Schröder Warns Weak Dollar Threatens World Trade

The last time Schröder was in the White House was two years ago. Since then Germany vehemently opposed the U.S.-led war to oust Saddam Hussein and along with France spearheaded the "old Europe" campaign protesting military involvement in Iraq without a U.N. mandate. In the past several months, however, the rhetoric -- if not the position -- in Berlin has softened and the first signs of an improvement in transatlantic ties are on the horizon.

Now at the start of a two-day whirlwind tour of the U.S., Schröder has made every effort to appear reconciliatory. Speaking at the Chicago Council on Foreign Relations on Thursday, the chancellor said he did not intend to dwell in the past, but rather wanted to look forward together with the Americans. The German-American relationship is a "trusting partnership among friends" he said, and as such each side must learn to accept differences and work together.

Germany remains firm in its refusal to send troops to Iraq, he announced ahead of Friday's meeting in Washington with President Bush. At the same time Schröder said Berlin would not stand in the way of a NATO mission. He also renewed his offer to help ease Iraq's mounting debt as part of any wider agreement in the 19-nation Paris Club of creditor nations.

"Germany is ready to cooperate, but our readiness to cooperate naturally has limits," the chancellor told NDR radio in Germany before heading to the U.S. "We've got nothing to give away, but we're ready to consider substantial debt relief."

Weak dollar endangers economy

Putting the discussion of Germany's contribution to Iraq momentarily aside, the main thrust of Schröder's Thursday speech was economic in nature. With the euro trading at an all-time high against the dollar, the German leader warned that further shifts in the exchange rate could seriously harm European trade interests.

In unusually direct terms, Schröder said the weak U.S. dollar poses dangers for world trade and could hinder economic growth. "Major imbalances in the global economy and fluctuations in exchange rates give us cause for serious concerns," he said.

The euro, which was trading at $1.25 on Thursday, reached a record rate of $1.29 last week. Since introduction in 2000, it has risen by more than 50 percent against the dollar -- a development that risks outpricing European export goods to the U.S.

"In the mid- and long-term, such a development makes no sense, not even for the American economy," Schröder said pointing to the effects it has on trade across the globe. Several European finance leaders have appealed to U.S. politicians to put a stop to the declining dollar, but to no avail. Schröder said he plans to take up the matter with Bush on Friday.

Legal jurisdiction is thorny issue

Pointing to another possible bone of contention in the future, Schröder said the increasingly global economy means court jurisdictions must be clearly defined.

"If national law is increasingly applied extraterritorially, this would, in effect, become a real stumbling block for all globally operating businesses. Particularly in a globally linked economy, lawsuits need to be decided in the place of primary legal jurisdiction," he told the Chicago audience.

The issue has been a thorny one for Germany, whose international companies frequently fall under the blanket of American civil lawsuits seeking hefty compensation for damages. In a current lawsuit against German drug maker Bayer on behalf of American users of its Baycol anti-cholesteral drug, Bayer has argued U.S. courts have no jurisdiction over German cases.

A bit of glory in the end

Schröder also said he will discuss the situation in the Middle East with President Bush as well as Afghanistan and EU membership for Turkey.

Schröder plans to meet with Senate leaders in Washington on Friday before traveling to Jackson, Mississippi where he will round off his trip by opening an exhibit entitled "The Glory of Baroque Dresden," featuring more than 700 works from eight museums in Saxony.