1. Transport services

2. Presentation outline First part Second part
Links between transport capacity, growth and development
The impact of trade policy reform in transport
Second part
Transport in GATS
How international trade negotiations can contribute to successful outcomes
Moving forward

3. First part

4. Transport and growth Transport costs and growth
Higher shipping costs slows growth
Transport costs and the concentration of economic activity
China example
Links between policy and transport costs
Eg port performance

5. Gains from market opening
Gains from trade
Attracting foreign investment
Economies of scale and scope
Competition and choice
Transfer of skills and technologies

6. Port reform in Argentina
Before reform
Declining cargo volumes
for domestic freight – which switched to other modes
Big rise in stevedoring fees in real terms
250% from 1980 to 1991
Cross subsidies between ports
Not enough investment
‘In the ports of Rosario, Buenos Aires and La Plata, for example, docks collapsed into the water’ [Trujillo and Serebrisky]
Private sector built its own grain handling facilities

7. Port reform in Argentina
In early 1990s, devolution of most port responsibilities to the provinces, plus private sector participation and promotion of service competition.
Provinces were given the freedom to operate, concession or close ports
With implications for competition
Independent autonomous companies for some large ports
Six terminals were competitively concessioned to the private sector in Buenos Aires
payment of a leasing fee to the government for use of infrastructure assets for years
now they compete against each other, plus free entry into the sector by allowing any operator to build, manage and operate a port for public or private use.
a new regulatory agency was created under the Ministry of the Economy
Not allowed to be an operator
Plus general anti trust laws, eg on mergers of operators

8. Effects of reform Average stay:
Indicator
1991
1997
Cargo (thousand tons)
4,000
8,500
Containers (thousand TEUs)
300
1,023
Capacity (thousand TEUs)
500
2500
Cranes 3 13
Productivity (ton per employee)
900
4850
[2001]
Charges per container ($/TEU)
450
220
Note:
Big drop in
employment
Average stay:
Fallen from 72 hours (1991) to 15 (2002)
These are
at global
benchmark
levels
180 in 2002

9. Remaining challenges the risk of collusion, due to horizontal mergers
Also some debate about vertical mergers ie ports and shipping companies
Improved monitoring and benchmarking mechanisms (across ports)
So that services continue to be provided on a cost-efficient basis.
Inefficient customs operations
pose a key constraint towards further productivity gains
Restraints on intermodal integration, eg quality of land transport access
Maintaining credibility of regulation
eg allowing mergers, introducing new competitors
[Trujillo and Serebrisky/GEP]

10. Other examples of impact
Competition
Eg railways - in the market and for the market
Specialisation and trade
Eg shipping or air transport
Variety of services
Eg air transport

11. Establishment compared to cross border supply
How would firms choose?
Set up costs offshore is a negative - offsets are locational advantages and requirements of the business model (multi-modal, protecting value of assets)
Effects: these can vary between modes….
Competition
Effects on incumbents
Local employment and investment
Spillovers

12. Competition drives many of these effects
Competition AND trade
Competition drives many of these effects
Trade (and investment) also matters
Adds to the competition effect
But has additional benefits
The focus here is trade policy reform

13. Second part

14. Transport in the GATS Coverage of the sector
All transport modes and complementary services

15. GATS: General Principles
Set of general principles and rules
Set of specific commitments
Applies to the 4 ‘modes of supply’
Cross borer, consumption abroad, establishment and movement of natural persons
Does not apply to ‘services supplied in the exercise of government functions’

16. GATS and MFN
The most-favoured nation principle is the core general principle
“Each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than it accords to like services and service suppliers of any other country”
GATS allows for one-time exemptions
Significant in transport, eg maritime services
Also special case of air transport
But with a time limit, subject to negotiation

17. GATS and Specific Commitments
National treatment obligation
Market access

18. GATS and National Treatment
“In the sectors inscribed in its Schedule, and subject to any conditions and qualifications therein, each Member shjall accord to services and service suppliers of any Member, in respect of all measures affecting the supply of services, treatment no less favorable than it accords to its own services and service suppliers”

19. GATS and Market Access Items except (e) refer to quantitative measures
Based on a list of measures which cannot be used unless specified in the schedule
Restrictions on
The number of suppliers
The value of transactions or assets
Total quantity of services output
Number of natural persons that may be employed
Type of legal entity through which services can be supplied eg branch vs subsidiary
Share or value of foreign equity
Market access commitments apply to both discriminatory and non-discriminatory measures

20. GATS: Horizontal and additional commitments
Members also make horizontal commitments relevant to modes of supply
Eg rules applying to mode 4
Members can make additional commitments that do not fall under Market Access or National Treatment
Eg commitment to move to international standards on professional services

21. Role of international negotiations
Policy credibility
Export market access
Value of concessions and cross sectoral bargains?
Guide to change
GATS has flexibility built in!

22. Progress in GATS Commitments documented the status quo
So GATS has not been a useful vehicle so far for market opening
Limited success in regulatory cooperation
Accession commitments are significant
Regional commitments have limited contributions

23. Moving forward Competition, regulation and sequencing
Capacity Building
Impact on the poor
Aspects of negotiating strategy

24. Competition, sequencing and regulation
Economies of scale and scope
Problem of regulating access
Trade policy issue is lack of regulation, Eg railways
Externalities and congestion
Problem of policy being no more restrictive than necessary
Eg noise congestion at airports
Sequencing challenges
Risks of loss if the sequence is wrong
Competition is the priority: if necessary, competition for the market
New issue: security in int’l transport

25. Capacity Building
Regulatory reform demands substantial resources for design and implementation
Value of cooperation with trading partners
Trade policy strategy
Depends on access to information, and analysis of impediments

26. Impact on the poor
Reform can add to efficiency and create opportunities to meet social targets
Reform and openness can also undermine existing policy mechanisms for supporting services to isolated and poor areas
Responses include
Setting investment targets
Flexibility with respect to price/quality
Liberal entry of providers
Involving communities
Subsidies, including competitive processes

27. Negotiating strategy Maintain focus on market access for best results
Identify export interests and seek gains from bargaining across sectors
Develop coordination between ministries
Mobilising business interests