Cage Analysis Administrative Essay
The second element of the CAGE analysis is the administrative distance between two countries. In this case we will be discussing the administrative distance between Germany and the United States. First of all Germany and United Stated do not belong to a common trade block. Although lately rumors occurred of the European Union and United Stated creating a free trade area called the Transatlantic Free Trade Area (TAFTA) or Transatlantic Trade and Investment Partnership (TTIP).
However it seems highly unlikely of that free trade are coming into existence due to a number of differences in regulations, trade barriers, etc. Tariff barriers such as the ones imposed on agriculture are politically sensitive. Disagreements exist on regulatory policy. Food safety or environmental standards are another issue. To complicate matters further, the responsibility for regulation is split in the European Union between European and national levels, and in the United States between the federal and state governments.
Negotiating with the right people about the right subjects seems to be a challenge. Investment barriers, especially in terms of infrastructure and transport sector ownership, will be very difficult to tackle. United States belongs to the North American Free Trade Arrangement (NAFTA) and Germany to the European Free Trade Association (EFTA). In terms of the 2012 Competiveness indices published by the World Economic Forum, Germany obtained the 6th place and United States 7th place. We can therefore say that in terms of competiveness Germany and United States are evenly qualified.
Relations between the European Union and the United States are the bilateral relations between the European Union (EU) and the United States of America (USA). Due to the EU not having a fully integrated foreign policy, relations can become more complicated where the EU does not have a common agreed position. The relationship between the EU and the US is one of the most important bilateral relationships in the world. They are the biggest economic and military powers in the world. Together they dominate global trade and play the leading roles in international political relations.
The growth of the EU’s economic power has led to a number of trade conflicts between the two powers. However both are dependent upon the other’s economic market and disputes affect only 2% of trade. In 2007, a Transatlantic Economic Counsel was established in order to direct economic cooperation between the European Union and the United States. The counsel was lead by the US Deputy National Security Advisor for International Economic Affairs and the EU’s Commissioner for Trade. The US and the EU do not see eye to eye on everything, one of the key issues is genetically modified food.
The EU has felt domestic pressure to restrict the import of genetically modified food until their safety is proven satisfactory. The US on the other hand is under pressure from its agricultural industry to force the EU to accept imports. They behold the EU’s restrictions as protectionary behavior. Economic barriers between the EU/EFTA and the US/NAFTA are considering all relatively low and some efforts have been made to relax trade relationships such as the single sky aviation agreement and the establishment of the Transatlantic Economic Counsel as mentioned before.
However the EU and US have many trade disputes, which the majority of them end up before the World Trade Organization, which they are both member off. All industrial imports into Germany are subjected to an “Import Turnover Tax” of 19%, which is charged on the duty-paid value of the import article plus the customs duty, which varies by item. This tax is being charged in order to create the same tax burden for imported goods as domestically produced goods.
For the US: Benefits from aligning Non-tariff measured (TMs) are estimated at €41 billion per year in increased GDP and a 6 percent increase in exports to the EU. Cost savings would be generated mainly in electrical goods, chemicals, pharmaceuticals, financial services, and insurance. For the EU: Aligning NTMs and regulatory divergences could translate into a potential annual gain of €122 billion in GDP and a 2 percent increase in exports to the U. S. Cost savings would accrue primarily from gains in motor vehicles, chemicals, pharmaceuticals, food, and electric goods.