Schröder Pushes for More U.S. Investment in Germany

German Chancellor Gerhard Schröder's trip to the United States -- with stops in Chicago, Washington and Mississippi -- is meant to put an end to differences over Iraq and highlight the dangers of a strong euro for European exports. Though less high-profile, the chancellor is also singing the praises of his domestic reform agenda and hoping to drum up more U.S. investment in Germany.

At least some of the business people he's preaching to may already belong to the converted. According to a survey of 100 U.S. firms with interests in Germany just released by the American Chamber of Commerce in Berlin, the companies are optimistic. But the coming year might not be quite what the chancellor is hoping for. While these firms think Schröder's "Agenda 2010" reform package is a good start, they also feel there's more work to be done.

Europe's biggest beneficiary

U.S. firms have a long history of direct investment in Germany, and over the years they have built up a large presence. Today, more than 2,000 American companies do business in Germany, representing more than €110 billion ($137 billion) in investment and more than 800,000 jobs. Germany, more than any other country in Europe, is the beneficiary of U.S. investment.

That's precisely why U.S. investors are so high on the chancellor's list of priorities. With persistently high-unemployment, -- currently around 4.6 million people are out of work -- more investment could mean more jobs for Germans. Thus, Schröder traveled to the U.S.in November to herald his package of domestic reforms and urge American companies to invest more.

"We have understood that after a phase of complacence, as I will call it, we must change something in our country," said Schröder at a dinner honoring Citigroup Chairman Sanford Weill. "We will change our labor market and make it more flexible so that we are better able to meet international competition," he added.

At the Chicago Council on Foreign Relations on Thursday night, amid his remarks on the euro and the situation in Iraq, Schröder likewise plugged his reform agenda.

U.S. firms positive but skeptical

The question is, do the heads of U.S. companies believe the chancellor and think Germany is the best place for their investment dollars? The American Chamber of Commerce study offered mixed results.

The good news was that U.S. companies invest disproportionately in Germany and plan to continue to do so over the next year. One-third of the firms plan to devote more than 40 percent of their European investment to Germany. They cite the access to markets and the highly-trained work force as key reasons for that decision.

But that could change if reforms aren't implemented fast enough. While the relaxation of laws regarding hiring and firing practices was a good start, U.S. firms in Germany would like to see more changes, including an overhaul of the complicated tax system. They also think the German government should spend more money to promote and improve Germany's image abroad.