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The Political Economy of the Air Cargo Industry in the Philippines and Taiwan

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The Political Economy of the Air Cargo Industry in the Philippines and Taiwan The London School of Economics and Political Science Department of International Relations OPENING SKIES: THE POLITICAL ECONOMY OF THE AIR CARGO INDUSTRY IN THE PHILIPPINES AND TAIWAN by Kevin Patrick Michaels Thesis submitted for a PhD degree assessment London, July 2001 Examining jury: Dr. Steven McGuire (University of Bath) Prof. John Stopford (London Business School) Supervisor: Dr. Razeen Sally (London School of Economics and Political Science) UMI Number: U615210 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U615210 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 Th£S£S OF POLITICAL U A N D g f '251Lc„ This thesis is dedicated to Dr. Michael Hodges (1945 — 1998). He was an example to us all. ii CONTENTS Chapter I: The Air Cargo Industry In International Political Economy 1 Introduction And Overview 1 The Empirical Focus 4 Interests, Institutions, And Ideas 13 The Structure Of The Study 20 Chapter II: Air Cargo Market Structure And Commercial Policy 24 A Brief History Of The Air Cargo Industry 24 Air Cargo Industry Structure 34 The Macro-Economic Influence Of Air Cargo Service 46 Air Cargo Policy Instruments 57 Conclusion 68 Chapter III: Air Cargo Commercial Policies In The Philippines And Taiwan 72 The Philippines Political And Economic Circumstances 72 Air Cargo Sector Development And Commercial Policies 84 Taiwan Political And Economic Circumstances 96 Air Cargo Sector Development And Commercial Policies 107 Conclusion 116 Chapter IV: The Economic Impact Of Air Cargo Commercial Policies 120 The Philippines Impact On Air Cargo Industry 120 Macroeconomic Impact 122 Taiwan Impact On Air Cargo Industry 128 Macroeconomic Impact 130 Conclusion 135 iii Chapter V: The Influence Of Domestic Factors On Air Cargo Commercial Policy 137 Interests, Institutions, and Ideology In The Domestic Level Of Analysis 137 The Philippines Domestic Institutions 141 Domestic Interests 149 Ideas 155 The Role Of Circumstances 159 Taiwan Domestic Institutions 160 Domestic Interests 168 Ideas 172 The Role Of Circumstances 176 Comparison Of The Philippines And Taiwan Domestic Institutions 177 Domestic Interests 182 Ideas 183 The Role Of Circumstances 185 Chapter VI: The Influence Of Transnational Interests On Air Cargo Commercial Policy 189 Transnational Interests And The International Level Of Analysis 189 The Philippines Air Cargo Transnational Corporations 191 Other Transnational Actors 207 Taiwan Air Cargo Transnational Corporations 210 Other Transnational Actors 220 Comparison Of The Philippines And Taiwan 221 Chapter VII: The Influence Of State-State Bargaining And International Organizations 232 On Air Cargo Commercial Policy State-State Bargaining, International Organizations, And Policy Outcomes 233 The Philippines State-State Bargaining 235 International Organizations And Regimes 246 Taiwan State-State Bargaining 254 International Organizations And Regimes 261 Comparison Of The Philippines And Taiwan 264 iv Chapter VIII: Conclusions 272 Review Of The Argument 272 Synthesizing The Results: The Interactions Of Interests, Institutions, And Ideas 278 Theoretical Implications Of Research 285 Further Directions For Research 293 Postcript: Recent Developments 295 Appendix: Implications For Policy-Makers And Business Executives 298 Bibliography 307 v LIST OF FIGURES Chapter I: The Air Cargo Industry In International Political Economy 1.1 Favorable Locations For Air Cargo Hub In East Asia 10 1.2 Empirical Focus Of Research 18 Chapter II: The Air Cargo Industry In International Political Economy 2.1 Forces And Constraints For Air Cargo Market Growth 30 2.2 World Air Cargo Market 1977 - 2000 31 2.3 World Air Cargo Flows By Region, 1999 32 2.4 The Air Cargo Supply Chain 34 2.5 Major International Air Cargo Carriers, 1996 35 2.6 Comparison Of Major Air Cargo Integrators 37 2.7 Air Cargo Market Segmentation 44 2.8 International Air Cargo Market Forecast: Express Share Of Market Demand 46 2.9 Porter’s Value Chain And Value System 48 2.10 Use Of Air Cargo For Merchandise Exports 51 2.11 International Service Trade, 1990 - 1999 53 2.12 Air Cargo Commercial Policy Instruments And Responsible Organizations 58 2.13 General Agreement On Trade In Services - Modes Of Supply 59 2.14 Air Freedom Rights In Bilateral Agreements 66 Chapter III: Air Cargo Commercial Policies In The Philippines And Taiwan 3.1 The Philippines 72 3.2 Largest Philippine Enterprises 79 3.3 Philippine Exports, 1990-1999 80 3.4 Philippine Exports By Country 81 3.5 1999 Philippine Imports 83 3.6 Philippine Air Cargo Commercial Policies, 1990 - 1999 89 3.7 Taiwan 96 3.8 Largest T aiwanese Enterprises 104 3.9 Taiwan Exports, 1990-1999 105 3.10 Taiwan Exports By Country 106 3.11 1999 Taiwan Imports 107 3.12 Taiwan Air Cargo Commercial Policies, 1990-1999 114 Chapter IV: The Economic Impact Of Air Cargo Commercial Policies 4.1 The Philippine Air Cargo Industry, 1990 - 1999 121 4.2 The Philippine Air Cargo Industry, 1990 and 1999 122 vi 4.3 Philippine International Trade Carried By Air Cargo 123 4.4 Philippine ASAs With Largest Export Markets 124 4.5 The Taiwanese Air Cargo Industry, 1990 - 1999 128 4.6 China Airlines and EVA Air Cargo Growth 129 4.7 The Taiwanese Air Cargo Industry, 1990 and 1999 130 4.8 Taiwanese International Trade Carried By Air Cargo 131 4.9 Taiwanese ASAs With Largest Export Markets 132 Chapter V: The Influence Of Domestic Factors On Air Cargo Commercial Policy 5.1 Empirical Focus Of Chapter Five 137 5.2 Key Government Organizations - Philippine Air Cargo Commercial Policy 142 5.3 The Philippine Civil Aeronautics Board 143 5.4 Ramos Administration Cargo Air Service Agreements: PAL And PEAC 151 Lobbying Positions 5.5 Organizations Responsible For Taiwan ASA Negotiations 162 5.6 Organizations Responsible For Taiwan’s Air Service Agreements 164 5.7 Taiwan’s Cargo ASAs And Commercial Agreements: CAL and EVA 171 Lobbying Positions Chapter VI: The Influence Of Transnational Interests On Air Cargo Commercial Policy 6.1 Empirical Focus Of Chapter Six 189 6.2 FedEx East Asia Route Network 192 6.3 FedEx Legal And Regulatory Resources 194 6.4 DHL and TNT Dedicated Route Networks 201 6.5 FedEx Asian Hub Requirements 211 6.6 UPS East Asia Route Network 215 6.7 FedEx and UPS Influence Channels In Hub Countries 224 Chapter VD: The Influence Of State-State Bargaining And International Organizations On Air Cargo Commercial Policy 7.1 Empirical Focus Of Chapter Seven 232 7.2 U.S. Air Service Agreements With Cargo Provisions - East Asia, 243 Australia, New Zealand Chapter VIII: Conclusions 8.1 FedEx Influence Channels On Customs Policies In The Philippines 282 8.2 Types Of Domestic Structures 288 8.3 TNC Influence Vs. Issue-Area Institutionalization - The Air Cargo 290 In The Philippines And Taiwan vii LIST OF ABBREVIATIONS AmCham American Chamber of Commerce APEC The Asia-Pacific Economic Cooperation APROC Asia Pacific Regional Operations Center (Taiwan) ASA Air Service Agreement ASEAN Association of Southeast Asian Nations BOT Build-Operate-Transfer CAB Civil Aeronautics Board (Philippines) CAL China Airlines (Taiwan) CEPD Council for Economic Planning and Development (Taiwan) CKS Chiang Kai Shek International Airport (Taipei) Delbros Delagado Brothers DHL DHL International DOTC Department of Transportation and Communication (Philippines) EVA EVA Air (Taiwan) EO Executive Order EU European Union FDI Foreign Direct Investment FTK Freight-T on-Kilometer GATS General Agreement on Trade in Services GATT General Agreement and Tariffs and Trade GDP Gross Domestic Product LATA International Association of Transportation Airlines ICAO International Civil Aviation Organization IGO Intergovernmental Organization IPE International Political Economy IR International Relations KMT Kuomintang MCIA Mactan-Cebu International Airport (Philippines) MOTC Ministry of Transportation and Communications (Taiwan) NAIA Ninoy Aquino International Airport (Manila) NEDA National Economic and Development Authority (Philippines) NT New Taiwan (dollar) PAL Philippine Airlines PEAC Pacific East Asia Cargo (Philippines) PRC People’s Republic of China ROC Republic of China (Taiwan) R.P. Republic of the Philippines RTK Revenue Ton Kilometers SEZ Special Economic Zone SCCP Subcommittee on Customs Procedures (APEC) TAA Taipei Airline Association TECO Taipei Economic and Cultural Office TNC Transnational Corporation TNT TNT Post / TNT Express UN United Nations UNCTAD United Nations Center for Trade and Development UPS United Parcel Service WCO World Customs Organization WTO World Trade Organization ABSTRACT This thesis examines the political economy of the air cargo industry in the Philippines and Taiwan in the 1990s. The air cargo industry is an important facilitator of economic globalization and now transports 34% of world merchandise trade by value. The Philippines and Taiwan were selected because of their central location in East Asia, a region highly dependent on air cargo-facilitated trade. The growing economic role of air cargo service clashes with the propensity
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