Download General Agreement on Tariffs and Trade (GATT)

GLOBALIZATION
The Aftermarket’s Economic Opportunity
Eliminating Trade Barriers
The following is a excerpt from a presentation by AAIA CEO Kathleen
Schmatz. For the purpose of this course, comments have been added to
the notes pages by your instructor
Guideposts
•
– Trade liberalization always helps expand the
global trade pie for aftermarket trade and all
trade.
– At the micro level, firms, workers and
consumers are demanding competition and
choice.
General Agreement on Tariffs and Trade (GATT)
– U.S. led in creating the General Agreement on Tariffs
and Trade (GATT) --today known as the World Trade
Organization (WTO) – following World War II.
– Gave the shattered European and Japanese
economies huge concessions.
– Opened the vast U.S. market.
– Global trade and consumer welfare increased.
Global Trade Liberalization
• Global Trade Liberalization has continued:
– 1963: Kennedy Round
– 1979: Tokyo Round
– 1994: Uruguay Round
– 2001: Doha Development Round began
Successes and Challenges
• Each time trade was liberalized – trade
expanded and consumers benefited.
• 1994 Round Successes:
–
–
–
–
Cut European parts tariffs more than 40%
U.S. car and parts tariffs were trimmed to 2%
Domestic Content was banned.
Intellectual Property Rights (IPR) was protected.
Successes and Challenges (cont.)
• 1994 Round Challenges
– Developing Countries conceded little market
access.
– U.S. light truck “tariff peak” of 25% remained.
– EU heavy duty truck tariffs remained high.
2001 Doha Round
• 2001 Doha Development Round
– Aftermarket sought to build upon successes, reducing
tariff and non-tariff barriers.
– 2001 – Congress renewed Trade Promotion Authority
(TPA).
– Gave President “fast-track” authority to negotiate
deals –with Congressional input – but requires
straight up or down, no-amendment, Congressional
vote on final deal.
– Parts trade expansion was named a primary objective
for WTO talks.
2001 Doha Round (cont.)
• Clock Running on Stalled Doha Round
– Fast-track authority runs out July,
2007. Renewal faces a bruising battle and
uncertain fate.
– Doha and pending bilateral free trade deals
need to be approved by then.
High Stakes Involved
• The University of Michigan estimates a
successful Doha Round, leading to the
elimination of all barriers could add:
– 6.3% to annual European GDP;
– 6.2% to Japan’s GDP;
– 5.5% to America ’s GDP.
The EU’s Hefty “Brie Tax”
• France’s protected farm lobby has blocked EU
agriculture trade concessions needed for Doha
progress.
• The EU’s 457 million consumers stand to lose
$800 billion in annual GDP growth – that’s about
$1,800 each.
• Each of France’s 400,000 farmers is creating a
$2 million “Brie tax” – or drag – on EU growth
potential.
High Stakes Involved (cont.)
• The World Bank estimates that full trade
liberalization could boost Developing
Countries’ incomes by $259 billion in 2015.
• The resulting income and wealth creation
is needed to sustain future growth in
vehicle and aftermarket consumption.