Recommendation 2 : Tariffs

The APEC Air Services Group's (ASG) 1998 Recommendation: "that APEC Economies support the removal or progressive easing of tariff regulations through the bilateral air services arrangements where this promotes competitive pricing to the benefit of consumers. A double disapproval regime could be considered. Consideration could also be given to the elimination of formal filing requirements. Where filing is required, electronic filing could be considered." ASG gave implementation of this recommendation a medium priority.

Sixteen economies responded to the questionnaire issued by Hong Kong, China on the review of the recommendation on tariffs, viz. Australia; Brunei Darussalam; Canada; Chile; China; Hong Kong, China; Indonesia; Japan; Korea; Mexico; New Zealand; the Philippines; Singapore; Chinese Taipei; the United States and Vietnam.

For most of the respondents, double approval remains the most commonly adopted regime for tariff approval in their bilateral air services agreements (ASAs) with other APEC Economies. Although ten respondents have adopted double disapproval in one or more of their ASAs with other APEC Economies, only one among them has adopted double disapproval in a majority of such ASAs.

Adoption of approval by country of origins in ASAs is not a general policy of any of the respondents, although a few have indicated that they are prepared to consider this possibility upon request by partners. In the few isolated cases where this is actually adopted in respondents' ASAs, it mainly serves as a transitional regime from double approval to double disapproval.

Reasons cited for adopting a double approval regime include the prevention of anti-competitive behaviors by airlines such as predatory pricing or cross subsidization, and the need to protect consumer interests and development of domestic airline industry. On the other hand, respondents with experience of double disapproval regimes point to benefits such as allowing airlines the flexibility required to respond to market changes, promoting competitive pricing, and reducing regulatory and administrative burden for airlines and governments.

Five respondents, viz. Canada, Chile, Indonesia, Singapore and the United States, have kindly made available their model tariff clauses on double disapproval, and New Zealand has kindly made available its two model clauses on the filing for notification only regime. These can be found in their responses to the questionnaire on tariffs as circulated to Economies. Most of these model clauses recognize that designated airlines may establish tariffs in response to market forces unless and until disapproved by the aeronautical authorities of both parties to the relevant ASA. They also seek to clearly limit the circumstances under which the aeronautical authorities can intervene, the most common ones being -

ii) protection of consumers from prices that are unreasonably high or restrictive due to the abuse of a dominant position; and

iii) protection of airlines from prices that are artificially low due to direct or indirect governmental subsidy or support.

Overall, the submissions show that over half of the respondents either have experience of adopting "double disapproval" in their ASAs with other APEC Economies or are prepared to consider moving towards this direction, although there is as yet no consensus on adopting "double disapproval" as the tariff approval regime within APEC. It is nevertheless clear that most respondents recognize the value of a liberal approach to tariff approval, and are prepared to take steps towards liberalization in manners most suited to their individual circumstances.

There is a clear intention amongst respondents to relax tariff filing requirements although most require the filing of tariffs either for approval or notification purposes at this stage. Three respondents advocate the early elimination of filing requirements. Of the others, one states that it is already prepared to remove filing requirements on a reciprocal basis, and four indicate that they can consider gradually removing such requirements. Only one respondent indicates that it is not prepared to consider their elimination.

The submissions also show a remarkable willingness among respondents to move towards the acceptance of electronic filing once the applicable domestic legislation and infrastructure are in place. Six respondents accept electronic filing of tariffs. Of the others, five indicate that they are prepared to move towards this direction - most within a timeframe of five years. The main reasons advanced in support of electronic filing include quicker decision, more efficient processing and reduction in printing and distribution costs, whereas the major difficulties cited include inadequate infrastructure and the lack of legal recognition for electronic documents.

Most respondents do not have strong views on the possibility of co-operation between APEC and other multilateral fora or regional associations on tariff liberalization whereas the view of the others are mixed. One respondent supports co-operation in general, and another suggests that there may be value in APEC and the WTO sharing ideas. On the other hand, two respondents indicate that they see no need for any co-operation, and another stresses that it might be preferable to first find effective means within APEC before attempting to co-ordinate with other fora.