WORLD TRADE

 ORGANIZATION

RESTRICTED

S/C/W/60

28 October 1998

(98-4221) 

LAND TRANSPORT SERVICES

 

PART I - GENERALITIES AND ROAD TRANSPORT

 

Background Note by the Secretariat

 

 

I.                   introduction

1.                  This note has been prepared at the request of the Council for Trade in Services.  It provides background information on land transport services for discussion in the information exchange programme of the Council. It contains basic and general information on trade in these services and should not be considered exhaustive.

2.                  During the Uruguay Round negotiations a special Working Group was set up for transport services.  In the course of its work, this Group examined, in particular, a note by the Secretariat MTN.GNS/W/60 dated 4 July 1989 on "Trade in Transport Services", of which paragraphs 95 to 106 and Tables 11 to 13 are devoted to land transport.  Notes on the Group's three meetings concerned with land transport are reproduced in documents MTN.GNS/TRANS/1 of 30 July 1990 and MTN.GNS/TRANS/5 of 30 November 1990.  Two drafts sectoral annexes on land transport submitted by Members (MTN.GNS/TRANS/W/2 of 20 September 1990 and MTN.GNS/TRANS/W/5 of 17 October 1990) are also of interest.

3.                  It was agreed at the outset of the exchange of information programme that the land transport paper would cover rail transport services (Section 11.E in document MTN.GNS/W/120: passenger transportation, freight transportation, pushing and towing services, maintenance and repair of rail transport equipment, supporting services for rail transport services), road transport services (Section 11F:  passenger transportation, freight transportation, rental of commercial vehicles with operator, maintenance and repair of road equipment, supporting services for road transport services) and pipeline transport (Section 11G:  transportation of fuels , transportation of other goods).

4.                  For convenience, this study has been divided into two parts.  The present note deals first with matters which concern all forms of land transport and then with road transport in particular.  A second note will examine rail transport in greater detail.  As far as pipeline transport is concerned, it has already been dealt with in the document on energy services (S/C/W/52).

5.                  The land transport sector covers a wide range of activities which often have little in common.  Thus, some types of transport are highly capital-intensive (rail transport, pipelines), whereas others require relatively little investment (taxis, trucks, even coaches).  Some employ large numbers of people (rail transport, for example, where a single company may employ as many as several hundred thousand people, taxis, HGVs), whereas in other cases labour costs are of only marginal importance (pipelines).  Moreover, some of these activities take place within a regulatory context characterized by planning considerations and the need to provide a public or universal service (urban public transport, passenger rail transport), whereas others are clearly treated as purely market activities (pipelines, freight transport by road and rail).  The degree of concentration is also extremely variable.  Some activities are in the hands of monopolies or oligopolies (pipelines, rail transport), while others may be carried on by companies of various sizes or even by individuals (taxis, urban and suburban road passenger transport, road haulage).  In view of this diversity the economic and regulatory characteristics can only be described subsector by subsector.

6.                  Nevertheless, these activities have certain features in common.  Thus, like telecommunications or energy, transport provides a "horizontal" service which benefits the economy as a whole, including the production of both goods and services, and if it is paralysed, then it is the economy as a whole that suffers.  It is also a "downstream" secondary activity whose cycles follow and amplify those of the general economy, i.e. an increase in GDP results in a more than proportional increase in the demand for transport.  Furthermore, these are activities which to some extent compete with each other and with other modes of transport.  Thus, taxis, urban buses and subways compete for urban passengers;  rail, road, inland waterways, cargo ships and pipelines compete for freight traffic;  and trains, aircraft, coaches and even taxis compete for the interurban passenger business.  This intermodal competition and the steady haemorrhage of traffic from rail to road which began in the thirties are largely responsible for the regulatory regime governing land transport, the "foreign competition" element being marginal and a consideration only in the road freight transport sector.

7.                  Finally, the various types of land freight transport also have in common the characteristic of being subject to the GATT rules and having already given rise to an initial body of jurisprudence.  Article III.1 of the GATT stipulates that "rules, regulations and requirements affecting … the internal transportation of products … should not be applied … so as to afford protection to domestic production".  Article III.4 establishes a national treatment principle in this respect, specifying that "[these] provisions shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the products".  These provisions have been interpreted in the context of two panel reports.[1]  Article V of the GATT also establishes detailed and rigorous rules concerning transit.  Although it has sometimes been invoked during consultations, in particular in connection with pipelines, it has never been the subject of a detailed interpretation by a panel.[2]  Finally, land transport, and in particular road freight transport, lies at the heart of the trade facilitation work currently being undertaken by the WTO under the auspices of the Council for Trade in Goods, as evidenced, for example, by document G/C/W/113 of 20 April 1998 "Check-list of Issues Raised During the WTO Trade Facilitation Symposium, Note by the Secretariat".

II.                overview of the economic, trade and regulatory characteristics of the road transport sector

8.                  Altogether, road transport represents between 2 and 6 per cent of Members' Gross Domestic Product (GDP) and employment, depending on their geography, the structure of their transport network and their level of development.  The figures vary considerably even between neighbouring countries with a comparable level of development:  thus, within the European Community road transport represents 5.7 per cent of Austria's GDP and 5.5 per cent of employment, whereas in France the corresponding figures are respectively 1.1 per cent of GDP and 1.7 per cent of employment (Source:  International Road Transport Union - 1990 figures).

9.                  Because of the downstream nature of road transport activity, the steadily increasing complexity of production methods (the increasing numbers of plants involved in the manufacture of a single product) and the generalization of just-in-time production, road transport has an impact on GDP and employment which far exceeds these figures.  Thus, in the United Kingdom, an econometric study showed that an increase of £1 on road transport costs led to a reduction of £1.66p in GDP.[3]

10.              It is not possible to give a complete geographical breakdown of these figures, even in terms of GDP, since in their GDP statistics many countries, particularly developing countries, do not distinguish between modes of transport or, within the land mode, between road transport, rail transport and pipeline transport.  In any event, aggregated at this level, the figures are of only relative significance.  In fact, road transport covers three large groups, each with its own economic and regulatory logic:  passenger transport (urban and interurban) and freight transport.