Non-Tariff Barriers in the Trade of Transport Services – Final Report TPT 02/2002T Steering Committee on More Competitive Transportation (including infrastructure) Wednesday 21 April 2004

Project objective Assess how trade inhibiting effects of non-tariff measures and anti-competitive business practices in the transport sector can be reduced while continuing to protect the legitimate safety, national security and environmental goals of APEC economies. – identify non-tariff measures, and – develop a “best-practice” model which can serve as a guide for the elimination or reduction of barriers.

Key questions What are the most important non-tariff barriers to trade in the transport sector within the APEC region? In which areas are the barriers most evident? Are the conditions explicitly devised to limit trade or are they (actually) intended to support other social, environmental or safety objectives?

Non-tariff measures Identified as “any law, regulation or business practice that has the effect of impeding free trade in transport services, including the provision of transport infrastructure.” Examples include: Ownership restrictions, Restriction on competition, Inadequate protection on competition, technical barriers to trade.

Some conclusions The diversity in size, form, level of economic development and specific transport challenges that face APEC economies means that it would be inappropriate to have prescriptive specific legislative and regulatory initiatives for the further reduction of non-tariff measures. However, it is possible to develop a set of guiding principles which, if consistently implemented by APEC economies, would enhance the flow of trade.

One way forward: A best practice model The principles underlying the best practice model are designed to progress 3 key objectives. 1.Extending the scope of market activity 2.Enhancing the participation in the market 3.Supporting the effective functioning of markets

Extending the scope of market activity 1.Adopt a general preference for private provision of transport infrastructure/services where there is no compelling policy reason to do otherwise. 2.Develop and promulgate a clearly articulated transport policy framework. 3.Unbundle those elements of transport service provision which can be effectively exposed to competition. 4.Separate regulatory from commercial functions of enterprises 5.Ensure that privatisation opportunities are publicly advertised well in advance of action. 6.Ensure that privatisation opportunities are open to international bidders on equal terms. 7.Ensure that all privatisation processes are open and transparent. 8.When markets are opened to competition, ensure that Government enterprises are required to compete on equal terms with new entrants.

Enhancing participation in the market 9.Remove nationality restrictions on the ownership of or inputs into enterprises providing transport services and facilities. 10.Wherever practical, remove restrictions on the number of service providers operating in transport markets. 11.Where it is considered the regular scheduled services can not be maintained without some restrictions on entry, award franchise rights through an open and transparent process in which international bidders can compete on equal terms. 12.Base technical standards for the regulation of transport services and equipment on international standards wherever these exist. 13.Rigorously review the requirement for technical regulation in areas not covered by existing international standards. 14.Allow foreign competitors to participate in all transport markets on the same terms and condition as domestic firms unless there are explicit legal or regulatory provisions to the contrary.

Maintaining effective markets 15.To ensure appropriate regulation of market behaviour, subject to the transport industry, irrespective of ownership, to the general competition legislation of each economy. 16.Include in the competition regime suitable procedures for applying a public benefit test to mergers and acquisitions that would result in significant levels of market concentration. 17.Include prohibition of predatory pricing in the competitive regime. 18.Include appropriate mechanisms in competition legislation to effectively ensure access to essential transport infrastructure. 19.Adopt appropriate formal guidelines and training programmes to ensure access to essential transport infrastructure. 20.Provide the competition authority with legislative backing and independence required to enforce competition policy.

Where to from here?

Some possible options Further work on the 20 underlying principles, perhaps by groupings identified in the report. Leave as a standing item on the SC-CT agenda. Conduct a half day seminar on outcomes, with different economies taking the lead for different elements of the session. An annual survey of economies. Australia invites other economies to share their views/perspectives.