So the new business model of the Americans is to prevent unpopular states from doing business. In doing so, the USA is also damaging the German export model.
“The business of America is business.” The American President Calvin Coolidge (1923 to 1929) once described his country’s business model with this simplicity. Tempi passati! Since then, the methods of doing business in America have been diversified – one could even say: politicized.
Economic sanctions have become a popular instrument to discourage other states from waging war (Russia, Syria), to prevent the construction of a nuclear bomb (Iran, North Korea) or to disrupt economic growth (China). So the new business model of the Americans is to prevent unpopular states from doing business. “Sanctions,” says John Smith, “are the alternative between words and war.”
For years, John Smith headed the US Treasury Department’s Office of Foreign Assets Control (OFAC), which is responsible for administering and enforcing economic and trade sanctions worldwide. He reports: “With the presidency of Donald Trump, sanctions shot through the roof. “
In numbers, when Smith became Treasury Director in 2015, there were more than 500 sanctions designations. By the time he left the agency three years later, their number had nearly tripled.
You have to know that Donald Trump’s “America First policy” was not just a Republican’s specialty. The Democrats also went along with the legislative process on Capitol Hill. Rarely has information been given so openly about the national interests of the USA as in the justification for the American sanctions law against Russia, which was passed in the wake of the occupation of Crimea.
Since March 2014, Western countries have imposed 12,747 sanctions on Russia. John Smith helped set up a system that has since been refined and which can now only be understood by thousands of sanctions experts in companies and the foreign trade departments of the ministries.
The new sanctions against Russia – imposed in the wake of the Ukraine invasion – are spearheaded by the US, Canada, Switzerland and the UK with 1,683, 1,418, 1,406 and 1,385 separate embargoes, respectively.
The Iran sanctions, which began after the attack on the US embassy in Tehran in 1979, are now to be extended. The recent reason is no longer the nuclear bomb ambition, but the protest of the Iranian women’s movement, which is to be supported.
Even China – although the country is not at war with any other nation – has been targeted by the sanctions politicians. The US imposed visa restrictions and sanctions on Chinese officials and companies, citing its repression of Uyghurs and other ethnic minorities in Xinjiang and Beijing’s claims in the South China Sea.
The sanctions are having an impact on German foreign trade: in 2021, the value of German trade with Russia was 59.7 billion euros; from January to September of this year it was only 41.7 billion euros.
In trade with Iran, the value of German exports and imports was still over 4.7 billion euros in 2010, in 2022 it was only around 1.5 billion euros up to the month of September.
When it comes to trade with China, the German export economy is all about the really big numbers. In 2022, goods worth a total of 223.4 billion euros have been traded so far. A drop of only ten percent would mean a loss of 22.3 billion euros in German-Chinese trade volume.
The German government has been under pressure from the US for months to change its China strategy. Olaf Scholz, traveling through Asia with a top-class business delegation for the second time in 14 days, feels the pressure – and also the counter-pressure from German company leaders. “Diversification does not mean decoupling from China,” said the chancellor, to the relief of the heads of Deutsche Bank, BASF and Siemens who were traveling with him.
The wind is currently blowing in the face of the German export economy. Free trade as we have known it is suspended. The values that were still in force were reassigned: it is no longer supply and demand and no longer price and performance that determine whether a trade relationship comes about, but the military and political constitution of the other party.
Even Angela Merkel felt the pressure and fought back: “Anyone who thinks that the problems of this world can be solved with isolationism and protectionism is making a huge mistake,” said the Chancellor in her government statement at the G20 summit on June 29, 2017 .
This offensive attitude is no longer appropriate today. The Americans – everyone in the German export industry has understood that by now – mean business. They have got used to extending their own sanctions decisions by law to other western states. The whole thing is called an “extra-territorial sanctions regime”.
This prohibits US companies from trading with German or French companies unless they comply with the US sanctions. This de facto declares US law to be German or French law.
Incidentally, John Smith is now a partner in the international law firm Morrison
Conclusion: The German economy feels the tide changing – and must be careful not to be flooded by the water masses. For an export nation, the politicization of trade relations is not a footnote, but a new chapter heading.
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