and gas prices rose by orders of magnitude last year. Although they have recently fallen back somewhat, prices remain high.
Even though our survey found that a good 80% of the U.S. companies operating in Germany do not expect the high energy prices to impact their business operations, one-third of U.S. companies are nonetheless taking a cautious approach to future investments in Germany: 27% of respondents intend to reduce their planned investments in the country as a result of the higher energy prices, and 6% even plan to put a temporary halt on investments. That said, almost 10% of the companies polled intend to increase investment in Germany, which suggests investments in energy efficiency measures.
Around one-third of parent companies of the German businesses in the U.S. that took part in the survey are more inclined to relocate more of their production to the U.S. due to the better energy prices and energy supply security there.
The high cost of energy is also affecting Germany's attractiveness as a place to do business: Four out of five of the U.S. companies in the poll rated energy costs as bad or not so good. None of the companies consider Germany to be well positioned in that regard.
Only around one in three U.S. companies still rates Germany as a good or very good business location overall. The previous year's figure was almost 60%. Besides energy costs, U.S. companies are also critical of labor costs, the availability of skilled employees and corporate taxation. By contrast, Germany scores well on quality of employees, supplier networks and R&D.
The U.S. fares much better by comparison: 74% of German companies rate the U.S. as a good or very good business location. The country's potential as a sales market, its energy costs and the environment for entrepreneurship and startups are seen as particularly positive. However, where the U.S. scores not so well is on labor costs, visa issuance and the overall reliability of politics.
The Business Barometer thus reveals a mixed picture of the current situation. On the one hand, the findings show how robust companies on both sides of the Atlantic are – in spite of the numerous crises being faced. On the other hand, the companies identify crucial location factors and current transatlantic cooperation as areas for improvement. It is evident that the need for reform is greater in Germany than in the U.S. and that companies want to see transatlantic cooperation intensified.
For the Transatlantic Business Barometer 2023, 33 U.S. companies with a business base and revenue of more than € 36 billion in Germany as well as 24 German companies with a business base and revenue of more than € 97 billion in the U.S. were surveyed in January and February 2023.
The Transatlantic Business Barometer brings together the results of a survey on business conditions and location factors among German and U.S. companies operating in the respective other country.
