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“COMPETITION IN THE U.S.-CHINA ALL-CARGO MARKET” mentioning the U.S. Dept. of Transportation was published in the Extensions of Remarks section on pages E2405 on Nov. 17, 1999.
The publication is reproduced in full below:
COMPETITION IN THE U.S.-CHINA ALL-CARGO MARKET
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HON. JOHN S. TANNER
of tennessee
in the house of representatives
Tuesday, November 16, 1999
Mr. TANNER. Mr. Speaker, earlier this year, the United States and the People's Republic of China completed a new civil aviation agreement. That agreement allows for one additional air carrier from each country to serve routes between these two nations. It has recently been suggested by some that Federal Express has a ``monopoly'' in the China market and that the Department of Transportation should grant another all-cargo carrier, such as UPS, the authority to serve China as opposed to expanding passenger carrier or Federal Express' service in this market. I believe that argument is meritless.
Federal Express initially applied to DOT in early 1992 for the authority it now holds. They pioneered U.S.-China express all-cargo services by acquiring an initial allocation of only 2 flights a week, under the old, more restrictive agreement. Only two other carriers, American International Airways and Evergreen International Airlines applied at that time. No other carriers even bothered to apply.
The Department selected Evergreen to operate the route and gave Federal Express backup authority. In early 1995, Federal Express and Evergreen jointly applied to transfer the primary authority to Federal Express because of problems experienced by Evergreen in its efforts to develop the market. At that time, DOT did consider, in response to comments filed by DHL, another air express carrier, whether the award to Federal Express would create a monopoly for express services. DHL was the only carrier to offer comments during these 1995 proceedings.
In its order approving the transfer from Evergreen to Federal Express, the Department concluded that Federal Express would not have monopoly power in the market, stating: ``Moreover, in this case, we found that there are alternative means of transportation. Not only does DHL have the opportunity to use U.S. and Chinese carriers in the market, Chinese carriers on both their combination and all-cargo services and the U.S. carriers on their combination services, but there are also third country carriers in the market available for use.''
Indeed, the market is already very competitive. Due to the historic imbalance in the number of flights DOT has allocated to passenger and air cargo services, U.S. passenger carriers, Northwest and United, can offer more freight capacity than Federal Express. Furthermore, I understand that both UPS and DHL already offer a wide range of express services through their joint ventures with SINOTRANS--the government-
owned China National Foreign Trade Transportation Group Corporation. DHL has represented that it controls, with the help of its joint venture relationship with SINOTRANS, 35% of the China express market and UPS operates an extensive ground network in China. In addition, the U.S. Postal Service offers U.S-China express and parcel services. There are also two Chinese airlines, and at least 18 other foreign airlines that can offer U.S.-China cargo services, including some of the world's largest airlines like British Airways, Japan Air Lines and Lufthansa.
Because of the limited number of flights that it has been allocated, Federal Express today accounts for only 11.5% of the air express volume from the U.S. to China, and 4.8% of that volume in the opposite direction. That is hardly a monopoly.
Federal Express has pioneered the development of markets throughout Asia for the benefit of U.S. exporters. It was difficult in the early stages, but Federal Express made China a high priority in the development of its Asian network. Their commitment to this market has helped ensure that U.S. companies can even expand their trade and presence in China's major markets. In many of the Asian markets, such as Hong Kong, Japan, and the Philippines, other express carriers entered the market much later to compete with Federal Express. In each of these cases, Federal Express' rates were the same before as they were after the others entered the market.
Federal Express can only operate 8 flights per week today, increasing to 10 on April 1, 2000. It currently is the only incumbent U.S. airline that lacks the frequencies necessary to offer even two daily flights. Due to its limited number of frequencies, Federal Express operates a complex but incomplete schedule in the major markets it services in China. For example, it can offer daily service to Beijing in one direction only--westbound from the U.S.--with only three eastbound flights from the capital. It operates only five flights a week to and from Shanghai, and it is able to offer only eastbound service from Shenzhen.
Trade is the key to our competitiveness and prosperity in the global marketplace. Federal Express must be able to continue to develop this market to provide U.S. exporters the transportation services they require to be competitive. Federal Express has the presence in China to make this goal a reality in the near term.
The attempt by others to justify their belated interest in this market by characterizing Federal Express as a monopoly is not supported by the facts. The U.S.-China market for air express cargo services is competitive today.
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