Organization / RESTRICTED
28 October 1998
Council for Trade in Services
LAND TRANSPORT SERVICES
PART I - GENERALITIES AND ROAD TRANSPORT
Background Note by the Secretariat
- This note has been prepared at the request of the Council for Trade in Services. It provides background information on land transport services for discussion in the information exchange programme of the Council. It contains basic and general information on trade in these services and should not be considered exhaustive.
- During the Uruguay Round negotiations a special Working Group was set up for transport services. In the course of its work, this Group examined, in particular, a note by the Secretariat MTN.GNS/W/60 dated 4 July 1989 on "Trade in Transport Services", of which paragraphs 95 to 106 and Tables 11 to 13 are devoted to land transport. Notes on the Group's three meetings concerned with land transport are reproduced in documents MTN.GNS/TRANS/1 of 30 July 1990 and MTN.GNS/TRANS/5 of 30 November 1990. Two drafts sectoral annexes on land transport submitted by Members (MTN.GNS/TRANS/W/2 of 20 September 1990 and MTN.GNS/TRANS/W/5 of 17 October 1990) are also of interest.
- It was agreed at the outset of the exchange of information programme that the land transport paper would cover rail transport services (Section 11.E in document MTN.GNS/W/120: passenger transportation, freight transportation, pushing and towing services, maintenance and repair of rail transport equipment, supporting services for rail transport services), road transport services (Section 11F: passenger transportation, freight transportation, rental of commercial vehicles with operator, maintenance and repair of road equipment, supporting services for road transport services) and pipeline transport (Section 11G: transportation of fuels , transportation of other goods).
- For convenience, this study has been divided into two parts. The present note deals first with matters which concern all forms of land transport and then with road transport in particular. A second note will examine rail transport in greater detail. As far as pipeline transport is concerned, it has already been dealt with in the document on energy services (S/C/W/52).
- The land transport sector covers a wide range of activities which often have little in common. Thus, some types of transport are highly capital-intensive (rail transport, pipelines), whereas others require relatively little investment (taxis, trucks, even coaches). Some employ large numbers of people (rail transport, for example, where a single company may employ as many as several hundred thousand people, taxis, HGVs), whereas in other cases labour costs are of only marginal importance (pipelines). Moreover, some of these activities take place within a regulatory context characterized by planning considerations and the need to provide a public or universal service (urban public transport, passenger rail transport), whereas others are clearly treated as purely market activities (pipelines, freight transport by road and rail). The degree of concentration is also extremely variable. Some activities are in the hands of monopolies or oligopolies (pipelines, rail transport), while others may be carried on by companies of various sizes or even by individuals (taxis, urban and suburban road passenger transport, road haulage). In view of this diversity the economic and regulatory characteristics can only be described subsector by subsector.
- Nevertheless, these activities have certain features in common. Thus, like telecommunications or energy, transport provides a "horizontal" service which benefits the economy as a whole, including the production of both goods and services, and if it is paralysed, then it is the economy as a whole that suffers. It is also a "downstream" secondary activity whose cycles follow and amplify those of the general economy, i.e. an increase in GDP results in a more than proportional increase in the demand for transport. Furthermore, these are activities which to some extent compete with each other and with other modes of transport. Thus, taxis, urban buses and subways compete for urban passengers; rail, road, inland waterways, cargo ships and pipelines compete for freight traffic; and trains, aircraft, coaches and even taxis compete for the interurban passenger business. This intermodal competition and the steady haemorrhage of traffic from rail to road which began in the thirties are largely responsible for the regulatory regime governing land transport, the "foreign competition" element being marginal and a consideration only in the road freight transport sector.
- Finally, the various types of land freight transport also have in common the characteristic of being subject to the GATT rules and having already given rise to an initial body of jurisprudence. Article III.1 of the GATT stipulates that "rules, regulations and requirements affecting … the internal transportation of products … should not be applied … so as to afford protection to domestic production". Article III.4 establishes a national treatment principle in this respect, specifying that "[these] provisions shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the products". These provisions have been interpreted in the context of two panel reports. Article V of the GATT also establishes detailed and rigorous rules concerning transit. Although it has sometimes been invoked during consultations, in particular in connection with pipelines, it has never been the subject of a detailed interpretation by a panel. Finally, land transport, and in particular road freight transport, lies at the heart of the trade facilitation work currently being undertaken by the WTO under the auspices of the Council for Trade in Goods, as evidenced, for example, by document G/C/W/113 of 20 April 1998 "Check-list of Issues Raised During the WTO Trade Facilitation Symposium, Note by the Secretariat".
II. overview of the economic, trade and regulatory characteristics of the road transport sector
- Altogether, road transport represents between 2 and 6 per cent of Members' Gross Domestic Product (GDP) and employment, depending on their geography, the structure of their transport network and their level of development. The figures vary considerably even between neighbouring countries with a comparable level of development: thus, within the European Community road transport represents 5.7 per cent of Austria's GDP and 5.5 per cent of employment, whereas in France the corresponding figures are respectively 1.1 per cent of GDP and 1.7 per cent of employment (Source: International Road Transport Union - 1990 figures).
- Because of the downstream nature of road transport activity, the steadily increasing complexity of production methods (the increasing numbers of plants involved in the manufacture of a single product) and the generalization of just-in-time production, road transport has an impact on GDP and employment which far exceeds these figures. Thus, in the United Kingdom, an econometric study showed that an increase of £1 on road transport costs led to a reduction of £1.66p in GDP.
- It is not possible to give a complete geographical breakdown of these figures, even in terms of GDP, since in their GDP statistics many countries, particularly developing countries, do not distinguish between modes of transport or, within the land mode, between road transport, rail transport and pipeline transport. In any event, aggregated at this level, the figures are of only relative significance. In fact, road transport covers three large groups, each with its own economic and regulatory logic: passenger transport (urban and interurban) and freight transport.
- The principal means of passenger transport by road is still the car with 53 per cent of the 25,000 billion passenger/kilometres of motorized journeys completed throughout the world in 1995. However, to a very large extent, the GATS does not apply to this type of transport which mainly involves individuals travelling on their own account in their own vehicle. Only taxis are covered by the GATS, and there are no world statistics that would make it possible to isolate their share which, however, must be very small.
- The rest of passenger transport at world level is distributed as follows: 4 per cent for two-wheel traffic and the like (here again, mainly on a private basis, with the marginal exception of vehicles such as rickshaws), 24 per cent for buses and coaches, 8 per cent for the railways (already dealt with), 0.8 per cent for trams and subways (already dealt with as far as the latter is concerned), 10 per cent for air transport, and 0.4 per cent for water transport. Measured in passenger/kilometres, 60 per cent of motorized transport takes place in the developed countries (including 20 per cent in the European Union), since the number of kilometres travelled increases with the level of development. The modal distribution of motorized transport also varies considerably with the level of development: thus, in the developed countries the share taken by cars is approximately 80 per cent.
- Altogether, then, road passenger transport represents about 25 to 30 per cent of world passenger transport consisting of the 24 per cent accounted for by buses and coaches, the tramways' share of the tram and subway item, and the indeterminate but small share corresponding to individual vehicle and two-wheel transport.
- The geographical breakdown of the millions of passenger/kilometres travelled in buses and coaches (urban and interurban) gives some idea of the relative importance of markets: out of a total of 6,000 billion passenger/kilometres travelled, 460 (7.6 per cent) were travelled in China, 360 (6 per cent) in the European Community, 230 (3.8 per cent) in the United States, 120 (2 per cent) in the countries of Central and Eastern Europe, 100 (1.6 per cent) in Japan, and 4,730 (79 per cent) in the rest of the world.
- Again, these aggregates are of only relative significance since the urban bus regulatory and economic regime, characterized by public service concerns, often by public or subsidized operation and by competition from taxis, trams and subways, is generally very different from that of the interurban coaches, which are usually privately operated and generally profitable, compete with the railways and airlines, and include an international dimension.
i) Urban passenger transport
- Some indication of the potential market is given by the steady long-term increase in the world's urban population, in both absolute and relative terms. It was 735 million in 1950 (29.5 per cent of the total), 2 billion in 1985 (39.9 per cent of the total), and it is projected that it will have risen to 2.95 billion (48.2 per cent of the total) by the year 2000. In 1989, there were 270 cities or conurbations with more than 1 million inhabitants worldwide, including 11 with more than 10 million inhabitants, eight of them in developing countries. In addition, it was forecast that by the year 2000 there would be 16 cities with more than 12 million inhabitants in the developing countries. In 1985, 60 per cent of the urban population was living in developing countries and 40 per cent in developed countries, exactly the opposite of the 1950 distribution. Since then this trend has continued to strengthen. The demand for urban transport has kept pace with this growth and even outstripped it, since distances and particularly journey times increase considerably as cities develop.
- The distribution of the demand among the various means of transport: private car, taxi, bus, tram and subway is extremely variable and depends on such factors as the level of development (as far as private cars are concerned), congestion, the existence or non-existence of a subway network (only 93 cities have subways) or a tramway system (350 cities), the number of buses and their condition, the existence or non-existence of dedicated lanes, the fares charged, the feeder networks, etc. The following table, taken from a World Bank study, gives an indication of this breakdown for a number of representative cities:
City / Breakdown by Mode of Motorized Transport
Car / Taxi / Bus / Paratransit / Tram/
subway / Other
Abidjan / 33 / 12 / 50 / .. / - / 5
Accra / - / - / - / - / - / -
Amman / 44 / 11 / 19 / 26 / 0 / 0
Ankara / 23 / 10 / 53 / 9 / 2 / 2
Bangkok / 25 / 10 / 55 / 10 / - / -
Bogota / 14 / 1 / 80 / 0 / 0 / 5
Bombay / 8 / 10 / 34 / 13 / 34 / -
Buenos Aires / - / - / 45 / 27 / - / 28
Cairo / 15 / 15 / 70 / - / - / -
Calcutta / - / 2 / 67 / 14 / 10 / 4
Harare / - / - / - / - / - / -
Hong-Kong / 8 / 13 / 60 / - / 19 / -
Jakarta / 27 / - / 51 / - / 1 / 21
Karachi / 3 / 7 / 52 / 18 / 6 / 13
Kuala Lumpur / 37 / - / 33 / 17 / 0 / 13
Lagos / - / - / - / - / - / -
Lima / - / - / 45 / 27 / - / 28
Manilla / 16 / 2 / 16 / 59 / - / 8
Medellin / 6 / 4 / 85 / 5 / 0 / -
Mexico City / 19 / - / 51 / 13 / 15 / 2
Nairobi / 45 / - / 31 / 15 / 0 / 9
Rio de Janeiro / 24 / 2 / 62 / 2 / 11 / -
San José / 21 / 2 / 75 / 0 / 0 / 2
Sao Paulo / 32 / 3 / 54 / - / 10 / 1
Seoul / 9 / 15 / 68 / 0 / 7 / 0
Singapore / 47 / - / - / - / - / 53
Tunis / 24 / 4 / 61 / - / 10 / -
London / 61 / 1 / 23 / 0 / 12 / 2
New York / 12 / 2 / 14 / 0 / 72 / 0
Paris / 56 / - / 8 / 0 / 21 / 15
Stockholm / 48 / - / 53 / - / - / -
Stuttgart / 44 / 6 / 33 / 6 / - / 11
Tokyo / 32 / - / 6 / 0 / 61 / 0
Wellington / 56 / - / 26 / - / 5 / 10
Source:Alan Armstrong Wright, "Urban Transit System: Guidelines for Examining Options", World Bank technical paper, No. 52, May 1986.
- For what this average is worth, worldwide transport capacity can be broken down as follows:
Type of transport / Vehicle fleet / Capacity
(in thousands) / Share of total capacity
Buses / 850,000 / 68,000 / 66.7%
Trolleybuses / 20,000 / 1,600 / 1.6%
Shared taxis / 350,000 / 5,250 / 5.1%
Taxis / 1,000,000 / 5,000 / 4.9%
Suburban trains / 100,000 / 10,000 / 9.8%
Subways / 40,000 / 6,000 / 5.9%
Trams / 45,000 / 5,850 / 5.8%
Total / 2,405,000 / 101,700 / 100%
- This table lists two types of taxis: individual taxis which constitute a luxury mode of urban transport by reason of their flexibility and comfort, and shared taxis, very common in developing countries, which carry between four and ten people on predetermined routes at fares competitive with or even cheaper than bus fares and help to make good the shortcomings of an overloaded bus system. This applies to the "jeepneys" in the Philippines, the "sergentos" in Ethiopia, the "mammy wagons" in Ghana, the "dolums" in Turkey, etc. These shared taxis may account for up to 30 per cent of the traffic or even more (80 per cent in Addis Ababa). These differences apart, the regulatory regime for taxis is fairly similar all over the world with a licensing and quota system, which sometimes gives rise to a grey market for licences, and some control over fares.
- With respect to buses the following table, taken from the same World Bank study, gives a geographically diversified overview of the forms of management and the general economics of the sector.
Bus Services: City Comparisons, 1983a,bCity / Ownership / Number of busesc / Availability % / Km. per operating bus per day / Staff per operating bus / Passengers per operating bus per day / Annual operating cost
(US$ million)d / Total cost per passenger/kme / Annual operating revenue (US$ million)f / Typical fare per 5 km. (US$) / Operating revenue/total costs ratioe
Abidjan / Mixed / 1,044 / 85 / 183 / 7.1 / 829 / 91.29 / 0.07 / 69.40 / 0.26 / 0.67
Accra / Public / 44 / 24 / 292 / 28.1 / 2,092 / 1.03 / 0.03 / 0.63 / 0.13 / 0.51
Accra / Private / 665 / 73 / 223 / 5.5 / 676 / 10.43 / 0.04 / 17.72 / 0.18 / 1.37
Addis Ababa / Public / 164 / 58 / 205 / 13.1 / 2,467 / 7.96 / 0.02 / 6.59 / 0.07 / 0.67
Ankara / Public / 899 / 67 / 210 / 5.8 / 1,273 / 25.62 / 0.01 / 15.31 / 0.14 / 0.48
Bombay / Public / 2,325 / 92 / 216 / 14.0 / 2,093 / 81.95 / 0.01 / 72.97 / 0.05 / 0.77
Cairo / Public / 2,454 / 69 / 246 / 14.6 / 2,417 / 60.41 / 0.01 / 36.19 / 0.07 / 0.50
Calcutta / Public / 981 / 64 / 133 / 18.0 / 1,641 / 23.05 / 0.01 / 13.09 / 0.04 / 0.45
Dakar / Mixed / 439 / 70 / 287 / 9.6 / 1,193 / 22.97 / 0.04 / 20.41 / 0.26 / 0.76
Guatemala / Private / 1,600 / 95 / 304 / .. / 1,037 / 29.00 / 0.02 / 54.60 / 0.10 / 1.55
Hong Kong / Private / 2,392 / 85 / 243 / 4.7 / 1,610 / 117.96 / 0.03 / 136.10 / 0.13 / 1.00
Karachi / Public / 646 / 65 / 267 / 9.9 / 1,135 / 11.73 / 0.01 / 6.73 / 0.04 / 0.43
Kuala Lumpur / Private / 358 / 80 / 250 / 4.3 / 753 / 12.03 / 0.02 / 12.38 / 0.17 / 1.00
Mombassa / Mixed / 89 / 90 / 315 / 7.5 / 1,640 / 3.93 / 0.03 / 4.48 / 0.11 / 0.96
Nairobi / Mixed / 295 / 84 / 330 / 9.7 / 1,762 / 16.31 / 0.03 / 17.98 / 0.15 / 1.08
Porto Alegre / Private / 1,492 / 95 / 218 / 4.3 / 669 / 46.68 / 0.05 / 65.35 / 0.23 / 1.17
San José / Mixed / 621 / 80 / 128 / .. / 2,013 / 19.39 / 0.02 / 24.24 / 0.07 / 1.04
San Paulo / Public / 2,631 / 83 / 284 / 7.4 / 795 / 159.51 / 0.03 / 75.64 / 0.26 / 0.41
San Paulo / Private / 6,590 / 83 / 280 / 5.1 / 765 / .. / .. / .. / 0.26 / 1.00g
Seoul / Private / 8,310 / 95 / 340 / 3.9 / 1,326 / 398.18 / 0.03 / 443.43 / 0.16 / 1.04
Singapore / Private / 2,859 / 91 / 269 / 3.9 / 374 / 110.23 / 0.10 / 147.75 / 0.24 / 1.32
Athens / Public / 1,768 / 87 / 245 / 6.6 / 910 / 100.36 / 0.05 / 37.39 / 0.23 / 0.34
Berlin (west) / Public / 1,505 / 85 / 199 / 5.8 / 992 / 234.99 / 0.16 / 130.08 / 0.78 / 0.51
Chicago / Public / 2,275 / 93 / 125 / 3.1 / 750 / 339.28 / 0.08 / 194.54 / 0.90 / 0.52
London / Public / 4,901 / 88 / 202 / 6.8 / 842 / 605.90 / 0.17 / 319.21 / 0.61 / 0.48
Paris / Public / 4,005 / 87 / 142 / 4.5 / 419 / 512.00 / 0.25 / 191.45 / 0.30 / 0.37
Sendai / Public / 777 / 92 / 128 / 2.5 / 495 / 57.76 / 0.11 / 59.44 / 0.58 / 0.96
a Two dots (..) indicate that data are not available or are not separately reported.
b Covering principal corporation or group of private operators in each city and not including paratransit.
c Number of buses belonging to the principal corporation or group of private operators covered by the survey.
d Excluding depreciation and interest charges.
e Including operating costs, depreciation and interest charges. For comparative purposes, a uniform method of calculating depreciation and interest charges has been used to obtain total costs. Passenger/km. are imputed using an average trip length of 5 km.
f Including fare box and advertising revenue, but excluding subsidies.
g Cost and revenue data for San Paolo private operators are not available; however, private operators receive no public subsidy and are known to at least break even.
Source: Alan Armstrong Wright, "Urban Transit System: Guidelines for Examining Options", World Bank technical paper; No. 52, May 1986.
- It will be noted that the services are often operated on a mixed or public basis, particularly in the developed countries (the entry for London needs updating, however, since urban transport was partly deregulated in 1994 with the introduction of a system of concessions granted to private or public companies requiring less in the way of subsidies). There is a very marked disparity in the rates of utilization of the fleet, productivity, cost per passenger and fares. Operation seems to be profitable in only eight cases out of 27, seven of these eight operations being private (all profitable in the sample) and one mixed. However, information is lacking with regard to the size of the networks and whether there are any public service obligations or, on the contrary, the networks are free to "cream off" the best routes. It also emerges that this activity is particularly unprofitable in the developed countries. Local bus services, which peripherally may be extra-urban or even interurban (and thus fall in another heading of the CPC), must meet similar economic and regulatory requirements.
- As in the railway sector, the system of concessions and delegated management is tending to spread both in the developed countries, keen to limit their subsidies and hence rely on the lowest bidder, and in the developing countries where it is being encouraged by the World Bank. Moreover, this semi-private management system is not incompatible with the frequent unprofitability of the activity to the extent that the concession contract provides for balancing subsidies. These concessions are more a matter of government procurement than market access.
- Trams and, to a lesser extent, trolley-buses are making a comeback.