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When it comes to transport, global market forces are not the only forces to be reckoned with, says ITF Assistant General Secretary Stuart Howard

The World Trade Organisation (WTO) was set up by governments in 1995 as a successor to the post-war trade body the General Agreement on Tariffs and Trade (GATT) to drive forward an unending agenda of global market liberalisation. Not only commercial industries have been affected. Even basic services such as water supply and public transport are being opened up to international market forces in a ratchet-like process, which obliges member states to enter “successive negotiations” for more and more liberalisation.

Key among the visions of global industry is a seamless global transport system. Yet while individual transport sectors continue to liberalise, the WTO has made little progress in bringing transport under the influence of its own services framework – the General Agreement on Trade in Services, or GATS. This is something the WTO is determined to change.

Among trade unions’ concerns about the growing power of the WTO is its refusal to consider the incorporation of international core labour standards into its rules both for trade in goods and in services. Unlike other international organisations such as the International Civil Aviation Organisation, the WTO has no form of stakeholder dialogue. Global Unions, including the ITF, are therefore pressing demands both for some form of consultative status in the WTO, and for vital restrictions on its remit, particularly when it comes to public services.

In the meantime transport industries continue to throw up complex challenges and obstacles to the WTO campaign.

Maritime talks run aground

International shipping has long operated in an environment of global deregulation. There are few restrictions on ships carrying cargo from one country to another. Shipping has produced its own extreme strain of deregulation, the flag of convenience system, which places a large part of the industry beyond the influence of government control.

Barriers remain, however, in many domestic shipping services. Most genuine flag states insist that, in line with UN rules, there must be a genuine link between the shipowner and the flag state. There are therefore restrictions on foreign ownership and national laws, including labour laws, apply on board. In some countries foreign ships are banned from coastal trade (cabotage). One of these countries is the United States where the US Jones Act allows only US flagged ships whose crews enjoy US conditions to transport goods internally.

Talks began on shipping and port services as soon as GATS was set up in 1995, but these collapsed when the US Government rejected any challenge to the rules reserving its coastal trade to national shipping. The US has since made it clear that access to its domestic market is non-negotiable, and following 11 September 2001 sensitivity over coastal and port security has virtually ensured that eliminating cabotage will stay off the agenda.

But maritime transport includes much more than domestic shipping services and the negotiating freeze has created enormous frustration among the growing number of global terminal operators, such as Hong Kong based Hutchison, which is the largest international port and terminal operator in the world. There was little surprise in March 2001 when the Hong Kong government urged an early resumption of maritime talks in order to discuss the elimination of restrictions on foreign equity ownership and management in ports.

The aviation exclusion

Civil aviation is even more problematic for the WTO than maritime transport. Air traffic services have been specifically excluded from GATS since the outset, due to the political and economic sensitivity surrounding air links from one country to another. The WTO’s other problem in its struggle for influence is that an effective international framework of rules for air traffic rights already exists.

The 1944 Chicago Convention, overseen by the International Civil Aviation Organisation (ICAO), a UN specialised agency, provides a legal framework for more than 3000 negotiated bilateral air agreements. It is also a regulatory regime, which keeps safety, security and economic and environmental regulation, under one roof.

The ICAO system of bilaterals is derided as “a nightmare” by former WTO Director General Mike Moore. Yet for years it has been the effective means by which a balanced exchange of market access has been achieved between any two countries under a principle of mutual benefit, rather than simply clearing the field for the giant carriers to dominate air services around the world. If traffic rights were brought within the scope of GATS, it would mean in principle that each country would have to offer all other WTO members the terms of its most liberal bilateral agreement.

The WTO cannot ignore ICAO but it has set out to go round it, absorb it, pressure it, and challenge it all at the same time. There are ongoing moves towards bringing air cargo out of the Icao system and under GATS, despite the complication, repeatedly highlighted by the ITF among others, that most air cargo is carried in the bellies of passenger aircraft. In the meantime Icao tries to keep the WTO at bay by pursuing its own aggressive programmes of liberalisation. A special ICAO Conference scheduled for March 2003 appears ready to propose a further raft of liberalisation.

Once more the position of the US in all this is problematic for the WTO. The US has fiercely promoted the liberalisation of international air routes. However, the US domestic market – the largest aviation market in the world – provides a vital economic platform for its own aviation and aerospace industries. For this reason, the US government argues for “open skies” agreements on international routes, but maintains a protective barrier around its domestic aviation market. For this arrangement to continue air traffic rights must stay outside the GATS framework.

While air traffic rights (what the WTO calls “hard rights”) are the key tradeable service in aviation, there are other important “soft” areas of aviation business. It is unique to civil aviation, among all the services covered by GATS, that three areas of activity are specifically included in its remit. These are: aircraft repair (though not line maintenance); computer reservations and marketing. Yet the number of commitments made under GATS in these areas is paltry. In March 2002, out of 138 WTO member states, just three had made commitments on aircraft maintenance.

The widest category of aviation activities referred to (though excluded from) GATS is “services directly related to air traffic services”. Inevitably this category is proving highly vulnerable to WTO tactics of redefinition and re-categorisation. This time the European Commission is leading the way on the WTO’s behalf. Through the current round of talks, the Commission has simply moved airline catering out of the aviation industry (which is outside GATS) and reclassified it as part of the catering industry (inside GATS). The same has been done with professional crew training, which is now part of education services. The European Commission also wants commitments from countries to liberalise airport ground services under GATS after making a unilateral decision that these are not “directly related to air traffic rights”.

Logistics: side-stepping the blockages

A renewed push for shipping and port liberalisation is coming from the logistics companies. There is increasing concern that the GATS approach to global transport through different transport service sectors has not adapted to take account of recent developments in intermodal transport and logistics. Logistics deals not just with transport but with such matters as cargo handling, warehousing, customs clearance, container depots, and inventory management.

The Hong Kong government has pinpointed an indispensable need “to meet the ever-increasing demand for customised door-to-door logistics services”. This position, which has strong support from the European Commission and the International Chambers of Commerce, is that maritime talks in GATS should put coastal trade issues to one side and move on to deal with the movement of goods through the ports and inland.

Failing the restart of maritime negotiations, the fall-back position would be to create a new service category for GATS called logistics services and set up a new negotiating group.

This approach links closely with the strategy being adopted by air cargo companies. Air courier companies such as UPS, Federal Express and others, as well as lobbying to loosen the links between the Icao system and air cargo operations, have also been pressing for the liberalisation of national postal services. To deal with this issue the WTO classified postal services and couriers within the same negotiating group. The cargo companies, aware of the high level of resistance to liberalising domestic postal services, now see themselves trapped in a negotiating group going nowhere fast. After huge corporate pressure, in July 2002 the US government proposed the setting up of a new separate GATS service sector called Express Delivery Services.

Not only maritime and aviation services are feeling the influence of the logistics lobby, but also road and rail further down the logistics chain. According to the International Chambers of Commerce: “It is recognised that land transport services may raise particularly sensitive issues. Nevertheless, given the growing significance of door-to-door services, inland transport (where it forms part of international maritime services) should be liberalised.” A few governments, such as the UK, are ready to make binding commitments in the current round of GATS, which will ensure that their current policy of allowing foreign investment in rail is irreversible. The current process of rail liberalisation in Europe is already anticipating the inland march of GATS.

The current round

The WTO has failed in the current round of negotiations to make significant progress in the two areas of transport with truly global route networks. Yet the WTO is unlikely to give up on bringing all transport sectors into the GATS. The international and regional institutions, including the OECD, the World Bank and the European Commission, work together closely to promote diverse routes to the same goal of global liberalisation. They are backed by powerful new business lobbying groups representing the logistics and supply chain interests of the global corporations.

The organised pressure being mounted for transport liberalisation can seem overwhelming. Yet pollution and safety disasters constantly fuel public concerns about the impact of liberalisation. A renewed interest in security now shares the international political agenda with lowering trade barriers. There is also a wide range of powerful national economic interests at play, which are often in conflict with the WTO model of liberalisation.

If trade unions can get used to the new terrain, there is still plenty of scope for labour to pose a sustainable development alternative to the WTO’s agenda of global free market liberalisation. Transport is still the WTO’s problem industry.

What are the WTO and GATS?

The World Trade Organisation (WTO) was set up in 1995 following a prolonged round of international trade talks known as the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). It was created with new powers to provide a permanent legal and administrative framework for the process of multilateral trade liberalisation.

The General Agreement on Trade in Services (GATS) is the framework under which trade in services is liberalised. This includes such basic services as water supply, telecommunications, postal services, energy services, health provision and transport. Hundreds of millions of workers are employed in these industries.

WTO negotiations work by bringing trade ministers together to discuss how much they are prepared to open their markets to each other. This process is pushed forward in timetabled rounds of negotiations. These talks operate in only one direction – the removal of trade barriers, and the extension of liberalisation.

The WTO also has certain important liberalisation principles which are enforced across all industries. These include:

• the national treatment principle – countries are not allowed to keep any measures which favour national businesses over foreign operators; and
• the most favoured nation principle – once a government has made a commitment it is offered equally to all other WTO member states.

Any country which fails to comply with its commitments is subject to substantial legally enforceable constraints backed up by trade sanctions. These mechanisms bind future governments and make liberalisation effectively irreversible.

Some key union concerns GATS free market aims can be in conflict with principles of universal or affordable access to basic services. This poses a serious threat to particular services including health, education and public transport. The ITF believes these services should be excluded from GATS. Any form of regulation protecting the environment, health and safety and employee rights is vulnerable to being ruled illegal by the WTO as an “unnecessary” or “discriminatory” trade barrier. The WTO has refused to accept union proposals for international core labour standards to be incorporated into its rules. WTO rules open the door to foreign companies insisting on market access to any services where some form of competition already exists. This would currently include most of the transport industries in most countries. The ITF, with its experience of flags of convenience in the maritime industry, believes governments must be able to retain national ownership rules and rules ensuring the application of national conditions. GATS negotiations operate in an environment of secrecy and without the participation of key stakeholders. The ITF calls for transparency in the WTO and structures of social dialogue with industry stakeholders.