[Congressional Record Volume 141, Number 141 (Tuesday, September 12, 1995)]
[Senate]
[Pages S13379-S13380]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                    FEDERAL EXPRESS HUB AT SUBIC BAY

  Mr. PRESSLER. Mr. President, I rise today to congratulate Federal 
Express Corp. on the opening last week of its new cargo hub at Subic 
Bay in the Philippines. This is a very favorable development for 
consumers of shipping services on both sides of the Pacific.
  As many will remember, Federal Express had intended that its Subic 
Bay hub be fully operational in July. Unfortunately, even though the 
United States/Japan bilateral aviation agreement clearly authorized 
Federal Express to do so, the Government of Japan refused to permit 
Federal Express to operate several flights from Japan which were 
integral to its hub operation. In late July, Japan reversed its 
position and thereby enabled the Subic Bay hub, the cornerstone of 
Federal Express' intra-Asian network, to become fully operational.
  As a result of the Subic Bay hub operation, consumers will be able to 
rely on expanded intra-Asian and trans-Pacific service. However, 
consumer choice will not be the only benefit. A recent article from the 
Journal of Commerce predicts this expanded service will come at a 
reduced cost to consumers. One economist estimates the price of intra-
Asian shipping may drop by as much as 25 percent as a result of 
competition from Federal Express' intra-Asian network. I am confident 
the Federal Express experience in Subic Bay will again prove U.S. air 
carriers can compete effectively in any international market they have 
a chance to serve.
  With respect to the widespread benefits of the Subic Bay hub, the 
Journal of Commerce article points out a very interesting irony. By 
violating the United States/Japan bilateral aviation agreement, the 
Government of Japan tried to prevent the Subic Bay hub from opening. 
Yet, Japanese companies are among the first flocking to the Subic Bay 
area to set up operations so they can benefit from Federal Express' 
superior air delivery services. For example, the Japan International 
Development Organization is planning a 450-acre industrial park in the 
area which will serve as a research and manufacturing center for 10 
Japanese companies.
  I ask unanimous consent that the article from the Journal of Commerce 
to which I have referred be printed in the Record at the end of my 
remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. PRESSLER. Mr. President, on several occasions during the pendency 
of the United States/Japan cargo aviation dispute I cautioned that the 
economic stakes in that dispute were very 

[[Page S 13380]]
significant. A recent study by the Boeing Co. emphasizes the critical 
importance of our firm stand during that dispute.
  Boeing Company's recently released annual world cargo forecast 
predicts the highest air freight market growth over the next 20 years 
will occur on Asian routes. Moreover, the study found international 
express delivery service grew 25 percent last year and it predicts the 
market will grow 18 percent a year for the next 20 years. That is why 
it was of critical importance that we safeguarded Federal Express' 
beyond rights. Now, Federal Express is well-positioned to earn its fair 
share of expanding Pacific rim business opportunities.
  Later this month in Tokyo, our negotiators will attempt to secure a 
United States/Japan open skies agreement on cargo. I hope these talks 
result in the fullest liberalization of cargo shipping rights possible. 
I am confident our cargo carriers can effectively compete with their 
Japanese counterparts if protectionist regulations are eliminated and 
market forces are allowed to work.
                               Exhibit 1

             [From the Journal of Commerce, Aug. 31, 1995]

            FedEx Hub To Give Lift To Shippers, Philippines

               (By William Armbruster and P.T. Bangsberg)

       Subic Bay, once the jumping off point for the U.S. 
     military's cold war efforts in Asia, becomes key to Federal 
     Express Corp.'s expansion plans on Monday, providing a major 
     boost for the company, the local Philippine economy and both 
     Asian and North American shippers.
       AsiaOne, FedEx's intra-Asian network, opens its new Asia 
     hub Sept. 4 at the former naval base. The operation, which 
     nearly sparked a trade war with Japan, is shaking up the 
     Asian market, making both regional and trans-Pacific 
     shipments easier, quicker and cheaper while spurring foreign 
     investment in the Philippines.
       ``It's really going to expand opportunities for investment 
     in the Philippines,'' said Levi Richardson, director of the 
     U.S.-Philippine Business Committee in Washington.
       AsiaOne, FedEx's intra-Asia network, ``will make the 
     Philippines very attractive as a regional hub for other 
     companies,'' Mr. Richardson said. ``A lot of small and medium 
     companies are looking at countries with a good 
     infrastructure. FedEx's investment is going to provide them 
     an opportunity to grow their business.''
       Joseph Schwieterman, a transportation economist at DePaul 
     University in Chicago, said the new FedEx service will lead 
     to intense price competition.
       ``I think you're going to see the price of intra-Asia 
     shipments drop as much as 25% as competition heats up,'' he 
     said, adding that AsiaOne also will provide overnight service 
     on some routes for the first time.
       Much of the foreign investment thus far at Subic Bay, a 
     former U.S. naval base, has come from Taiwanese companies, 
     such as Acer Inc., ranked the world's seventh-largest brand 
     name personal computer vendor in 1994 by International Data 
     Corp. in Framingham, Mass.
       ``The new FedEx service will be a great benefit for us by 
     cutting lead time inbound and speeding shipments outbound,'' 
     said
      Kenny Wang, manager at Acer Information Products 
     (Philippines) Inc.
       ``Having a direct flight into Subic from Taipel will cut 
     the time for delivery of components to one or two days from 
     two or three days when routed via Manila, and 10 days by 
     sea,'' Mr. Wang told The Journal of Commerce.
       Cliff Deeds, a FedEx spokesman, said the carrier will have 
     a single cutoff time for pickups in the Asian markets served 
     by the new network, whereas shippers in the past faced 
     different cutoffs depending on where they were shipping their 
     goods. For those in Penang, a high-tech manufacturing center 
     off the northwest coast, they might have a 1 p.m. deadline 
     for shipments to Seoul, but a 2 p.m. cutoff for packages 
     going to Taipei.
       Under the new FedEx network, the cutoff in Singapore will 
     be 4 p.m., for example, but at Subic Bay, it will be 10 p.m., 
     Mr. Deeds said.
       ``I see FedEx being instrumental in bringing Asian markets 
     closer to the U.S.,'' said Raul Rabe, the Philippines' 
     ambassador to the United States.
       The Subic Bay flights, connecting 11 Asian business 
     centers, will hook up with the carrier's expanded trans-
     Pacific operation. Acer's Mr. Wang said he looks forward to 
     the new flight starting Sept. 4 from Osaka to Oakland, 
     Calif., where FedEx has a regional hub serving Silicon 
     Valley. ``We've been promised one-day service on that run,'' 
     he said.
       Subic is Acer's first manufacturing site outside Taiwan. It 
     has earmarked $35 million over the next two years for 
     expansion, with officials expecting to double capacity of its 
     existing complex to 200,000 units by next year.
       Acer will also add a global repair center at Subic ``to 
     take advantage of the abundant availability of high-quality 
     local engineering talent,'' said Managing Director Harvey 
     Chang.


                     texas instruments greets move

       Larry Horton, manager of logistics carrier management for 
     Texas Instruments, welcomed the new FedEx operation. ``It 
     will give us a lot more cargo flights,'' he said. ``We used 
     to have to rely on commercial carriers for intra-Asia 
     shipments.''
       The semiconductor manufacturer has a large operation in the 
     Philippine city of Baguio and hopes FedEx will set up a small 
     feeder service linking it with Subic Bay, he said, adding 
     that the new hub will enable the company to feed its plants 
     in Taiwan, Malaysia and Singapore.
       ``It should help us. Cycle time should be improved. 
     Inventory reduction should take place,'' Mr. Horton said.


                            another memphis

       Joseph C. McCarty, FedEx's vice president for Asia, told a 
     conference in Washington this summer that the Subic Bay 
     operation will do for the Philippines what the carrier's main 
     hub in Memphis has done for that city, where more than 100 
     companies have set up manufacturing operations to take 
     advantage of the carrier's overnight network.
       Japanese companies are starting to move in. The Japan 
     International Development Organization is planning a 450-acre 
     industrial park that will serve as a research and 
     manufacturing center for 10 Japanese companies.
       Subic, meanwhile, is promoting itself as an alternative 
     printing and distribution center in Asia, a field now 
     dominated by Hong Kong and Singapore.
       Eric Montandon, manager at New Age Publications in Subic, 
     said the new FedEx service could help his firm. New Age is 
     essentially a printer, but also distributes newsletters, 
     advertising and other material within the region.
       ``We were spun off and set up at Subic in anticipation of 
     good air connections,'' he told The Journal of Commerce. ``We 
     need the overnight service to Southeast Asia FedEx is now 
     promising.''
       Current movement to Singapore can be two or even four days, 
     he said.
       DHL Worldwide Express plans to set up its own intra-Asia 
     hub later this fall in Manila, but has had difficulty putting 
     all the pieces together. Nonetheless, spokesman Dave 
     Fonkalsrud said its traffic within the region was up 48% in 
     the first half of this year, reflecting the tremendous 
     potential in the world's fastest-growing area.
     

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