WORLD TRADE ORGANIZATION (WTO) AND ICAO LISTEN TO TIACA'S CASE FOR AIR CARGO LIBERALIZATION
The World Trade Organization (WTO) and the International Civil Aviation Organization (ICAO) have both invited The International Air Cargo Association (TIACA) to give its views on liberalizing access to the air cargo market and how such a move will benefit global trade.
On October 1st, 2007, Ulrich Ogiermann, Vice Chairman of TIACA and President & CEO of Cargolux Airlines, addressed a seminar on air transport services organised by the European Commission at the WTO headquarters in Geneva, Switzerland for an audience of government authorities from the 150 countries that are members of the WTO. The WTO membership is currently in the process of reviewing the Annex to the General Agreement on Trade & Services (GATS) that allows WTO members to negotiate access to their trading partners' markets on a multilateral basis.
In its invitation to TIACA, the EU and WTO stated: "We consider it valuable for air cargo operators to be able to share their experience in doing business abroad in order to assist WTO members in understanding the degree of market openness and the barriers to market access that exist in the global market for air cargo transport services."
In his address to WTO delegates, Mr Ogiermann said the current bilateral system is far from perfect, stating that the need to obtain explicit approval by governments for every operation was a lengthy process and not necessarily compatible with the economic requirements of trading countries or carriers' business flows. The current practice, he added, is mainly driven by passenger traffic considerations and is often influenced by 'national' carriers.
He called for an urgent overhaul of a system that dates back to The Chicago Convention in 1944, a time when regulations were mainly driven by the desire to control competition in a post war environment. Today, he added, the principles of the Convention with regards to entry, price and capacity were 'out of place and time'.
TIACA's Vice Chairman said the bilateral system works for developing markets, pointing to China's success in striking a 'difficult balance' since 2000 between opening up market entry points and protecting fragile local airlines. Subsequently, the Chinese market has gained significant momentum.
However, developed markets require evolved versions of this bilateral regulatory system. Examples of this already exist between trading blocs around the world as well as in the US domestic market - liberalized in the late 1970s - the intra-EU market since the 1990s and the first phase of 'open skies' between the US and EU set for 2008.
Rapid change, he said, must come by separating cargo from the bilateral agreements; regional trading blocs must encourage multilateral agreements between their members. Mr Ogiermann called for a clear vision for leveraging the bilateral system, stating that governments and trade organizations must seize the momentum.
TIACA's position on cargo liberalisation is underpinned by the value of air cargo services as a job creator and economic growth engine. The industry is a key intermediate service for many other kinds of trade worldwide and a vital part of the production process of pre-manufactured and manufactured goods. Today, 30% of world trade by value &endash; 2% in volume terms &endash; worth US$2.5 trillion per annum is carried by air.
Air cargo has a vital macroeconomic impact and is an enabler of globalization. It is essential to the economic viability of developing nations. Ulrich Ogiermann stated: "Airfreight is gaining in importance but is currently too restricted by a bilateral system designed for passenger traffic demands. Including air transport services into GATS will not improve market access for cargo carriers. We need more decisive action. Full liberalisation is not a wish, it is a must," he added. TIACA's presentation to WTO member countries comes just days after its latest working paper was submitted to ICAO's Economic Commission stating 'The case for liberalizing access to the air cargo market'. The paper was presented jointly by the Airports Council International, the International Federation of Freight Forwarders' Associations and TIACA.
Jack Boisen, Chairman of TIACA and Vice President Cargo of Continental Airlines, said: "The world's largest trading nations and industry regulators are increasingly starting to recognise air cargo's pivotal role in the global economy and we believe this is best served by fully liberalized market access, a step already taken by several States. Along with ACI and FIATA, TIACA strongly believes that the air cargo marketplace should be unrestricted as to the ability of air carriers to move cargo in any international marketplace between two points anywhere in the world."
The joint paper states: "Equally, such liberalization for all-cargo rights should not in any way restrict the ability of combination carriers to obtain similar agreement rights for both passenger and cargo service. In its entirety, the air cargo industry is enabling rapid integration of the world economy, bringing efficiencies to complex production processes by moving intermediate goods to regions which add the highest value at the lowest cost. Air cargo carries high value finished goods quickly from manufacturer to consumer, cutting inventory costs and driving high levels of customer satisfaction.
"The future of our industry depends to a large extent on governments recognizing that market forces should continue to drive innovation. Excessive regulation has a high cost, creating inefficiencies in a global supply chain and thereby reducing the positive economic impact of air cargo on the economy."
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