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- If the Carolinas together were officially one trading block with the European Union, one global unit, if you would, then it would easily eclipse in total the annual investment of many just individual countries.

It's that big.

Welcome again to the most widely watched and the longest running program on Carolina Business, Policy, and Public Affairs.

I'm Chris William.

In total, there are almost 450 German companies and subsidiaries in both North and South Carolina.

That includes roughly 70,000 people directly employed by German firms.

The annual capital money that flows between the Carolinas and Germany is in the billions of dollars annually with Germany being easily one of both state's largest trading partners.

In fact, the Carolina's largest city is named after a German queen, of course, Charlotte.

Joining us in a moment is the most senior diplomat to and in the US from the Federal Republic of Germany, ambassador Andreas Michaelis.

- [Narrator] Major funding also by Blue Cross Blue Shield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

And Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation on which our communities improve and grow.

(upbeat music) On this edition of Carolina Business Review an executive profile featuring Ambassador Andreas Michaelis, German Ambassador to the United States.

(upbeat music) - Hello and welcome again to our program, your Honor, glad to have you in the Carolinas.

Obvious first question, what brings you to the Carolinas and why now?

What is it about the Carolinas?

- Well, I've heard a lot about the Carolinas in terms of importance for German business 'cause there are many German companies that have invested here that run production in the Carolinas.

So when I started my tenure as ambassador in August '23, so that's just about six, seven months that I'm here.

I think my staff was already pressing me to consider a possible visit in the Carolinas.

And I must say I was ready to look with my own eyes, how it feels to be here, what the environment looks like, and what kind of feedback I get from German companies that operate here.

- Is an ambassador, as I kind of, if you forgive me a bit as I bang around, I'm sure you know the statistical information about German companies much better than I ever will.

450 or so companies that are based in North and South Carolina, is that one of the largest concentrations of German companies in the US?

- Yeah, would clearly say it is, if not the largest concentration of German companies in the United States.

I could already visit various centers or hubs of German business and German industry in the south.

So I've been to Texas, I've been to Georgia, and that relatively sure, I've been to California.

I have not been so far to the northern parts to Ohio, to Michigan, where you also find, for all the obvious reasons, a higher concentration of German companies.

But here in terms of manufacturing, in terms of doing business, I think clearly, one, if not the greatest concentration of German business in the United States.

- Is there a particular interest of why the Carolinas?

Is it because there's a good port, a good airport?

Is there because it's a can-do spirit if you will?

Is there some type of German attraction both ways?

- Yeah, well, I've asked myself the question and I have only so far I would say a provisional answer.

I can see many reasons and I think there is a German dimension here because there are two things that play out.

One, Germany has an economy that has known multinational companies, which you are aware of, of Siemens or of BMW as a car manufacturer.

But there are primarily relatively small and medium-sized companies in Germany that form the backbone of the economy.

And these medium-sized companies, by German standards, you would still consider a company with $1 billion turnover per year a medium-sized company, could even be more than 1 billion.

They are mostly family-owned and because they are family-owned, it is families that actually exchange information about their business and about where they invest and where they produce.

And so that element should not be underestimated that at some point in time, once there are companies from Germany that find it attractive to invest somewhere that is really spreading inside the community.

And then others say, what really matters for me is that another CEO tells me he did find a very good place to do business.

That is one.

And the other is certainly that it's not so much in our character and our nature that we jump somewhere, we stay for a short period, and then we move out again.

I think once we go, once we set up business, even during difficult times, we tend to stay.

So here is a long tradition, I think in the case of the Carolinas, because there was investment here, North Carolina for instance, in particular into the textile industry in the sixties, in the seventies.

So that was probably one of the first important moves where Germany and the Carolinas connected.

And from there, it got stronger and stronger, and deeper and deeper.

- So this, the term I heard is Mittelstand, is that backbone, the German companies?

- [Andreas] Yeah.

- I use this term, is that kind of word of mouth, is that the grapevine within those small companies that talk about our experience in North Carolina, for instance, was excellent, here's our challenge, here's what we wanted to do.

Is that how that works?

- Yeah, I would say that is one.

And then these companies, they have a very intimate, a very, very close relationship with the very large German companies as suppliers for instance, because they have grown together.

So let's say like in the 1990s in South Carolina, when BMW decided to set up a plant in South Carolina, Spartanburg, I think, the belts were ringing in many Mittelstand companies in Germany that said, okay, maybe we have to be there because we supply in a very, very important way to BMW.

And that is exactly what happened.

So that first, I think that was a signature investment that happened because it was, as I was told the first time that BMW considered producing BMW cars outside Germany and it actually happened in South Carolina.

So that was probably crossing a line in a very positive way.

- You're a career diplomat, if I can use that term.

This is not new to you.

You were the Ambassador for Germany to what we call England or the Court of St James's.

You were also Israel, you were also Singapore.

So sir, this is not your first rodeo, of course.

And you come with some pretty deep background.

So when you look at now your role when it comes to trade and investment, we're not talking geopolitical but trade and investment.

What do you bring from what you learned within the EU from Germany to Britain?

How do you bring that into the US?

- Yeah, well there are many points, Chris.

I think that are relevant, one is you should never forget that you have to create win-win situations.

So this is not just about German investment here as much as we profit from it in the US, it's also part of my job to attract US investment to Germany.

We have very important investments recently Intel is setting up chip manufacturing site in Magdeburg, which is in the east of Germany.

They're investing 30 billion US dollars just at that site.

So we are looking at a very, very important deep transatlantic investment relationships.

Sometimes we are a bit distracted because we just look at trade, but we need to look at trade, the exchange of goods between Germany and the US, and we also have to look at the investment relationship.

And here I can see also when you look at the tech companies, the US tech companies, they're very interested investing there.

That is a very, very important part.

But if there is something at which probably you can say German companies excel, it is manufacturing.

So manufacturing is very much on the agenda when it comes to the Carolinas.

- What's the dialogue within the German?

And you've got a three-party system or a three, yeah, you have three-party system and three-party rule, it is funny, you talk about Intel and you talk about Intel relocating to Germany with a major investment.

And then you've got within the US, there was a buy American, of course, especially with the chips, that there were subsidiaries for that.

How does that balance, how do you, who is clearly at the inflection point between the EU, Germany, and the United States facilitate and be an honest broker of that dialogue?

- Yeah.

- So both sides of the Atlantic feel like they're not missing out?

- Yeah, I think that's a very important question.

A crucial question as far as the relationship and the realization of potential and the realization of a true win-win between the two countries is concerned.

And what I would like to understand better and better here in the US is the interplay between economic policy at the state level and economic policy at the federal level.

Because the two of course combine to create a reality that at the end of the day determines whether we make investments, whether we can do successful business here in the US.

And there are a few points that are sometimes irritating not only for German companies, but are also irritating, to speak very frankly, for the German and other European governments.

And that's the question of let's say localization requirements, access to subsidies that is based on certain requirements that cannot be met by foreign actors, et cetera.

We don't have a free trade agreement between the European Union and the United States of America.

So there are many, many aspects that have to do with that transatlantic space which we fill with trade and investment, and the environment we are determining for it.

At the moment, I think the name of the game is economic security.

So as much as the US looks at economic security, we in Europe look at economic security.

So can we source in a certain place and can we source in a reliable way, will we be supplied with very important, let's say chips, which we need for the production of certain goods.

Now these security considerations have become very, very important.

I don't think we have yet found a way to deal with it in a, let's say that's a complicated word, but in a rules-based agreed international system.

So far all the answers are answers that we in Europe define at the European end.

And here in the US, the US defines at national level as well.

And that is creating obstacles at the same time.

And I think what we need to achieve is that at not too far away from today, we are, let's say, after the presidential elections here in the US because during the presidential campaign, I think it's not exactly the time where you approach fundamental trade questions, but we find a way to regulate with economic security in mind the international trade system.

I think that's very important to make it very simple.

In the past we were all free traders.

We are not free traders anymore.

Do we return to a free trading reality?

Not very likely.

What we however need to achieve is that we establish a system that is fair for all that participate in it.

And that is something we haven't so far agreed on and it is something we need to achieve.

- So this is, if you don't mind me saying, sir.

- [Andreas] Yeah.

- This is a very delicate business.

It's very sensitive to all parties involved.

I would say, and I'm not just saying because you're sitting here, but it would seem to me you as a senior representative of Germany, who spent time in the UK, who is also arguably the UK and Germany together are of the closest relations to the US.

- Yep.

- You would have a particular place of being an honest broker of some of these very sensitive questions about security and about economic security.

Do you feel that, do you feel that that's your role?

- Well I dunno, I don't want to overestimate the role of an ambassador, but certainly it is a task for my government and it is a task for the US government.

We need to achieve this.

We also need to achieve it against the backdrop of a very important geostrategic development because it has become, since the attack of Russia on Ukraine, it has become since the terrible atrocities committed by Hamas in the south of Israel.

Since we are looking at these challenges, we mentioned the Red Sea and Houthis blocking international trade in the waters of the Red Sea.

Now we have so many, suddenly, so many international challenges we need to face.

So there are very close allies and you've mentioned them, it is the US, it is Germany, it is the UK.

It also is Italy, France, Japan, Canada.

It is Australia, it is New Zealand.

It is the countries that form the backbone of the west as we understand it, that are very much roots-bound and share norms.

These countries need to be successful in also attracting countries that sit on the fence at this point in time and are not sure which way they would want to move.

Do they want to move with authoritarian regimes arm-in-arm because that is the game that needs to be played or are they willing, ready, interested to move with us on the basis of a fair system based on democracy and norms which we have embraced for so many years.

So that is basically the question.

And I'm convinced that we can only, like we were successful in the Cold War, in the Cold War, which we won in 1990, and I represent the country where the wall came down.

So we were profiting from this.

I think in our case it is very clear that we understand we won the Cold War, we won it because we were patient, we were united, and we had a platform on which we were standing.

And that platform included besides certain values, and certain norms, and certain institutions, it included a certain way of doing business.

As I've said, we were engaging in a free trade system in a global context.

Now we end at a different point, but we will only be successful as an alliance.

We will only be able to face these political and security challenges if we find our place on a platform on which we have agreed.

- Can Germany, would you like Germany, which would include you and your efforts to be a facilitator between the US and China?

As difficult as that has been the last couple of years.

- I would start at a different point.

I would first say that we, our alliance partners, the US and Germany because there are many challenges that come under the name of China, which we need to face together.

So I wouldn't see us in a more or less neutral role as a facilitator here.

There are so many things that are being questioned by China at this point in time so that we are not in a middle position here.

However, I think that our way of looking at the China challenges very much matches the way the US, this administration, the Biden administration looks at as well.

Which is not to say that we have exactly the same policy, but for your viewers, Germany just adopted a so-called China strategy for the first time, which is a government strategy, how we deal with China on the economic side, on the security side, on the political side of things, it's a document which basically describes not only the way the government deals with China, but also gives clear benchmarks of what we are doing and how we are doing that in the next years.

Now I can say from the feedback which I and others have received in Washington, that this document is very much appreciated and understood because what we have done, we probably went from a slightly naive way of doing China business in the 1980s and in the 1990s to a more enlightened and self-reflective way, which is to say we also see the downsides.

We see the risk much more clearly.

There's one aspect which is totally different today, in the past, we all looked at the opportunities in China and how we can make money there.

We were not really looking at the way China was dealing with us on our own soil.

And that is something which has a far more prominent place now.

And I think this is the right move, which is not to say we are not doing business with China, we don't want to use the opportunities, we are not disengaging and we are certainly not going towards disinvestment.

But what we are doing is to actually look at the critical points of doing business with China.

One example, why can't German companies invest into port infrastructure in the People's Republic of China?

Why can the People's Republic of China invest into port infrastructure in Europe?

There has been a trend that very, very important investments were made.

We are not possible to invest into something similar.

So there are this just one example, important asymmetries that need to be addressed in order to have a level playing field, a level playing field is exactly what we would like to achieve vis-a-vis China, and I think we, Germany is in a very good position to also take other European countries with us.

Half of all EUs trade with China is German trade.

That explains the magnitude and the importance of China because China for our economy is very, very important and continues to be.

- Above and beyond the geopolitics as you sit physically between many of these countries, as you sit, you could almost say spiritually between some of these countries in dialogue politically.

Back to a dialogue about artificial intelligence.

Is there more of a global standard now that's being sought for AI to have a better dialogue and not in these silos in these different countries?

- Yeah.

- And we have about three minutes.

- Okay.

So I have to be very fast.

Yes, there will be European regulation of AI.

So that's a very important move forward because it's the first, in this case, group of countries that is regulating AI.

From my point of view, I think it's rather at the softer end of it to start with, it's addressing all the challenges, but it's not over-regulating because that question has been asked very often here in the US and I think it will set a standard.

We are also discussing in the G7 how we should regulate AI, but the mere fact that Europe has now taken a decision at political level between the European parliament, the heads of state and government, and the commission of the European Union.

That is what has happened, which is now being transformed into legal language that will then be implemented.

So that's where the whole thing stands.

It has not been finalized so far, but the political concept or the political essence of the regulation has been defined at political level.

So that's where we are.

And I must say I'm surprised to get positive feedback from big American tech firms about it because they don't deny at this point in time, they don't deny that regulation has to happen.

So from that point of view, I think I feel quite confident that we are moving into the right direction.

- Do you feel like the EU could have the standard that others could draw upon if the US continues to battle internally about what an AI standard within Congress?

- Well, it's a sovereign question here in the US what this country, what this government will adopt at the end of the day.

But I think it will be an important factor on how, because that will happen.

US companies will position themselves in the European market.

We are looking at 450 million consumers in the European Union.

So that's a huge market that's very important for US firms.

So they will have somehow to find their way, how to deal with it.

And I would be very surprised if this had no consequences with regard to what they're doing here in the US.

- We have a minute left and this is a fun thing, but the NFL and the United States announced that 2024 international games that will be in London, in Munich, the Panthers will play in one of those in Munich.

And I know you're a football fan, a European football fan of which I endorse as well, but having American football on the soil in Munich has got to be fun.

- It is fantastic.

And people, I'm surprised myself when I look at the reaction in Germany.

I mean, you could sell every, each ticket three times or four times.

So it's a huge success.

And I like it because we are very fixated, we are very focused on the game of football slash soccer, and I think it's a good contribution and I try to learn myself.

- Thank you, Mr.

Ambassador, very gracious to join us on a very busy whirlwind trip, not just in the US but in the Carolinas.

And we're awfully glad to have you.

Thank you.

- Thank you very much.

- Thank you.

Thank you for watching us.

If you have any questions or comments, certainly you can watch this program again at www.CarolinaBusinessReview.org.

Until next week, I'm Chris William.

Goodnight - [Narrator] Gratefully acknowledging support by Martin Marietta, Blue Cross Blue Shield of South Carolina, Sonoco, High Point University, Colonial Life, and by viewers like you.

Thank you.

For more information, visit www.CarolinaBusinessReview.org.

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