'Open Skies' agreement a boost for cargo industry

'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.