'Open Skies' agreement a boost for cargo industry

Ken Torok, Hong Kong

Two of the most potentially far-reaching events in aviation liberalization in recent years have occurred in the Asia Pacific region, and we hope soon to celebrate a third one.

In 2001, the first-ever multilateral air services agreement was completed by the U.S. and its partners Brunei, Chile, New Zealand and Singapore. Samoa and Tonga have joined and Indonesia too has agreed to be part of this agreement, considering a great economic value for both countries.

On the other hand, the 2004 protocol to the US-China air services agreement signed recently in Beijing has brought a great impact on the economies of both countries and other Asian economies as well.

This new agreement afforded nearly open rights for air cargo carriers who invest in hubs. It will affect not only the US air carriers like UPS who seek the new authority, but also economic interests far beyond the borders of the two signatories.

Indeed, the new US-China Air Services Agreement will also serve these important goals. We at UPS describe the previous (1999) U.S.-China agreement as a "home run." Not surprising from our perspective, since that agreement allowed UPS to become only the fourth US airline with the rights to serve China. But in comparison, for nearly all U.S. and Chinese carriers, shippers and businesses, the new 2004 Protocol is a "grand slam."

It is a far-sighted deal that will accelerate the flow of goods into and out of China, providing substantial benefits to workers, businesses and consumers in both countries.

The APEC Transport Ministerial Meeting in Bali late last month provided ways and means of reducing impediments to trade and investment, while enhancing security and safety, including progressively liberalizing transportation services. Through the Secure Trade in APEC Region (STAR) initiative, APEC economies are building a transport and trade system in Asian region that strengthens security while facilitating the movement of people and goods.

In light of this, an amendment of the multilateral agreement on liberalization of international air transportation or MALIAT have been agreed upon by a few countries, including Indonesia which will bring benefits beyond the aviation industry to other economic sectors.

Recognizing the great advantage of open-skies policy, we must focus to sustain a safe, secure, efficient, integrated and environmentally-sound transportation system for the region to comply with the ever-growing demand for air cargo services.

Hence, the emphasis now is to creating a safe and secure supply chain management that must be fully supported by other developments in human resources, infrastructure, trading facility and favorable investments.

By this time next year, we hope to celebrate a major step towards removing the limits that impede efficient air cargo service -- the key infrastructure of the global marketplace.

As businesses continue to streamline their supply chains, the seamless and efficient movement of goods becomes ever more critical. The ability to establish true cargo hubs - with the freedom to conduct unlimited flights to, from and beyond the hub point, including seventh freedom rights - will allow UPS and other express carriers to ensure the speed, reliability, and cost-effectiveness that global business has come to demand.

In light of this important new China agreement, and the market openings by others like Thailand, Vietnam, and Indonesia, the question remains: What about the rest of Asia? Will the great increase in flight activity in China be at the expense of existing flight activity elsewhere? While some countries in the region have "open skies" agreements, other key markets maintain relatively restrictive regimes with the United States.

UPS and any global airline want the market to dictate the service we offer our customers, rather than have outmoded bilateral restrictions require us to operate at less than maximum efficiency. When airlines plan routes, we can not wait for the required air rights. And when we invest in a route, we must commit ourselves to that route. An economic opportunity today can be lost by the time market access rights become available in the future, to the detriment not only of the carriers, but their customers and the communities they do not serve.

UPS believes the future of global trade resides in what we call synchronized commerce. Synchronized commerce is about managing and coordinating the flows of goods, information and funds to better balance supply and demand cycles among trading partners.

It requires tighter connections and a high degree of trust among partners. To achieve this, the governments must step back from old-fashioned market access constraints that impede the optimization of global supply chains.

The author is President of UPS, Asia Pacific.