After a period of fractious relations, the US and Japan may still be able to agree to a limited liberalisation of the air cargo market between the two countries. But events of the past month have dashed US officials' hopes that renegotiating the cargo bilateral would be a relatively easy precursor to later, highly contentious passenger service talks.
The talks have faltered as both sides miscalculated negotiating ploys and misunderstood diplomatic gestures that led to Japan's threat to rescind FedEx's fifth-freedom beyond rights from Japan.
Last July, US transportation secretary Federico Peña and Japanese transport minister Yoshiyuki Kamai agreed on a settlement that gave FedEx seven new routes beyond Japan. Though the US all along deemed FedEx's application for the beyond rights completely within the rights of the 1952 US-Japan bilateral, it nonetheless agreed this first 'cascade' would be followed by a second, giving Japan Airlines and Nippon Cargo Airlines new authorities to Chicago, New York and beyond the US. A final 'cascade' would follow by the end of March to liberalise fully the cargo rights - to be signed in mid-July between President Bill Clinton and Prime Minister Ryutaro Hashimoto.
Four negotiating sessions ensued to define this third cascade, but by the third session, Japan was becoming frustrated by US unwillingness to offer incumbent JAL a mostly symbolic 'equality' of rights with US incumbent FedEx. At the same time, the US angered Tokyo with a proposal for limited increases in frequencies for carriers governed by the more restrictive post-1952 memorandum of understanding. The Japanese issued a verbal threat that if broad liberalisation was not achieved, both other cascades, including FedEx's rights beyond Osaka set up last July, would fall away.
US negotiators considered the threat 'positioning,' especially since the US believes no formal connection between the various cascades was ever agreed to last July. Anyhow, says a US official, the US's proposal was simply a starting place: 'The offer was very narrow, I agree - it did not address what they considered to be fundamental issues. [But] we were prepared to go much further.'
But not soon enough. As the fourth session began in Washington in early March, Japanese negotiators were hoping for a positive response to two offers that included essentially what the US wanted: almost complete liberalisation between the two countries, with a three-year freeze on fifth freedom growth beyond Japan. The US, however, reiterated its position. This time Japan issued a formal threat to withdraw FedEx's new rights. US officials were affronted by this bold move by Japan, but were comforted when the letter was revoked. The next day, however, a Japanese official incensed the US by saying that the threat remained.
Though subsequent meetings appear to have stiffened both sides' resolve, a senior All Nippon Airways source believes a cargo accord will still be reached in early April.
However, US officials are less optimistic, partly because FedEx chairman Fred Smith has complained that the US proposal gives too many third- and fourth-freedom rights away. Charles Hunnicutt, assistant secretary for aviation and international affairs, says the US will instead exchange a 'much smaller' package of opportunities for cargo.
Mead Jennings
Source: Airline Business
