The United States and the European Union have signed up to a new transatlantic economic partnership at a summit in Washington.
Ms Merkel will soon be Mr Bush's closest ally in the EU
The pact is designed to boost trade and investment by harmonising regulatory standards, laying the basis for a US-EU single market.
The two sides also signed an Open Skies deal, designed to reduce fares and boost traffic on transatlantic flights.
But little of substance was agreed on climate change.
However, EU leaders were pleased that the US acknowledged human activity was a major cause.
Economics rather than the environment or politics was the focus of the summit, says the BBC's Europe correspondent, Jonny Dymond, from Washington.
The two sides agreed to set up an "economic council" to push ahead with regulatory convergence in nearly 40 areas, including intellectual property, financial services, business takeovers and the motor industry.
The aim is to increase trade and lower costs.
Some reports suggest that incompatible regulations in the world's two richest regions add 10% to the cost of developing and producing new cars.
German Chancellor Angela Merkel, whose country holds the EU's rotating presidency, said last month that if the US and EU could set business norms today, they would "secure the markets of tomorrow".
Since she came to office 18 months ago, she has made repairing damaged relations with the US a top priority.
The Europeans said they were pleased that the US now officially acknowledged that climate change was happening and that human activity was a major cause of it.
"We agree there's a threat, there's a very serious global threat," said European Commission President Jose Manuel Barroso.
"We agree that there is a need to reduce emissions. We agree that we should work together."
But behind the scenes, says our Europe correspondent, officials were saying that not much had changed.
Ms Merkel will try to nudge the US towards a global approach to climate change before a G8 summit Germany is chairing in six weeks' time, says our correspondent.
But the US has consistently rejected the European approach of imposing national limits on greenhouse gas emissions, saying they would harm the international economy.
The Open Skies agreement will take effect on 30 March 2008 and will allow EU carriers to fly to anywhere in the US and vice versa.
The deal promises to lower airfares and widen choice for passengers on both sides of the Atlantic.
The EU hopes to go further and create an "Open Aviation Area" between the two sides "in which investment can flow freely and in which European and US airlines can provide air services without any restriction," said a EU statement.
The EU is also hoping that the US will agree to withdraw its visa requirement for travellers from a number of EU states.