Transport goes transnational

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Kemal Ulker explores the role of foreign direct investment in sending transport the way of other globalised industries

Faster transit times, coupled with dramatic reductions in the cost of air and sea transport over the last few decades, have made possible the separation and globalisation of production that dominate industry today.

Until the 1970s international economic activity was mainly based on the exchange of goods and services between countries. During this period, multinational corporations and their foreign outposts produced almost entirely for the national (and neighbouring) markets in which they were located. Foreign trade was the driving force of the world economy, and traditional transport modes were mainly concerned with linking markets on the global level.

Today much of the transport sector is concerned with linking the complex production systems of transnational corporations. These are companies that coordinate production, design, marketing and management facilities on several continents. In order to do so, they invest in the capacities of other countries, for example by buying or building factories or call centres overseas to operate different aspects of the business. This is an example of foreign direct investment, a process that allows companies to take advantage of a global labour market.

In the last two decades foreign direct investment has grown at up to twice the rate of growth of international trade. Global outward foreign direct investment stocks totalled US$8,197 billion in 2002, compared with US$590 billion in 1982.

Transnationalisation hits transport

Having facilitated the process of transnationalisation in other industries, transport itself is now evolving to become more and more transnationalised. The latest World Investment Report published by the United Nations’ Commission on Trade and Development (UNCTAD) demonstrates that the structure of foreign direct investment has shifted towards transport industries, together with other services such as electricity, water, and telecommunications.

According to the report, over the period 1990-2002 the value of foreign direct investment stock in storage and transport rose 16-fold. The postal operator turned logistics giant Deutsche Post World Net emerged as one of the most transnationalised companies, with majority-owned affiliates in as many as 99 countries. The report details recent major investments by transport companies overseas. These include a new European IT operations centre in the Czech Republic (US$456 million invested by Deutsche Post), construction of a new port in Mexico (US$185 million by Hutchison Port Holdings), and a new logistics park in China (US$1.5 billion by GSL Holdings).

Postal Services International Growth

Employees
Company	1990	2003
Deutsche Post (Germany)	313,177	341,572
TPG (Netherlands)	63,000	163,028
UPS (United States)	252,000	357,000
FEDEX (United States)	58,000	190,918

Growth rate
Company	1990 turnover (US$ million)	2003 turnover (US$ million)	% increase per annum
Deutsche Post	7,734	45,267	4.6
TPG	2,351	13,423	14.3
UPS	13,600	33,485	7.2
FEDEX	5,183	22,487	11.9

Source: UNCTAD, World Investment Report 2004

In the meantime, GU partner organisations have been gathering information about the situation on the ground.

Deutsche Post is not the only large postal operator to have diversified into a transnational logistics entity. These huge corporations invest more and more abroad as they try to satisfy the fast-changing demands of their existing clients, seek new ones and exploit their own ownership advantages.

One of the main consequences of the increase in foreign direct investment has been the rise in cross-border mergers and acquisitions, and this is exactly what we see in postal services, with deals being undertaken in response to, or by way of pre-empting, the actions of competitors.

In contrast to postal services, aviation hasn’t yet experienced full-scale liberalisation. Global frameworks governing flying rights emphasise national airline ownership, and many countries ban foreign financial ownership of their national airlines. This is normally for reasons of national security and in order to retain infrastructural control in an emergency. Takeovers and mergers are rare, but there is growing pressure for change. Three years ago, foreign investors owned only 17 per cent of the world’s airlines. Today this figure is closer to 25 per cent.

Airline alliances have become an increasingly important vehicle for airlines wishing to take advantage of the potential for market consolidation without merging. Figures from the World Trade Organisation for 2001 showed over 1,200 agreements – in areas such as cargo, marketing and joint ground handling – arising from such alliances.

Labour and foreign investment

The shift of foreign direct investment to transport creates ever more pressure on governments to deregulate their transport services and open them up to takeover or competition from the inter-modal transport firms.

Virtually all governments around the world are bringing in laws and regulations to facilitate the foreign investment activities of transnational companies. In 2003 alone there were 244 such changes in laws and regulations – 220 of them in favour of more liberalisation. Over the period 1991-2003, around 94 per cent of the 1,885 changes worldwide in laws governing foreign direct investment created more liberalisation, as a more favourable environment for FDI.

As a result, workers in all the transport modes can expect to continue experiencing increases in work intensity and labour flexibility requirements, coupled with reduced manning levels, pressures to reduce wage costs, attacks on union organisations and pressure to ignore or break national regulations and laws.

These are pressures which can only intensify in the coming years, creating a growing need for international solidarity among trade unions. Fortunately, the global structures that create such challenges for the labour rights movement facilitate its ability to bring far flung workers together for that purpose. The dependence of TNCs on the “just in time” delivery of parts, products and services also enhances the strategic importance of transport workers in global industry.

TNC case study shows transport is key to success

Delphi Product and Service Solutions is a transnational company producing automotive systems and components for vehicle manufacturers around the globe. It employs nearly 175,000 people worldwide, and has 208 manufacturing locations in 36 countries. As a typical transnational company it coordinates production, design, marketing and management facilities on several continents, taking advantage of a global labour market.

Delphi regards logistics/ supply-chain management as a strategic weapon in the battle for growth. The company gives the same attention to supply-chain efficiency as it does to priorities like brand strength and product innovation. Union representatives visited a Delphi factory in Vienna during the 2004 ITF summer school. The visitors were told that, other than some “central cores”, all Delphi’s manufacturing locations around the world work on the basis of just in time delivery systems to reduce the amount of money tied up in stocks.

Kemal Ulker is education coordinator for the ITF.

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