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LAND TRANSPORT SERVICES-Part 06

  1/18/2014

                   

III.             Analysis of commitments

55.                  Following this brief description of the economic aspects and before analyzing in detail the commitments undertaken, some comments on the WTN/GMS/W/120 classification for this sector are called for.  The study of this sector highlights what appear to be a number of instances in which the classification does not reflect the true situation.  Moreover, in some cases the classification itself seems to be ambiguous. 

B.                 preliminary remarks on the relevance of the classification to commitments

56.                  Document MTN.GNS/W/120 (cf. Annex 1) distinguishes five categories, namely:  passenger transportation, freight transportation, rental of commercial vehicles with operator, maintenance and repair of road transport equipment, and supporting services for road transport services.  This structure calls for the following remarks:

57.                  The CPC is much more detailed than W/120, as it distinguishes, between ten kinds of passenger transportation, seven kinds of freight transportation, two types of maintenance and four types of supporting services. The question arises therefore whether this complexity should not also be reflected in W/120 as an excessive level of aggregation might sometimes be regarded as a deterrent to progressive liberalization.

58.                  This degree of detail seems not to be uniformly relevant for trade purposes.  For passenger transportation it seems relevant, as the economic structure, the involvement of the public authority, the subsidy regime, the licence regime, and the regulatory regime are completely different for a taxi and for a long-distance bus, for instance. Thus, some forms of transport are collective, others individual, some are based on competition, others on a monopoly with public services obligations and subsidization regime, etc. It may therefore be worthwhile considering retaining some of this complexity at the W/120 level. 

59.                  In the case of freight, the distinctions are based not on transport organization and structure but on the nature of the goods transported.  Although the analysis of commitments shows significant variations between the various kinds of goods, only one type seems to deserve special treatment or some kind of classification clarification, namely mail transport, especially in relation with postal and courier services.[1]

60.                  As far as maintenance is concerned, W/120 aggregates two CPC items whose definitions are relatively unclear.  While the title of CPC 61120 refers to "maintenance and repair of motor vehicles" in general, the definition which follows refers only to automobiles, which seem to include taxis but to exclude lorries and buses, for instance.  On the other hand, CPC 8867 "Repair services not elsewhere classified of motor vehicles, trailers and semi-trailers on a fee or contract basis" is not defined, like all the other services of division 88 "Agricultural, mining and manufacturing services".  The combination of the two items seems to cover all cases of repair and maintenance but the analysis of commitments (see paragraph 80 below) shows that some Members did not commit on both items.

61.                  Finally, Members will find a detailed assessment of the changes suggested for road transport in the CPC Rev.1 classification in document S/CSC/W/6/Add.5, dated 4 June 1997, paragraphs 6 to 11, and a summary of those changes and of their potential impact on existing commitments in document S/CSC/W/9, dated 9 October 1997, paragraphs 33 to 35.

A.     analysis of commitments

62.                  As far as road transport is concerned, as explained in paragraph 63, document W/120 identifies only five subcategories (passenger, freight, rental, maintenance and supporting services).  However, among the 40 Members that have given commitments, only 28 have done so at the high level of disaggregation indicated by W/120, while the remainder have used either CPC in greater detail or sui generis concepts or a mix between CPC, sui generis concepts and W/120.  Additionally, even among the 28 that have followed W/120, in some instances, the restrictions listed have reintroduced more detailed subcategories such as a special regime for taxis.  Therefore, in order to assess the extent of the commitments undertaken in the sector, it is necessary to follow the CPC disaggregation which distinguishes 25 types of road transportation services.  Table 2 in Annex 2 details by mode and subsector, the number and types (full, partial, none) of market access commitments undertaken by Members. 

63.              With respect to passenger transport, it appears that there are more commitments for interurban regular transportation services (25), taxi services (21), rental of passenger cars with operators (24) and rental of buses (25) than for urban and suburban transportation, whether regular (17) or special such as school transportation (17).  This seems to reveal a certain political sensitivity where urban public transport is concerned, probably linked to the extent to which it is subsidized and to the monopolies enjoyed by the concession-holders in exchange for the performance of public service obligations.  There is also a series of sectoral qualifications attached to passenger transportation:  limitation to the transport of tourists exclusively, limitation to closed-door services (as opposed to multi-stop services), limitation to certain federal states or provinces, limitation to occasional services, exclusion of passenger transportation by man- or animal-drawn vehicles and, more significantly and frequently, exclusion of cabotage.

64.              As far as modes of delivery are concerned, consumption abroad is largely liberalized with only four Members not having any commitments on this mode while all the others (between 13 and 20 Members depending on the subsector concerned) have given full commitments.  Mode 4 in passenger road transportation does not diverge from the general pattern of "unbound except as indicated in the horizontal commitments".  Mode 1, which is essential at least for non-urban road transportation, offers a more contrasted picture:  the commitments are divided between full commitments (eight to 11 Members depending on the subsector) and no commitments at all (nine to 15 Members depending on the subsector).  There are just two cases of partial commitments (economic need tests) in two subsectors.  Only one Member (two in the case of rental services of passenger cars with operators) has judged passenger transportation services in mode 1 technically infeasible.  Finally, as far as mode 3 is concerned, commitments are divided between full commitments (nine to 15 Members depending on the subsector) and partial commitments (six to 11 Members).  The restrictions scheduled are typically:  economic need tests (specially for taxis, limos and bus services), citizenship requirement, natural persons only or, to the contrary, incorporation required, establishment required, numerical quotas, exclusive licences by zones and routes, and authorization required and not extended to foreign-registered vehicles.

65.              As far as national treatment is concerned, there are very few specific limitations listed:  residency requirement, requirement of establishment in the country concerned to provide cabotage services, prior approval, obligation for entities established under mode 3 to use vehicles with national registration.

66.              Overall, the level of commitments for passenger transportation seems low:  between 12.8 and 18.9 per cent of Members depending on the subsector. However, it is even lower when the impact of MFN exemptions is taken into account. Leaving aside the "all sectors" exemptions and the general "land transport" exemptions, 34 exemptions out of 37 include passenger transportation.  Out of the 25 Members undertaking passenger transportation commitments, 12 have taken MFN exemptions granting various partners preferential treatment on rights concerning passengers/cargoes to, from, across and into their territory and on operating conditions, either on the basis of bilateral agreements, existing or future, or on the basis of reciprocity.  As in maritime transport, the cargo-sharing nature of this preferential treatment implies an exclusionary element for third parties.  This factor must be taken into account when assessing the extent of commitments in this sector.

67.              As far as freight transportation is concerned, the number of Members committed varies from 20 to 27 according to the type of goods transported.  It is noteworthy that the fewest commitments correspond to the "mail transportation" category (20 commitments, on the difficulties of classification raised by the transport of mail see also document S/C/W/39 on Postal and Courier Services, dated 12 June 1998, last paragraph of the introduction), "freight transportation by man- or animal-drawn vehicles" (21 commitments, probably due to the residual character of this category) and transportation of bulk liquids and gases (24 commitments, probably due to the sensitivity of the oil sector, where a monopoly on oil production and refining is frequently associated with a monopoly on transport).  The low level of commitments (23) in the residual category "transportation of other freight" remains to be explained.  Symmetrically, the levels of commitment in the most economically significant segments of the market (with the biggest volumes and the highest unit values and therefore the highest freight rates) are higher:  27 for frozen and refrigerated goods, 27 for containers and 26 for furniture, that is for removals.  The main sectoral qualification which also tends to limit the extent of commitments is the frequent exclusion of cabotage.

68.              As far as market access is concerned, the most liberalized mode appears to be mode 2, where full commitments have been given in four fifth's of cases (from 19 out of 23 to 22 out of 27).  Here again, the situation with respect to mode 4 is the classic "unbound except as indicated in the horizontal commitments".  Mode 1 appears much less committed than for passenger transport.  Thus in more than three quarter's of cases (from 15 out of 21 to 20 out of 27) there are no commitments at all.  In addition, two to four island Members consider this mode of delivery technically infeasible.  Only five Members (four for mail) have taken full commitments for mode 1 and there are two cases of partial commitments (commercial presence required in one case, only certain federal states committed in the other).  Mode 3 is nearly evenly split between full commitments (from 9 out of 20 to 14 out of 27) and partial commitments (from 9 out of 20 to 13 out of 27):  the restrictions listed are typically economic need test, foreign ownership restrictions, incorporation required, nationality of the board of directors, citizenship requirement, authorization required but not extended to foreign-registered vehicles, emergency safeguards on the number of services suppliers, of services operations and of services output, and limitations on the use of leased vehicles.  Only two Members undertook no commitments for this mode.

69.              As far as national treatment is concerned, there are few specific restrictions listed:  requirement of establishment in the country concerned to provide cabotage services, prior approval, cargoes confined to containerized cargoes to be exported or imported, and requirement on established entities to use vehicles with national registration.

70.              As in passenger transport, the MFN exemptions have an important bearing on the extent of the commitments undertaken.  Out of the 25 countries having given commitments on freight transportation, ten also have one or more MFN exemptions regarding cargoes. 

71.              As, in the vast majority of cases the MFN exemptions regarding road transport cover both freight and passengers, it is possible to try to draw a general typology of these MFN exemptions.  In a significant number of cases (five counting the E.U. as one) Members have felt it necessary to lodge separate exemptions for preferential fiscal treatment on VAT, vehicle tax and income tax. Some of these derogations are subject to reciprocity, others are granted only to specifically designated Members, and all are indefinite in duration.  In other instances this preferential tax treatment has been combined with cargo-sharing provisions in a single derogation, either by mentioning the preferential tax treatment specifically or by referring more generally to the operating conditions. 

72.              As far as the cargo–sharing provisions of the MFN derogations are concerned, a relatively clear pattern seems to emerge. They are mainly bilateral (19 cases), although there are cases where they are regional (five cases including the "all land transport" derogations) or both bilateral and regional (four cases).  In six cases (including the "all land transport" derogations) they are unilateral and in five of those cases based on reciprocity.  In nearly all cases they cover all countries and existing and future agreements, although sometimes accompanied by a detailed list of beneficiaries.  They are also nearly all indefinite or non-specific as far as their duration is concerned.  Geographically speaking, they can be found in developed as well as in developing countries and in Europe, America and Africa.  As far as Asia is concerned, only one Member has taken such an exemption.  This pattern shows clearly that there is an unaddressed problem as far the liberalization of road transport is concerned.  These derogations seem to have been meant by their drafters to last forever and will fall foul of the limitation to ten years, in principle on the MFN exemptions.  They also remove a significant proportion of the traffic from the application of MFN and more generally from liberalization.  Certain regional attempts have been made to liberalize the road transport sector, such as the single European transport market, the NAFTA provisions or the multilateral quota administered under the aegis of the ECMT, but no targeted thinking seems to have been devoted as yet to the multilateral liberalization of the sector. It should be kept in mind, however, that these MFN derogations only cover modes 1 and 2, while mode 3, which is essential, remains unaffected.

73.              As far as auxiliary road transport activities are concerned, rental services of commercial freight vehicles with operators have been offered by only a few (nine) Members but with nearly no restrictions.  Repair and maintenance activities are split into two subcategories CPC 6112 and 8867 which have registered 22 and 20 commitments respectively.  Clarification is certainly needed regarding the technical feasibility of these activities under mode 1.  As Members appear to be nearly evenly split on that question (ten against 12, eight against 12), a half-way solution could be to collectively agree that tele?diagnosis activity or even tele?maintenance activities by electronic means are technically feasible in contrast to the rest of the activities which require a physical presence on the same territory as the vehicle.  Consumption abroad and to a lesser extent commercial presence are largely liberalized in these sectors, mode 4 following the classic pattern of "unbound except as indicated in the horizontal section". 

74.              Finally, supporting services for road transport which cover four very different items (bus station services/highways, bridges and tunnel operation services/parking services/others) have attracted very few commitments (four cases) and with exactly the same pattern for the four services, which consists of a very liberal regime.  The existence of a common pattern of commitments might lead to the conclusion that it would be useless to disaggregate further at W/120 level.  However, considering the extremely different nature of the services involved and the economic importance and high profitability of two of them (highways, bridges and tunnel operation services, parking services) and the fact that these services are frequently associated with Build Operate Transfer operations or concessions or monopolies, their singling out with a view to attracting commitments might be worth considering.



[1] See document S/C/W/39, dated 12 June 1998, "Postal and courier services, background note by the Secretariat ", page 2.


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