Express Delivery and the Postal Sector 23:353 (2003) 353 Express Delivery and the Postal Sector in the Context of Public Sector Anti-Competitive Practices D. Daniel Sokol* I. INTRODUCTION International trade plays an increasingly important role in global eco-nomics. One growing part of the international economy has been express delivery services. Because various governments that maintain public sector postal monopolies have erected barriers to entry to impede its growth, ex-press delivery has become an important battleground within the realm of trade. International trade, which initially consisted mainly of the trade of goods, is now increasingly focusing on services. This article focuses on the problem of a particular type of service and the barriers on this service (ex-press delivery) that countries place upon it. Not surprisingly, those coun-tries that are the most competitive and have the fewest barriers to trade and problems of monopolization (i.e., those countries that suffer least from mo-nopolistic behavior in their express delivery market) have the most effective and competitive distribution systems.1 Section II of this article explains the importance of express delivery to the international economic system. Sec-tion III offers examples of how countries erect public sector barriers to en-try in this field to limit the ability of private sector entrants to compete. Section IV examines how privatization in conjunction with liberalization will improve opportunities for entrants to provide express delivery services. Section V explains how current legal mechanisms could promote greater competition on the issue of public sector barriers to entry in the express de-livery segment of the postal services sector. Section VI concludes by advo- * B.A. Amherst College; MSt. University of Oxford; J.D. University of Chicago; Associ-ate, Steel Hector & Davis LLP. The views expressed in this article are those of the author alone and do not represent those of the firm or its clients. 1 Office of the United States Trade Representative, Express Delivery Services, available at http://www.ustr.gov/sectors/services/express.html (n.d).Northwestern Journal of International Law & Business 23:353 (2003) 354 cating increased global cooperation for the elimination of entry barriers. Many countries have placed anticompetitive barriers for entrants in their respective express delivery markets, in many cases to protect such countries’ local monopolies.2 Consumers are the ultimate losers of these policies, because they must pay higher prices for poor service quality.3 Competition stimulates productive efficiency. Companies that face falling costs in production (due to competition and the corresponding efficiency gains) respond by reducing price and increasing production.4 With all other things being equal, such gains in efficiency lead to greater consumer wel-fare. Continuing barriers, therefore, threaten the global economy by reduc-ing efficiency gains and the ability to maintain effective supply chains of the delivery of goods from one country to another. II. NATURE OF EXPRESS DELIVERY SERVICES Express delivery is a method of communication and transportation that serves to get items from door to door within a definite period of time. The key element to this service is the time sensitivity of the packages, often next day service. The best known companies in this field are United Parcel Ser-vice (“UPS”), Federal Express (“FedEx”) and DHL. Given the rapidly globalizing economy that utilizes a just-in-time production schedule, ex-press delivery of parts has become essential to global operations of busi-nesses. Further, express delivery offers faster delivery of business documents, thereby promoting more rapid transactions for services. It also allows small and medium-sized businesses to compete in the global mar-ketplace by giving them access to an international distribution system. Express delivery requires a robust service system that involves air and ground transport, distribution centers, delivery, and the use of advanced technologies in all facets of its business to track items and provide informa-tion. Each of these segments is a potential bottleneck that would slow ex-press delivery services if governments were to erect barriers to competition in order to protect their domestic monopolies, the domestic postal service providers.5 Such bottlenecks exist when monopoly postal operators cross-subsidize their competitive express delivery services via their monopoly services.6 Costs and delays associated with cross border parcel delivery, and unequal treatment toward postal incumbents are other methods by 2 For examples of anticompetitive barriers see infra Section III. 3 Barriers to trade have been found to lower economic growth. See Sebastian Edwards, Openness, Productivity and Growth: What Do We Really Know, 108 ECON. J. 383 (1998); Ann Harrison, Openness and Growth: A Time Series, Cross-Country Analysis for Develop-ing Countries, 48 J. DEV. ECON. 419 (1996). 4 JEAN TIROLE, THE THEORY OF INDUSTRIAL ORGANIZATION 66-67 (MIT ed. 1988). 5 See infra Section III. 6 OECD, INTERNATIONAL PARCEL DELIVERY, OCDE/GD(97)151, 12 (1997).Express Delivery and the Postal Sector 23:353 (2003) 355 which governments stymie competition in this sector, as Section III de-scribes. These anti-competitive barriers keep the price of express delivery and mail services artificially high. Moreover, there is a link between mail ser-vice generally and express delivery service. A lack of competition in mail service leads to a decreased mail market, which reduces the size of the ex-press delivery services market as well.7 Put differently, “the regulatory situation in countries A and B does not only affect domestic parcel rates, but it also exerts an impact on the entire price for international transport and delivery.”8 In any one country, a lack of competition in general mail ser-vice has a ripple effect on the competitiveness of that country’s express de-livery service, which, in turn, has a ripple effect on other countries’ mail service (including express delivery services). These pernicious, unequal practices serve to destroy a part of the international free market system and thus to limit global consumer welfare. It is because of this linkage that a global solution to anti-competitive concerns in express delivery is needed—one that also addresses the problem of
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