American and Chinese officials will meet this week in Washington to work out a bilateral aviation deal, but observers say critical parts of the agreement, if achieved, will be based on 'handshakes' and will not be written into the contract. Taken purely from the perspective of the airlines, any air services agreement cannot help but appear in favour of United States interests. US carriers from American Airlines to United Parcel Service will be asking for as many frequencies to, and beyond rights through, China's big three cities - Guangzhou, Beijing and Shanghai - as they can get. 'We are looking to amend the agreement to expand opportunities for both combination and all-cargo services, including additional carrier entry, additional weekly frequencies, and additional code-sharing rights,' Bill Moseley, a spokesman for the US Department of Transport, told the South China Morning Post last week. Mainland carriers already have more rights than they use to US destinations, so a quid pro quo arrangement on that level is unlikely to be requested, nor granted. It is also thought that while China's biggest airlines have made great strides towards fiscal and operational discipline since its accession to the World Trade Organisation, none are ready for head-to-head competition with the world's leading carriers, US or otherwise. The more China opens its skies to foreign carriers, the greater the negative impact will be on the revenue of mainland carriers, at least in the short term. It is for this reason that the US negotiators from both the public and private sectors are urging China to focus on the quantifiable commercial benefits of a liberalised aviation regime - the macroeconomic picture. 'If there's no new China deal, there will be no new hub in Guangzhou for FedEx, for example,' a US airline executive sitting in on the talks said. 'You can quantify that.' However, it remains to be seen whether Beijing thinks the commercial benefits of whatever degree of liberalisation it chooses to award can compensate for the pressure carriers such as China Eastern and Air China will come under in their home markets. This is why the sweeteners may have to come from outside the formal topics of negotiation. Take the case of visas, for example. Since the September 11 attacks, Chinese nationals wanting to visit the US have had to wait up to six months for a visa. There has been no transparency in the process and exemptions are only available to the highest mainland cadres. No progress reports are given during the waiting period, denials have appeared arbitrary, and it has been a sore point for some legitimate and powerful mainland businessmen. Easing the visa restrictions was brought up in the last round of talks, which ended on April 30. However, granting such a request is outside the transport department's remit and therefore formally cannot be part of an air services agreement: it is an issue for the State Department. However, extra-contractual handshakes on trade transport deals between the US and China are not without precedent. On December 8 last year, the countries wrapped up a new maritime agreement which, by the letter of the contract, appeared to grant US shipping and forwarding companies greater access to China's booming maritime exports and permission to wholly own their own businesses on the mainland for little in return. The unofficial and unwritten trade-off behind the scenes was what clinched the deal, according to a mainland shipping executive. The transport department agreed to lobby the Federal Maritime Commission, which governs seaborne trade to and from the US, on behalf of mainland carriers for their exemption from 'controlled carrier' status. The exemption, subsequently granted in April, allowed the state-owned firms China Shipping, Cosco and Sinotrans to change the rates they charge for carrying cargo across the Pacific within 24 hours, instead of the 30-day notice period they previously had been bound to. It has allowed those carriers to respond far more quickly to fluctuations in market demand and optimise their resources in a more profitable manner. The State Department is also coming under increasing pressure at home to ease visa restrictions for Chinese nationals, particularly business visas. A report released last week by a consortium of US trade associations led by the US-China Business Council found US companies had lost US$30.7 billion in the 21 months to March due to 'delays/denials in the processing of business visas'. This included US$25.53 billion in lost revenue, or an average revenue loss of $1.5 million per respondent. Almost 75 per cent of the 141 American business executives surveyed said they had experienced problems, with more than 50 per cent saying the problem had deteriorated in the past year. The report, compiled by the Washington-based Santangelo Group, equated the economic loss to 4 per cent of the US trade deficit and found China visas by far to be the most problematic area. Clearly, the incentive is there on both sides to reach an agreement this week. But if one is struck, you may not find all the details in the fine print.
