A View from Germany

Hanns W. Maull

The summit in Ise-Shima was already the third G7-meeting without Russia. (Germany had hosted the previous gathering in Elmau in 2015.) Japan, thus, worked particularly closely with Germany in coordinating the substance of this summit. This is evident from the importance given to issues such as global health, climate change, and women’s empowerment and gender equality in the discussions and summit declarations.1 Prime Minister Abe had visited Germany on May 4 to prepare for Ise-Shima and to explore the possibilities of narrowing differences between the two countries.2 Those differences mostly concerned economic issues, and Abe’s efforts were not particularly successful. The two sides with exquisite politeness agreed to disagree on most macro-economic policy issues, and their disagreements remained unbridged in substance in the Ise-Shima communique, the “Leaders’ Declaration.”

The three contested issues were monetary policy, intervention in exchange rate markets, and fiscal policies to stimulate economic growth. While Merkel shrewdly took up Abe’s metaphor of the “three arrows” of his macro-economic policy approach (“Abenomics”) in their bilateral meeting in Meseberg,3 talking about the need carefully to coordinate monetary and fiscal policies (the first two “arrows”) while advancing structural reforms (the third “arrow”), it was clear that Merkel and Abe’s understandings of what that meant diverged significantly. Thus, Germany’s position on monetary policy has traditionally been cautious, while the Japanese government and the Bank of Japan appear to be preparing further measures of monetary easing. Since German monetary policy now lies in the hands of the European Central Bank, which—much like the other central banks in the G7—is pursuing the unorthodox monetary policy path of “quantitative easing,” this policy difference is de facto not all that relevant, however, and both leaders could live with the consequences. The Declaration thus confined itself to stating the obvious:

Monetary policy authorities have committed to supporting the economic recovery and overcoming disinflation, consistent with their mandates, including through unconventional policies. However, monetary policy alone cannot lead to strong, sustainable and balanced growth.4

Intervention in exchange rate markets to lower the value of the yen was apparently considered within the Japanese government when the Japanese currency, after a period of decline, recently started strengthening again (by the month of May, it had appreciated by almost 11 percent vis-à-vis the US dollar). Yet, such interventions are risky; they could result in competitive efforts to drive the value of one’s currency against others lower, which would leave everybody worse off. None of the other G7 leaders, therefore, showed much sympathy for such a remedy to Japan’s perceived plight. The one sentence in the “Leaders’ Declaration” on the issue could thus be read as a reminder to Tokyo not to dabble with such experiments.5

The greatest macro-economic policy difference within the group concerned fiscal policies. The Abe administration has decided to postpone the increase in the value-added tax planned for this year and to take action to stimulate Japan’s tepid growth through additional budget outlays. This would, of course, further push up Japan’s total public debt further—which presently hovers around 260 percent of Japan’s gross domestic product (GDP)—rather than reducing it. Germany, on the other hand, is firmly committed—indeed, constitutionally obliged—to consolidate public finances and reduce public debt; the government takes considerable pride in its newly balanced federal budget. On this issue, however, the two countries in Ise-Shima favoring conservative budget policies, Germany and the United Kingdom, were in a minority; the other governments (and the two EU presidents who participated) inclined, more or less, toward Japan’s preference for “flexibility,” i.e., for giving priority to economic growth over public debt consolidation. The compromise formula, in essence an agreement to leave every member state free to follow its own preferences, sounded somewhat like a promise to square the circle:

We concur on the importance of strengthening our efforts in a cooperative manner to implement our fiscal strategies flexibly to strengthen growth, job creation and confidence, while enhancing resilience and ensuring debt as a share of GDP on a sustainable path, as well as to advance structural reforms decisively. This will also allow us to respond to emerging risks and urgent social and humanitarian needs.6

The return to the G7 format corresponds to the original format of those meetings: Russia’s membership in that group (it was first invited to join the summits in 1996) was suspended after its annexation of Crimea in 2014.7 The absence of Russia facilitates agreement in principle and restores the group’s characteristics as a gathering of industrialized and liberal Western democracies. References to “shared values,” therefore, figure prominently in the declaration.8 Yet, it also represents one more element in an increasingly antagonistic relationship between Russia and the West that carries the risk of a major conflagration. Germany has traditionally been concerned about drawing the Soviet Union, and then Russia, into cooperative arrangements with the West; the notion that European security could only be achieved together with Russia, not against it, is axiomatic in German foreign policy. Thus, Germany developed a particularly close economic and political relationship with Russia since the demise of the Soviet Union.9 It was a rude shock to Moscow when Berlin, in response to the annexation of Crimea, against Putin’s expectations,10 decided not only to impose a tough sanctions regime on Russia itself, but also assumed a leadership role in getting the European Union to unite behind that regime. Yet, Merkel also played a key role in diplomatic efforts to contain and resolve the Eastern Ukraine war, and she opposed arming Ukraine in that ongoing war.

When Abe considered bringing Putin back into the G7 as part of his desire to improve Japan’s relations with Russia, he could, therefore, expect a degree of sympathy and support from the government in Berlin, and in particular from Foreign Minister Frank-Walter Steinmeier, a Social Democrat. The Social Democrats have traditionally been particularly supportive of German-Russian cooperation—a legacy of the Ostpolitik pioneered by Chancellor Willy Brandt under the slogan of Wandel durch Annäherung (change through rapprochement). During the first two years of the present grand coalition government, the chancellor and her foreign Minister aligned their policies toward Russia closely, though occasionally some differences surfaced. Thus, the foreign minister seemed more favorable to Abe’s proposal than the chancellor, although the latter has also considered inviting Putin back into the G7 if there was progress on settling the conflict in Eastern Ukraine. The differences between the two concerned the definition of what constituted “progress,” i.e., what specific concessions were expected from Moscow.11 In any case, Berlin did not consider the time ripe for a return to the G8. Washington and several other G7 governments were also opposed, and the Japanese government, therefore, dropped this initiative.

China, the other important absentee in this gathering in Japan, nevertheless loomed large over this G7 summit—larger, indeed, than Russia. The reasons were both economic and political. On economics, the declaration targeted China’s steel exports in a barely disguised attack and threat of retaliatory measures, and, thus, satisfied not only the government in Washington, but also the presidents of the European Commission and the European Union, who also participated at Ise-Shima.12 Politically, it was China’s long shadow over the security and stability in the Asia-Pacific that haunted the gathering. This shadow fell on two specific issues: maritime territorial conflicts in the South and East China seas and their possible implications for freedom of navigation, and the situation on the Korean Peninsula and North Korea’s growing nuclear arsenal and military activities.

On the former issue, the G7 foreign ministers had already issued a strong statement in April in a preparatory meeting for Ise-Shima that expressed firm German and European support for the position of the US–Japan alliance on those issues. Although China was not mentioned by name, the statement did not mince words in its demands as to how the People’s Republic of China (PRC) was expected (but refused to) behave in the South China Sea.13 China reacted angrily to this declaration, and repeated its warnings again immediately before the summit.14 The declaration, nevertheless, reaffirmed support for the statement on maritime security by the foreign ministers, though in much more general and, therefore, less offensive terms.15

Freedom of navigation is a principle of obvious concern to one of the world’s largest trading nations, and (West) Germany has long taken a close interest in efforts to strengthen international maritime law. That law was developed further in the context of the UN Conferences on the Law of the Sea (UNCLOS I to III), which from 1956 to 1982 negotiated the UN Convention on the Law of the Sea (UNCLOS). Yet despite this interest in and commitment to UNCLOS (the city of Hamburg in Germany was chosen as the seat of the International Tribunal for the Law of the Sea [ITLOS], a court established by UNCLOS), Germany still finds it difficult to deal with possible implications of that commitment to freedom of navigation. When President Horst Köhler in 2010 dared to suggest that Germany under certain circumstances might have to defend freedom of navigation with military force, this caused such an uproar in the media and in public opinion that Köhler resigned.16

On the second issue where China’s shadow loomed large, the Korean Peninsula, the foreign ministers had already penned a strongly worded condemnation of North Korea’s nuclear weapons and missile tests, as well as of its dismal human rights record. Yet, the role of China in enabling the North Korean regime to survive was no more than hinted at obliquely; the ministers confined themselves to a call for the full implementation of the sanctions imposed—with the support of the PRC—on North Korea by the United Nations Security Council (UNSC).17 The “Leaders’ Declaration” essentially repeated that position of strongly worded demands on North Korea combined with a call “on the international community to fully implement and enforce” the UN sanctions regime.18 China, in other words, was left off the hook on the North Korea issue.

Traditionally, (West) German-Japanese bilateral relations have been plagued, according to a much-quoted phrase by one of West Germany’s ambassadors to Tokyo in the 1970s, by the problem of an absence of problems;19 the relationship has been friendly and smooth but distant. Economic frictions that started around that time did not much interfere with this pleasant but unexciting state of affairs, as the Commission, not Bonn, handled those frictions at the European level. There was a brief flurry of interest in each other’s security situation at the time of Prime Minister Nakasone, when the threat emanating from Soviet (mobile) intermediate nuclear forces (INF) to Western Europe was treated as a common threat, and the security of the G7 was described as “indivisible” in the Williamsburg summit communique in 1983.20 From the German perspective, Nakasone also had the simple advantage of having been around for longer than most Japanese prime ministers, creating personal familiarity.

Abe also meets that criterion, and the personal chemistry between the two leaders seems to be remarkably good. This has no doubt contributed to a closer bilateral relationship between the two countries: Merkel visited Japan in both 2015 and 2016, and she was able to persuade Abe to back her approach to climate change at the Elmau summit in 2015; those commitments were taken up again in this year’s declaration. Berlin was also successful in getting its primary concerns for the G20 meeting in China later this year into the “Leaders’ Declaration” of Ise-Shima: refugees and tax havens.21

Yet, the two governments are still far apart not only on the way they deal with issues of importance to each other, but also in their ability to understand the other. Thus, Berlin may perhaps have come to understand better Tokyo’s concerns about security and stability in Asia-Pacific, but it still seems to find it difficult to see what Germany could do there, let alone envisage that it might be drawn into a crisis in this region.22 Also, Japan’s approach to issues of WWII history, nuclear energy, and immigration differs markedly from that of Germany, making it difficult for Tokyo to understand Berlin on those issues. Indeed, Merkel’s efforts subtly to nudge Abe towards a more flexible approach regarding Japan’s imperial history during her visit to Japan in 2015 were apparently not much appreciated by the latter.23

The most significant issue weighing on the bilateral relationship, however, is again China. There is no doubt that the German relationship with China is in many ways significantly more substantial than that with Japan, starting with the value of bilateral trade: in 2015, China was Germany’s fourth largest bilateral trading partner (with total trade worth about EUR 163 billion), while Japan ranked number 15 (after Hungary), with bilateral trade worth about EUR 37 billion.24 Germany and China hold annual cabinet level consultations that usually involve at least a dozen ministers from each side. The close economic cooperation between Germany and China is a constant source of irritation and suspicion for Japan’s leaders; they suspect Berlin (not entirely without justification) of ultimately valuing its relationship with Beijing more highly than that with Tokyo. Against this background, the G7 might see its role as a community of like-minded Western democracies that share certain basic values, and the G7 summits as an opportunity for common reflection and deliberation of their leaders.25

1. “G7 Ise-Shima Leaders’ Declaration,” G7 Information Center, May 27, 2016, http://www.g8.utoronto.ca/summit/2016shima/ise-shima-declaration-en.html, 13-15; “G7 Guiding Principles for Capacity Building of Women and Girls: Towards Sustainable, Inclusive and Equitable Growth and Peace,” G7 Information Center, May 27, 2016, http://www.g8.utoronto.ca/summit/2016shima/principles-women.html.

2. The Federal Government of Germany, “G7 Summit preparations, Chancellor Merkel meets with Prime Minister Abe,” May 4, 2016, https://www.bundesregierung.de/Content/EN/Artikel/2016/05_en/2016-05-04-vorbereitungen-auf-g7-gipfel-in-japan_en.html (accessed Jun 2, 2016)

3. In the summit communique, the metaphor of the three arrows resurfaces in a more prosaic form as the “three pronged approach.”  See “G7 Ise-Shima Leaders’ Declaration,” 1.

4. “G7 Ise-Shima Leaders’ Declaration,” 4.

5. “We reaffirm our existing exchange rate commitments to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets.” Ibid., 5

6. Ibid., 4.

7. The first G7 meeting took place in the United States (in the resort of San Juan in Puerto Rico) in 1976, when Canada was invited to join the original six heads of state and government, who had met from November 15 to 17, 1975 at Rambouillet castle in France. The summits then were still seen as economic summits.

8. The second paragraph of the preamble begins as follows: ”The G7 has a special responsibility to lead international efforts to tackle these (major economic and political, HWM) challenges. We remain bound together as a group guided by our common values and principles, including freedom, democracy, the rule of law and respect for human right.” “G7 Ise-Shima Leaders’ Declaration,” 1.

9. Stephen F. Szabo, Germany, Russia and the Rise of Geo-Economics (London & New York: Bloomsbury Academic 2015).

10. Michail Sygar, Endspiel, Die Metamorphosen des Wladimir Putin (Cologne: Kiepenheuer & Witsch 2015), 333.

11. “Hundert Prozent minus X,“ Der Spiegel, no. 22 (May 28, 2016): 30-32.

12. “We recognize the negative impact of global excess capacity across industrial sectors, especially steel, on our economies, trade and workers. In particular, we are concerned about subsidies and, in particular, we are concerned about subsidies and other support by governments and government-supported institutions that distort the market and contribute to global excess capacity.”

13. “We express our strong opposition to any intimidating, coercive or provocative unilateral actions that could alter the status quo and increase tensions, and urge all states to refrain from such actions as land reclamations including large scale ones, building of outposts, as well as their use for military purposes and to act in accordance with international law including the principles of freedoms of navigation and overflight.” “G7 Foreign Ministers’ Statement on Maritime Security,” G7 Information Center, April 11, 2016, http://www.g8.utoronto.ca/foreign/formin160411-maritime.html (accessed June 2, 2016).

14. “G7 in Japan urged not to escalate regional tensions,” Ecns.cn, May 27, 2016, http://www.ecns.cn/2016/05-27/212250.shtml (accessed June 2, 2016).

15. “We are concerned about the situation in the East and South China Seas, and emphasize the fundamental importance of peaceful management and settlement of disputes,” “G7 Ise-Shima Leaders’ Declaration,” 25.

16. Peter Carstens, “Bundespräsident Köhler tritt zurück,“ Frankfurter Allgemeine Zeitung, May 31, 2010, http://www.faz.net/aktuell/politik/bundespraesidentenwahl/nach-heftiger-kritik-bundespraesident-koehler-tritt-zurueck-1977920.html (accessed June 2, 2016).

17. “We call on the international community to fully implement and enforce relevant UN Security Council resolutions,” “G7 Ise-Shima Leaders’ Declaration,” 22. “We also call on the international community to fully implement and enforce relevant UN Security Council resolutions, in particular, UN Security Council resolution 2270, to respond to the clear and continuing threat to international peace and security posed by North Korea’s nuclear and ballistic missile programs,” “G7 Foreign Ministers Joint Communique,” G7 Information Center, April 11, 2016, http://www.g8.utoronto.ca/foreign/formin160411-communique.html (accessed June 2, 2016).

18. “G7 Ise-Shima Leaders’ Declaration,” 22.

19. Wilhelm G. Grewe, Rückblenden, Aufzeichnungen eines Augenzeugen deutscher Außenpolitik von Adenauer bis Schmidt (Frankfurt: Ullstein 1979), 20. Grewe ended his remarkable diplomatic career that had begun in 1951 as legal advisor to Germany’s first chancellor, Konrad Adenauer, and as ambassador to Japan from 1971 to 1976.

20. “Statement at Williamsburg, Declaration on Security,” G7 Summit: Williamsburg, May 29, 1983, http://www.g8.utoronto.ca/summit/1983williamsburg/security.html (accessed June 2, 2106).

21. On refugees, see “G7 Ise-Shima Leaders’ Declaration,” 2, 17-19; on tax havens, Ibid., 6f.

22. For a scenario that illustrates the real possibility of this happening, see Christian/Hilpert Becker, Hanns Günther, Hanns Maull, Alexandra W. Sakaki, “Asia-Pacific: Earthquake Shatters Geopolitical Balance,” in Unexpected, Unforeseen, Unplanned, Scenarios of International Foreign and Security Policy, ed. Lars Brozus (Berlin: SWP, 2016), 17-20, http://www.swp-berlin.org/fileadmin/contents/products/research_papers/2016RP01_bzs.pdf   (accessed June 2, 2016).

23. Justin McCurry, “’Do mention the war,’ Merkel urges Japanese,” The Guardian, March 9, 2015, http://www.theguardian.com/world/2015/mar/09/merkel-urges-japanese-confront-wartime-conduct (accessed June 2, 2016).

24. Statistisches Bundesamt: Außenhandel, Rangfolge der Handelspartner im Außenhandel der Bundesrepublik Deutschland 2015 (Wiesbaden 2016), http://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/Aussenhandel/Handelspartner/Tabellen/RangfolgeHandelspartner.pdf?__blob=publicationFile (accessed June 2, 2016).

25. Volker Stanzel, „G7—Meinungsbildung in der Wertegemeinschaft,“ SWP Kurz gesagt, May 30, 2016, http://www.swp-berlin.org/publikationen/kurz-gesagt/g7-meinungsbildung-in-der-wertegemeinschaft.html (accessed June 2, 2016).

#German-Russian cooperation #ITLOS #Leaders' Declaration #Quantitative easing #Three arrows #UN sanctions regime #Wandel durch Annäherung