The International Air Cargo Association

Air cargo liberalization offers nations 'new economy highways in the sky', says TIACA

Removing a bilateral system that is ‘stuck in the past’ and creating a liberalized air cargo industry will create ‘new economy highways in the sky’ and provide countries with quick and efficient global supply chains and market accessibility, The International Air Cargo Association (TIACA) has told the Asia-Pacific Economic Co-operation (APEC) USA 2011 conference in San Francisco. 

Addressing the theme of ‘Air Cargo, Trade and Economic Growth’, TIACA’s Secretary General, Daniel Fernandez, highlighted how the partnership between air cargo and manufacturing fosters economic development. This is because, he said, airfreight and integrated air express are critical to time-based competition and allow ‘large pools of labor to connect with the needs of wealthy Western European, North American and Northeast Asian markets.’  

He added: “In addition to the apparel and electronics industries, for example, air cargo has allowed otherwise remote agricultural regions to access world markets. As a result, flowers, exotic fruits and vegetables are becoming substantial export earners. Prosperous local businesses have developed on the strength of this capability such as  produce grown in Kenya that is picked and packed to the specific requirements of major supermarkets in the UK and arrives at the store just hours later, straight to the shelf. Using traditional ocean transportation, exporters in most developing countries are at a considerable shipping time disadvantage compared to domestic producers. Air cargo goes a long way towards leveling the temporal playing field for developing country producers.”  

The conference also heard from officials from the U.S. Department of State, the New Zealand Government, Boeing, the World Bank, Cisco Systems, Janel Group, Medtronic, the Express Association of America, and Pacifica Skincare as well as senior APEC representatives.  

Addressing the need for more liberalization, TIACA’s Secretary General told delegates:

“We believe that countries should view air routes as highways in the sky, a competitive public good every bit as important as surface transportation infrastructure. Under a fully liberalized aviation environment, numerous new international highways in the sky are possible which would markedly improve the speed and accessibility of a nation's businesses to their global suppliers and customers. In so doing, the competitiveness of a nation's businesses will increase, more foreign direct investment will be attracted and economic development promoted. 

“Unfortunately, the transportation of air cargo is still regulated by rules established over 60 years ago in the 1944 Chicago Convention when almost all airlines were national flag carriers and the air cargo industry was still in its infancy. Change is overdue.”  

Fernandez said: “We need to get over the assumption that 20th century rules still apply in today’s global economy. Airlines are competing in the 21st century but the bilateral system is still stuck in the past. It does not offer airlines the freedom to sell their products where there is demand and to merge operations where it makes financial sense. Bilateral agreements, as important as they are, ignore the needs of the emerging fast and flexible supply chain practices.”  

The flow of airfreight is geographically unbalanced, TIACA said. “Increased governmental liberalization would allow the more efficient use of air carrier resources. We live in a world in which the components of a product might be manufactured in Malaysia, China and Mexico, then assembled in the U.S. for shipment to markets in Europe. National pride or prejudice play little part in the location or outsourcing decisions by manufacturers. Production or assembly facilities are built or relocated at short notice to those countries with the lowest costs and best access to the most efficient transportation options.  

“Most parts of the freight transportation industry can respond to such shifts without restriction. Container ships sail to any ports they choose. Freight forwarders have also grown into global entities, operating with little restriction in all parts of the world. Air transport cannot,” he added. 

Where air traffic rights have been liberalized, TIACA said it has resulted in more capacity in the market, lower rates, and increased commercial opportunities and economic development, giving examples of the U.S. domestic market, the EU’s Common Aviation Market and Dubai. 

“TIACA supports the full liberalization of the aviation industry. However, we realize that due to political and structural impediments, this may be too much to try to achieve in one fell swoop. That’s why we favor a stepped approached towards full liberalization. The first step is to separate cargo bilaterals from passenger agreements. Once cargo has a separate bilateral system, regional trading blocks can provide momentum towards implementation of multilateral agreements.  

“Under this approach, a new generic agreement for cargo flights would grant the same rights and privileges, on a reciprocal basis, to all signatories. The aim is the establishment of a multi-lateral group of countries permitting full cargo freedom rights. The economic benefits derived from cargo liberalization will provide the incentive for full liberalization of passenger services and this is a position that has been endorsed by the European Shippers’ Council, ACI, and FIATA,” Fernandez told the APEC 2011 conference.