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 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, 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 The resulting income and wealth creation is needed to sustain future growth in vehicle and aftermarket consumption.