Multinationals don’t always get their way. Stuart Howard reports on how the logistics companies were left stranded by the collapse of talks in Cancun...

The failure of the World Trade Organization (WTO) talks in Cancun, Mexico in September last year has posed serious problems both for governments committed to liberalisation and for the corporations hoping to benefit.

Not least among those affected are the transport and logistics companies, who have been large spenders on lobbying activities and keenly anticipating a new raft of liberalisation. The logistics companies themselves front up much wider pressure coming from global corporations who need to be able to move goods speedily and cheaply between their assembly lines and distribution centres around the world. For these companies logistics are the sinews of globalisation.

The way was paved for the emergence of the multi-billion dollar logistics industry by the steady liberalisation of many national regulations governing transport during the 1980s and 1990s. Nevertheless, a range of obstacles remains before a truly seamless world freight transport system can be achieved. As a result the lobbying organisations of the logistics industry are currently to be found everywhere, feeding corporate views into US government institutions, European Union bodies and various multilateral agencies. Unions have had to try to match these glittering corporate campaigns with their own concerns for the social accountability of such key services as transport and postal operations.

The WTO offers up the hope of a massive acceleration of liberalisation in services such as transport and logistics traded between countries. Yet while the purpose of the WTO is in tune with the needs of the transport companies, it has failed miserably to achieve anything much for them (see Transport the WTO’s Problem Industry, TI issue 11).

Most agitated of all about this situation have been the express delivery companies. These have contracts to operate huge and complex just-in-time delivery systems within global corporations. These companies take lobbying seriously. According to the Polaris Institute, both Federal Express and UPS are among the top contributors to political party funds in the United States. Fed Ex was the second largest single corporate contributor to the 2000 US presidential election over all, spending US$2.5 million.

In the run up to the Cancun ministerial meeting, industry lobbyists had identified a number of major difficulties with the WTO. The first problem was that the aircraft fleets of companies like UPS, FedEx and DHL are not covered by the WTO’s negotiating framework, the General Agreement on Trade in Services (GATS), at all.

They are governed by the international regulatory regime of the International Civil Aviation Organization (ICAO), in which their air cargo routes come under a complex and at times restricting system of bilateral government treaties. Logistics companies have been pressing hard that air cargo should be brought out from ICAO and into GATS, but with little success. They received their latest rejection on this from governments at an ICAO Conference in March 2003. It was an outcome welcomed by ITF affiliates who had lobbied hard to keep the trading agreements between governments on air traffic services with ICAO, under the same roof as safety and security decisions.

Business frustration
The main WTO negotiating group covering express delivery companies is the postal and courier services group. Here the problem is that governments keen to liberalise their national postal services are in the minority and the process of liberalisation proceeds at barely a crawl. Governments apply one set of rules and customs procedures for goods being moved by their national postal services as part of the postal system, and separate rules for commercial goods being moved by the express delivery services.

The logistics companies have become increasingly frustrated at the WTO. Their perspective is that it has failed so far to deliver on their goals of rapid liberalisation and the virtual extinction of differences between postal services and commercial express delivery. As the European Express Association put it during the Cancun ministerial, this lack of movement is “not in the interest of European business, which relies heavily on the worldwide logistics services provided by the express delivery service companies”.

In May 2002, David W, Spence, Senior Legal Counsel for Federal Express, laid out a set of lobbying priorities to address these problems. Spence’s lobbying strategy singled out two key demands. First, that the WTO should set up a new and separate express delivery services negotiating group. Second, that the WTO should progress with a programme for trade facilitation, with its focus on removing any barriers to the movement of goods across international borders. In order to progress the latter, logistics corporations were circulated with a request for a list of discriminatory barriers they faced in their operations.

When the US government made its submission for GATS negotiations in March 2003 it duly included a strident call for a new industry negotiating group for express delivery services. As a bonus the US Trade Representative also got a special WTO working group on logistics set up. The industry’s European lobby was not so successful with the European Commission, which did not follow the call for a new industry group. Both the US and the EU, however, strongly supported adding trade facilitation into the WTO programme.

Trade facilitation was one of the controversial “Singapore issues” which influential countries such as the US wanted to see brought into the scope of the WTO (the other three were investment, competition, and government procurement).

Organised opposition
The resistance of many governments, especially among developing countries, to the Singapore issues was no secret. They believed the proposals gave unfair trading advantages to the more industrialised economies, while these same governments refused to concede ground on issues like agriculture. Days before the ministerial gathering US business leaders urged the US government to “unbundle” the Singapore issues, and to be ready to ditch the most controversial (investment and competition) in the hope of saving the remaining two (government procurement and trade facilitation).

The expectation was that the US and EU would as usual be able to drive through most, if not all of their agenda. Instead they encountered unexpectedly well-organised opposition, which meant that no consensus could be reached (or bullied) and the talks collapsed.

For the logistics corporations, the WTO has failed even more dramatically to deliver as a mechanism for fast track liberalisation. There is much business that the WTO will carry on as usual. Nevertheless, while GATS was not the main topic of Cancun, its scheduling and the boldness with which it can be pursued are now under question.

Trade facilitation is, for the present, dead in the water along with the other Singapore issues. Of course this will not mean that the corporate lobbyists will give up their efforts for the liberalisation of global transport services. There is likely to be a new focus on bilateral trade and regional services negotiations, particularly between the EU and the US such as with the Transatlantic Common Civil Aviation Area. The EU port liberalisation will be used to pressure for similar reforms around the world. X

Stuart Howard is Assistant General Secretary of the ITF.

Social coalition shifts balance of power
The US and EU delegations have come to expect to be able to push through their agenda at WTO ministerial meetings. However, much more sophisticated coalition building by a number of countries, largely led by Brazil, and including India, South Africa and China was able to resist such bullying.

This resistance was strongly bolstered by an articulate civil society presence of NGOs and trade unions.

Government representatives from developing countries, unused to much in the way of support systems, suddenly found they had an unpaid army of researchers and analysts at hand. The ITF, represented by its vice president Alicia Castro of Argentina, made a number of presentations on the issue of trade facilitation, warning that it could be used as a back door route to further liberalisation of transport services, in meetings parallel to the intergovernmental talks held at Cancun.

The future of the WTO is now under intense discussion. The more organised cooperation between developing countries capable of acting as a counter balancing force is a positive step. However, a reversion from multilateral trade talks to bilateral or regional agreements would actually mark a step backwards. Conducting trade talks through individual bilateral meetings obviously reduces the number of countries covered in a trade agreement. However it generally means that the bargaining power of the stronger country is more easily exerted.

Unions and civil society organisations will need to see if the inevitable process of re-examining WTO structures will provide them with opportunities for putting forward their own proposals. These should have the aim of producing a much less damaging and more accountable world trade body. A new multi- lateral approach could set the world trading system in a context of human development and social rights, as well as one concerned for business profits.