11128130511Andrea Goldstein

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Information about 11128130511Andrea Goldstein

Published on May 8, 2008

Author: Manuele

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Beyond Traditional Market Access in North-South Regional Agreements: The Case of Air Transport Provisions :  Beyond Traditional Market Access in North-South Regional Agreements: The Case of Air Transport Provisions IDRC – Ottawa, 17 February 2005 Andrea Goldstein – OECD Development Centre Outline:  Outline main characteristics of international air transport regulatory development at the multilateral level, including at the WTO experiences in some developing regions developments in selected North-South agreements Market Liberalisation and FDI in the Global Transport Industry:  Market Liberalisation and FDI in the Global Transport Industry a sui generis market dominant state ownership and high degree of immunity from competition policy; pervasive controls on entry, capacity, and tariffs; an international regime with specific organisations and institutions; high degree of vertical integration Restrictions on foreign ownership:  Restrictions on foreign ownership the right to take up the market access available in the BASA depends on the designated airline being ‘substantially owned and controlled’ by the nationals of the economy involved Further restrictions on the extent of foreign ownership apply at national level, for example, caps on the extent of foreign ownership development of global alliances and franchising agreements competition and consumer concerns an imperfect substitute to consolidation through (cross-border) mergers and acquisition October 2003 proposal to merge Air France and KLM Since the late 1970s substantial progress in liberalizing ownership and market access:  Since the late 1970s substantial progress in liberalizing ownership and market access U.S. domestic deregulation 1978 Australia-New Zealand Single Aviation Market Arrangements 1996 European Single Aviation Market 1997 Privatizations Open skies (since 1992, 89 BASAs, 74 parties, US one of the partners in 60) In 2003, Chile-Uruguay and Albania-US Extension of 7th freedom rights for all-cargo services Regional regulatory developments:  Regional regulatory developments 12 regional agreements Association of Caribbean States  Resolution on “Common Commercial Air Transport Policy Criteria”  development of a binding document twd “unification of the Caribbean by air and sea” Fortaleza Agreement  Agreement on Sub-regional Air Services  efforts to standardize the granting of operation permits for all sub-regional flights the CLMV States (i.e. Carnbodia, Lao PDR, Myanrnar and Viet Narn) signed a multilateral agreement on air services APEC Multilateral Agreement on the Liberalization of International Air Transportation (MALIAT), also known as the "Kona" agreement provides for full seventh and eighth freedom services signed by seven States in 2003 Tonga and Chile deposited their accession instruments North Atlantic Open Aviation Area ? Pressures for change:  Pressures for change 11 September 2001 events, global economic slowdown, SARS new competition from the low cost carriers regulatory system applying to international aviation is notoriously slow to change  a pillar of the system that restricts the adjustment options available is its rules on ownership and the restriction on foreign participation in particular Air transport in the WTO:  Air transport in the WTO GATS air transport commitments (Annex on Air Transport Services AATS) aircraft repair and maintenance selling and marketing computer reservation excluded consideration under the GATS of traffic rights and services related to traffic rights “built-in” GATS agenda the WTO resumed its mandated review of the Annex on Air Transport Services in 2001 adopted the guidelines, procedures and work programme for the negotiations Air transport in the WTO:  Air transport in the WTO Proposals for AATS additions multi-lateralization of first and second freedoms of the air ground-handling services airport management services leasing or rental services of aircraft without operator services auxiliary to all modes of transport when delivered in an air transport context strong interests among airlines to have ground services included in the Annex private investors in airports may prefer to widen the AATS coverage to include airport services current review remains stalled and may close soon  another review would then begin in 2005 general negotiations in progress and those economies with a strong interest might seek to return some specific air transport issues through those negotiations Routes to change :  Routes to change WTO/GATS Extend the coverage of the treatment of air services Add air transport related services to the agenda in the normal negotiations Promote progress through trade-offs with impediments in other market the WTO process remains relatively slow ICAO model clause the designated airline has its principal place of business [and permanent residence] in the territory of the designating Party; the Party designating the airline has and maintains effective regulatory control of the airline; the Party designating the airline is in compliance with the provisions set forth in Article __ (Safety) and Article __ (Aviation security); and the designated airline is qualified to meet other conditions prescribed under the laws and regulations normally applied to the operation of international air transport services by the Party receiving the designation. Implications:  Implications air services are still provided by a few carriers only in a few cases new entrant airlines play a significant role a single airline controls more than half of the available slots in a large number of airports productive efficiency increases and fares decline when regulations and market structures become friendly to competition productive efficiency is sensitive to actual competitive pressures, as proxied by low market concentration Open Skies Agreement Highlights :  Open Skies Agreement Highlights Free Market Competition Pricing Determined by Market Forces Fair and Equal Opportunity to Compete All carriers -- designated and non-designated -- of both countries may establish sales offices in the other country, convert earnings and remit them in hard currency. Designated carriers are free to provide their own ground-handling services -- or choose among competing providers. User charges are non-discriminatory and based on costs; CRS displays are transparent and non-discriminatory. Cooperative Marketing Arrangements Provisions for Dispute Settlement and Consultation Liberal Charter Arrangements Safety and Security Optional 7th Freedom All-Cargo Rights Asian air transport systems:  Asian air transport systems Some liberalisation plurilateral open skies agreement among a group of APEC-member economies (November 2000) ASEAN MoU on Air Freight Services (2000)  allows the designated airlines of each member State to operate all-cargo services of up to 100 tonnes weekly with no limitations on frequency or aircraft type Multilateral Agreement on Air Transport in the CLMV Sub-Region, which formalized a 1998 arrangement (May 2003) extent of government ownership among airlines in the region In very few carriers the level of private ownership exceeds 50 per cent. (exceptions are Cathay Pacific, Eva Airways, and Philippine Airlines). The extent to which governments can sustain the operations of loss making carriers is an important policy issue in these markets. As in other industries, what FDI exists has been thanks to privatisation – in particular in Sri Lanka Impact of regulation on APEC air transport markets:  Impact of regulation on APEC air transport markets Doove et al. (2001) index Designation requirements (single, multiple or no restriction) Capacity regulation Price regulation Treatment of non-scheduled services wide variation in policy regimes in the region relatively restricted nature of the regimes significant impact on airfares Impact of regulation on APEC air transport markets:  Impact of regulation on APEC air transport markets Oum (1998) dismantle the BASAs which restrict the building of an efficient intra-Asian network establish a timetable for regional open skies relax the ownership limits on second-level carriers move faster on charter, freight and secondary airport services further multiple designation of carriers Regional integration in African air transport:  Regional integration in African air transport state–ownership, poor management and monitoring, and a maze of anti–competitive arrangements corruption, fares and costs higher than the world norm, poor financial results, and low safety of airlines and airports low frequencies between regions, poor infrastructure, and the absence of real hubs make Africa’s network the world’s weakest Yamoussoukro Decision free exchange of traffic rights including the 5th Freedom between African States; multiple designation by each state party on a city pair basis; no restriction of frequencies and capacity offered on air services linking any city pair combination; complete tariff liberalization; complete liberalization of cargo and non scheduled services; and encourages commercial and other forms of cooperation between and among African airlines Structure of SADC air transport:  Structure of SADC air transport not a marginal emerging market passenger equal to Mexico freight equal to Luxembourg staggering dominance of the South African market, the world’s 24th-largest for passengers traffic South African companies perform much better not only than the rest of SADC carriers, but also relative to Ethiopian (the only profitable African airline in 2001) and Royal Air Maroc SADC airlines are usually large companies in their home countries, for instance Air Mauritius is the island’s second-largest company Chapter 9 of SADC Protocol on Transport, Communications and Meteorology :  Chapter 9 of SADC Protocol on Transport, Communications and Meteorology need for enhanced co-operation in order to overcome the constraints of small national markets, market restrictions, and the small size of some SADC airlines develop a harmonized regional civil aviation policy in respect of the gradual liberalization of intra-regional air transport markets for the SADC airlines regionally owned airlines; the economic and concomitant institutional restructuring of the SADC airlines, airports and the provision of air traffic and navigation services; the development of ownership options, including the extent to which national, regional, continental and international strategic investors can be introduced; the optimal utilization of existing aircraft capacity in the region JIA transformation into the region’s hub:  JIA transformation into the region’s hub dramatic increase in the number of flights to and from other SADC airports falling number of flights to, and destination in, Europe from Gaborone, Harare, and Windhoek Cape Town shows an increase in the number of flights to Europe (although with fewer destinations) and SADC Durban only had one non-SADC destination in winter 2001/02 The future of SADC air transport 1:  The future of SADC air transport 1 with distances so great and surface transportation facilities so few, though relatively well developed, this transportation mode can play a leading role in the integration process these auspicious developments however have not been accompanied by an increase in capacity – on the contrary soaring airport charges and overflight rights over many African countries, coupled with the weakening of the rand, have led many European carriers to flee the country The future of SADC air transport 2:  The future of SADC air transport 2 in South Africa licensing requirements for charter operations have not been relaxed despite the existence of pent-up demand in Mozambique and Zimbabwe the business community has criticised authorities for the heavy toll imposed by their timid approach to deregulation governments have not made too much of an effort to speed up divestiture continued to provide budgetary resources to keep airlines afloat unable to make a credible gesture of bailing out for the very last time an airline in order to clean its balance sheets and prepare it for privatisation The future of SADC air transport 3:  The future of SADC air transport 3 unlikely that SADC air transport industry could develop and prosper if entrusted to foreign carriers only, so concerns hinging on ensuring participation and survival of domestically registered airlines sound genuine unless and until regionally owned and managed airlines are formed, liberalisation of the regional market will encounter resistance aviation as vital to their national economic well-being necessary to support and sustain their own airlines airlines as useful for security reasons keen to ensure that particular routes are served (to encourage tourism and export diversification) US-Singapore FTA:  US-Singapore FTA launched on November 16, 2000 final round of negotiations on November 11-17 2002 Agreement concluded on January 15, 2003 broadest possible trade liberalization in services Singapore will treat U.S. services suppliers as well as its own suppliers Market access is supplanted by strong disciplines on regulatory authority Singapore reserves the right to adopt or maintain any measure that accords differential treatment to countries under any international agreement in force or signed after the date of entry into force of this Agreement involving: (a) Air Services; (b) Maritime and Port matters; and (c) Land Transport matters Individual investors, apart from the Singapore government, will be subject to 5% equity ownership limit in Singapore Airlines US-Chile FTA:  US-Chile FTA entered into force on January 1, 2004 after 13 years of bilateral conversations and 2 of negotiations Chapter 11 (Cross-Border Trade in Services) does not apply to: (a) financial services, (b) air services, including domestic and international air transportation services, whether scheduled or non-scheduled, and related services in support of air services, other than: (i) aircraft repair and maintenance services during which an aircraft is withdrawn from service, and (ii) specialty air services EC horizontal agreements with Azerbaijan, Bulgaria, Chile, Croatia, Georgia, and Lebanon :  EC horizontal agreements with Azerbaijan, Bulgaria, Chile, Croatia, Georgia, and Lebanon November 2002 rulings by the European Court of Justice  nationality restrictions in BASAs are contrary to EU law BASAs with third countries need to make provision for non-discriminatory market access to all EU airlines HAs = Community agreements that modify only a few articles (designation being the most important) in all BASAs between the third country and all Member States (HA cannot include provisions on traffic rights) HA with Croatia could be included as an annex to the Stabilization and Association Agreement, which cannot be considered a pure FTA Euromed negotiations include usually TA or capacity-building transport provisions  in the next few months negotiations of ASA with Morocco which will include provisions on market access, safety, security, etc. The future of air transport in developing countries:  The future of air transport in developing countries “restricted access to capital is not a reflection of the unsustainability of carriers based in the developing world to attract additional investment, but is rather a result of the restrictions imposed by existing airline ownership and control rules” → ICAO Community of Interest Principle EU Council Regulation 2408/92, imposing Public Service Obligations on routes considered vital for economic development which the liberalised market cannot serve

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