Economic Section

Aviation And Other Transport - The Backbone Of A Modern Economy

A unique characteristic of some industries, such as in the services sector, is that they are also critical components of a country's infrastructure and their development can have important implications for the rest of the economy. The transportation services sector is such an industry. A modern transport services sector, especially in the aviation area, is a critical need for any country striving to develop a competitive economy. It does little good for a country to develop an effective export industry, for example, if the costs and convenience of moving those goods from the producer to market outweigh the competitive costs of the product itself. One reason, for example, that China's export sector has developed rapidly in recent years is that the shipping and air cargo costs of moving goods to the largest markets in the U.S., Europe and elsewhere, have been steadily reduced. This has occurred in part because increased volume of shipments, but most importantly, because China has allowed and encouraged the participation of foreign transport providers and the development of competing domestic providers. As a result, hundreds of foreign and domestic shipping companies and dozens of foreign air carriers have invested in services in, to and from the Chinese market, creating a broader web of services available and competitive pricing. Not only has China's trade economy grown rapidly as a result, China's own air and maritime carriers have grown rapidly and prospered.

Aviation is a particularly important aspect of infrastructure. Without a broad variety of passenger flights and competitive pricing for flights between Vietnam and major world markets, foreign business persons and tourists will not visit Vietnam. At present, it is difficult to fly between the U.S. and Vietnam without spending an unreasonable amount of time transiting third countries. The number of carriers one may choose from is also extremely limited. Finally, ticket prices are not competitive because they are not set by market prices. For example, it currently costs almost as much to fly between Hanoi and Hong Kong as it does from Hong Kong to the U.S. That is one reason many businesspersons and potential investors bypass Vietnam when they travel to the region to explore business opportunities. A similar situation exists with respect to tourism. Vietnam loses considerable opportunities for tourism, and revenue for hotels, tours, food, souvenir purchases and internal flights, because of the difficulties in including Vietnam as a part of a Southeast Asia itinerary.

Aviation cargo is another area in which a lack of available capacity and over-pricing by near-monopoly carriers can seriously disadvantage an economy. Many modern industries rely on air cargo to ensure their products are transported quickly to market. Computer chip makers use air cargo for light-weight, high-value products. Aquatic products require rapid shipment of perishable products. Even the textile industry uses air cargo extensively to get samples and light-weight, high-value products to customers quickly. Foreign investors will bypass countries where there is an inadequate level of service, infrequent flights, low capacity, or monopoly-driven air cargo rates. Domestic industries that must rely on air cargo to meet buyer specifications will also find that they are far less competitive internationally, even though their prices may be lower.

Because of the importance of the aviation services sector to any country's economic development, countries around the world are rapidly liberalizing this sector. The U.S. currently has dozens of bilateral "open-skies" agreements that completely liberalize aviation and bring market forces to bear to ensure competitiveness. Additional information on aviation and the transport sector is provided through the links below.

 

U.S. Goverment Aviation-Related Sites

• FAA Home Page

• U.S. Department of Transportation

Other Resources on Air Services Market Access

• Plurilateral Agreement on Trade in Civil Aircraft on the WTO Website

Articles on Air Safety and  Security

• FAA Newsroom

Aviation Safety Connection