Cargo carriers promote new trade formula

Date: 30/10/1997

By Chris Johnstone

AIR cargo companies are pushing the European Union to launch a separate strategy to open up their sector to competition by drawing a clear distinction between freight and passenger services.

Freight companies United Parcel Services (UPS) and Federal Express have written to Trade Commissioner Sir Leon Brittan and Transport Commissioner Neil Kinnock calling for the sector to be included in its own right in the next round of World Trade Organisation (WTO) talks aimed at liberalising services.

They have suggested a formula under which all countries would offer to extend the most favourable cargo conditions in existing bilateral deals to all other countries in return for similar treatment. They say arrangements could cover domestic foreign investment rules, the right of establishment and cabotage.

In addition, the specific focus on air cargo could aim to develop separate standards and most favoured nation treatment to tackle other problem areas such as groundhandling services and air transport taxation.

Currently, only three air transport services are covered by WTO rules: aircraft repair and maintenance, com-puter reservation systems, and selling and marketing of air transport services.

In the past, the pace for opening up the dynamic cargo market has been dictated by progress on the far more problematic issue of passenger traffic, which is dominated by bilateral negotiations between countries. Splitting cargo from passenger traffic would increase chances of future agreement, say the companies.

Unbundling freight and passenger services is becoming increasing urgent given the explosive growth in cargo traffic, now averaging around 9&percent; a year and expected to rise by more than 7&percent; annually until the year 2010.

Passenger and cargo services are increasingly going their separate ways, say the US companies. The proportion of freight carried together with passengers is expected to slip in the next 15 years from 58&percent;, with the air express industry alone likely to increase its market share to around 30&percent;.

The suggestions have been cautiously welcomed by the Trade and Transport Commissioners' top staff - in particular, the formula for transforming current bilateral agreements into a global deal.

More talks have been offered as preparations gather pace for a new round of talks on world trade liberalisation by 2000, with negotiating positions firming up during 1998.