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37.                  The road transport sector is characterized by easy entry and poor economies of scale.  Combined with the development of motorway networks starting in the '30s and '50s and the increases in commercial speeds and net loads, this explains why the sector has developed so quickly and so competitively.  It also explains the low concentration:  for example, in 1985 in Sweden, 60 per cent of operators were owners driving their own vehicle.  In France, 76 per cent of enterprises had less than five employees but accounted for only 18 per cent of the market, whereas companies with less than 50 employees held two thirds of the market and, at the other extreme, the 20 largest enterprises held 19 per cent of the market.  In some countries, such as the Netherlands and the United States, the concentration is higher, especially since these countries were quicker than others to switch to integrated logistics.  At the same time, it is possible to observe an apparent movement of de-concentration with the large enterprises converting their employees into independent pseudo-entrepreneurs ("owner-operators"), advancing them some of the money they need to purchase a vehicle and benefiting, in return, from reduced social security contributions and other social charges.

38.                  Since the '30s, road transport has been subjected to tight quantitative regulation, at least in North America and in Europe.  The aim was to prevent the erosion of the modal split share of the railways by introducing a system of licences, quotas and tariffs.  For its part, the road transport profession had the benefit of a market closed to new entrants and tariffs fixed at a level that enabled the least competitive to survive.  Thus, until the two waves of deregulation in the '60s and '80s the profession had to operate within the context of various forms of mandatory road transport pricing and freight bureaux benefiting from anti-trust exemptions.  These domestic regulations were supplemented by international regulations based on bilateral agreements incorporating the same principles:  quantitative restrictions and fixed tariffs.  This economic regulation of the sector was accompanied by social regulations (driving hours, no driving on Sundays and public holidays) and a body of technical and safety legislation (axle loads, dimensions, speed). 

39.                  The quota system did not achieve all the objectives set for it by its promoters:  it did not succeed in regulating capacity or in preventing the erosion of rail transport, and it encouraged fraud and the development of transport on own account.  These systems of quantitative regulation have gradually disappeared domestically.  In the United States this has taken place within the framework of the deregulation movement (in particular, the Motor Carriers Act of 1980 reducing the rate-setting powers of the Inter-State Commerce Commission and the anti-trust immunity of the tariff bureaux and making licences more flexible) and in the European Community in the process of establishing a single road transport market (price deregulation in 1990, abolition of intra-EEC quotas, progressive liberalization of cabotage completed on 1 January 1998, definition of qualitative criteria for access to the profession, harmonization of driving hours and weights and dimensions, and a start on the harmonization of the taxation of vehicles, use of infrastructure and fuel).  In the countries of Central and Eastern Europe, liberalization was sudden and abrupt and has been succeeded by a period of re-regulation or rather regulation, since the previous State-owned fleets did not need to be regulated, all this accompanied by a collapse in the market share of rail transport and a considerable increase in that of road transport.[1]

40.                  In recent years, wherever there were domestic quantitative regulatory and mandatory pricing systems or indeed State haulage enterprises, there has been a trend towards liberalization and, where necessary, denationalization, especially at the instigation of the World Bank.[2]  This has affected countries as different as Mexico[3], Papua New Guinea[4] and the sub-Saharan African States.[5]

41.                  The effect of this domestic liberalization has been a fall in prices, the creation of new enterprises but also bankruptcies, an acceleration of concentration and specialization, the establishment of networks, a decline in the profitability of the sector, an adaptation of services to market demand, job creation and a relative decline in wages.  The impact on safety and working conditions has been the subject of doctrinal controversy in the specialized literature.  On the other hand, there is consensus among the economists that liberalization has been successful in taking into account the short-term objectives of transport policy (lower prices, diversification of supply) but less so at internalising the medium-term objectives:  reduced congestion of the road infrastructure, pollution control, energy conservation.

42.                  In terms of trade and modes of supply this internal liberalization process is of capital importance.  Road transport is essentially short-haul (for example, in the European Community 66 per cent of loads - measured in tonnes - are delivered within a radius of less than 50 kilometres), and thus most traffic, particularly in large countries, is confined within the boundaries of the State.  Quantitatively, therefore, mode 3 is by far the most important and, consequently, will doubtless be one of the main bones of contention in future negotiations.  It should be noted that the issue of the land?leg of multi-modal transport and maritime also relates essentially to mode 3.

43.                  As regards cross-border supply, mode 1, the international regulations have also begun to be liberalized mainly, in view of the "intra-continental" nature of this mode of transport, through regional agreements.  Thus, outside the single road transport market of the European Community, the European Conference of Transport Ministers (ECTM), an organization linked to the OECD but which has for many years included the countries of Central and Eastern Europe, administers a multilateral licence quota[6], which even includes "green" and "greener and safe" categories, and as a first step towards complete multilateralization has undertaken to standardize the bilateral agreements on a recommended model.[7] Moreover, road transport is included in NAFTA where it is the subject only of limited reservations concerning mainly cabotage traffic.  Finally, several regional agreements in Central America and South America concern road transport and have been the subject of MFN exemptions.

44.                  Apart from the commitments and MFN exemptions analyzed below, there are no synthetic and easily accessible data on the international regulatory regime for road transport in Asia and in Africa.  The industry's overall perception of the barriers (as described by the International Road Transport Union) is that "the most acute obstacles facing international road transport can be found on the European continent, extending to the Middle East and North Africa.  This is due to its high-density population, increasing trade and the number of borders in such a concentrated area".  Consequently, everything should be done to "ensure that trade and tourism do not face the same barriers in other regions as they develop, in particular, Asia, Africa and South America, due to impediments to road transport".

45.                  The barriers to cross-border trade as perceived by the industry and as described, for example, in the Final Resolution of the XXVIth Congress of the International Road Transport Union, held at Marrakesh on 20 March 1998, are not or only marginally of the type covered by Articles XVI and XVII of the GATS.

46.              The first of these barriers, according to the industry, is the blocking of roads and motorways as a result of political and sectorial demonstrations.  The industry considers that measures should be taken in respect of governments which fail to maintain free circulation and even calls for an independent centralized compensation tribunal to administer claims for losses due to road blockades, with internationally harmonized rules covering the eligibility of claims, the standard of proof required for claims to be accepted and minimum rates of compensation.  An attempt to introduce European regulations along these lines recently failed because States were opposed.  In WTO terms, this problem is similar to that of non-violation, but there is no precedent for basing non-violation on failure to act. 

47.              The second barrier identified by the industry concerns traffic bans at weekends and on public holidays.  The IRU has expressed the wish that, where driving restrictions currently exist, they should be reduced to the period from 7 a.m. to 10 p.m. on Sundays and public holidays only.  It also wants a harmonized regulatory framework to exempt vehicles involved in international transport from these restrictions.  Finally, it again requests the creation of a supra-national system of arbitration on driving restrictions, taking into account the demands of road safety, congestion and the environment.  This point was dealt with in the draft sectorial annexes discussed during the Uruguay Round (see paragraph 2 above).

48.              The third barrier mentioned by the IRU concerns border-crossing difficulties.  In this connection, the IRU invites governments to recognize the costs and dislocation of international trade caused by inefficient and uncoordinated border-crossing procedures, asks all the States concerned to accede to the international agreements and UN conventions governing international road transport and apply them in an efficient and harmonized manner[8], and also recommends the development of cooperation between national control services on each side of the border and the introduction of "one-stop" technology, improved training of border personnel and improved quality and capacity of border infrastructure, with international financing institutions and private investors being invited to finance them.  These border-crossing problems seem to be universal, as evidenced, for example, by a recent Southern African Development Community document [9]which estimates that these delays cost its members 48 million dollars every year.

49.              The fourth barrier identified by the industry concerns the issuing of visas for professional drivers.  In this connection, the IRU calls for the introduction of a driver identification document similar to the "seaman's passport" which would exempt drivers from having to obtain a visa.  In the event of it not being possible to abolish visas, the industry proposes the creation of a multilateral visa system, the acknowledgement of the role of national road transport associations in acting as intermediaries to obtain visas for their members, the development of multi-entry visas, the simplification of the procedures, and the reduction of the time needed to obtain a visa, the number of documents required and the prices of visas. 

50.              The cost of these barriers has been studied and estimated.[10] Thus, it would appear that border delays account for almost 6 per cent of transport time in some countries of Central and Eastern Europe.  Similarly, French road transport companies estimate that 12 per cent of transport time is lost due to road blockades.  Again according to these studies, total transport time losses are higher in Central and Eastern Europe (between 17 and 22 per cent) than in Western Europe (between 7 and 16 per cent).  In terms of annual costs, these barriers would appear to account for between 1 and 7 per cent of total transport costs in Western Europe and between 8 and 29 per cent of total transport costs in Central and Eastern Europe.  Finally, in terms of GDP, the losses amount to between 0.1 and 0.3 per cent in Western Europe and between 1.3 and 2.6 per cent in Central and Eastern Europe. 

51.              The industry also considers that, a variety of measures such as total or partial bans on transit, quantitative restrictions on road transport which distort intermodal competition, bureaucracy which prevents forwarders from freely choosing their mode of transport, quantitative restrictions on road transit in the form of authorization quotas or limitations on vehicle weights and dimensions below the levels usually accepted and excessive transit charges all impair the freedom of transit recognized by Article V of the GATT and the principle defined in Article V.4, according to which "all charges and regulations imposed by contracting parties on traffic in transit to or from the territories of other contracting parties shall be reasonable, having regard to the conditions of the traffic".  However, it should be noted that Article V has never been invoked in dispute proceedings (see paragraph 7).

52.              Finally, the industry considers that the inadequate harmonization of fiscal charges (excise duties on fuel, road use charges and tolls) and of technical regulations (specifying weights and dimensions and making it necessary to underload goods vehicles in order to comply with the legislation of the transit country) constitutes a serious barrier, as does the very uneven application of social legislation concerning driving and rest times (number of controls, penalties).  In this connection, the literature also mentions the existence in Europe of optimization strategies and a trend to divert traffic to those countries whose social legislation is less strict.  These comments by the industry mostly relate to the European Community but it seems that they could also be extended to other geographical areas.

53.              Finally, as regards mode 2, there do not appear to be any serious restrictions.

54.              The relatively low wage level and the relatively unsophisticated technology have meant that there is also little commercial interest in the development of mode 4 trade, which accordingly seems marginal or even non-existent. 

[1] For further details of these deregulation processes, see, in particular:  OECD "Competition Policy and Deregulation of Road Transport ", 1990, and ECMT "Economic Regulation Reforms in the Transport Sector", 1987.

[2] See "Sustainable Transport Priorities for Policy Sector Reform", World Bank, 1995.

[3] See "Privatization and Deregulation in Mexico", Operation and Evaluation Department, Précis No. 97, November 1995.

[4] See Ian C. Heggie "Designing Major Policy Reform, Lessons from the Transport Sector", World Bank discussion paper No. 115, 1991.

[5] See Jose Carbajo, "Regulatory Reform in Transport, Some Recent Experiences", World Bank, 1993.

[6] See document CEMT/CM(98)7/final.

[7] See documents CEMT/CM(97)21 and CM(97)21/Add.1.

[8] The list of United Nations conventions, drawn up by the IRU is as follows:  European Agreement on main international traffic arteries (AGR) of 15 November 1975;  Convention on road traffic of 8 November 1968;  European Agreement supplementing the Convention on road signs and signals (1968);  Agreement on minimum requirements for the issue and validity of driving permits (APC) of April 1975;  Agreement concerning the adoption of uniform conditions of approval and reciprocal recognition of approval for motor vehicle equipment and parts of 20 March 1958;  European Agreement concerning the work of crews of vehicles engaged in international road transport (AETR) of 1 July 1970;  Convention on the contract for the international carriage of goods by road (CMR) of 19 May 1956;  Customs Convention on the international transport of goods under cover of TIR carnets (TIR Convention) of 14 November 1975;  International Convention on the harmonization of frontier controls of goods of 21 October 1982;  European Agreement concerning the international carriage of dangerous goods by road (ADR) of 30 September 1957;  and Agreement on the international carriage of perishable foodstuffs and on the special equipment to be used for such carriage (ATP) of 1 September 1970.  To these should be added, at the regional level, the Final Act of the Conference on Security and Cooperation in Europe (Helsinki, 1975), the Consolidated resolution of the European Conference of Transport Ministers (ECTM) of 1994 recognizing the principle of reciprocity in bilateral road transport operations, and the Declaration of Helsinki of 1997 adopted by the European Conference of Transport Ministers (ECTM) providing for the principle of non-discrimination as regards regulatory measures and confirming the duty of carriers to make an appropriate contribution to infrastructure investment and maintenance costs

[9] SADC "Transport and Communications", Maputo Conference, 29-30 January 1998

[10] In particular, "Barriers to Road Transport", the Hague Consulting Group, 1998.

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