Open Skies agreements are basically international trade agreements for international airlines. They open competition in airlines between two countries, freeing air carriers to enter the market between the two countries as they choose, and on the routes they choose.
Open Skies agreements also restrict or prohibit government intervention or subsidies in favor of each government’s domestic carriers, especially critical because so many foreign governments own and operate their own national flagship airlines.
That government ownership serves as a potential mighty river of financial favoritism for the national airline, inherently discriminating against foreign carriers. If that mighty river becomes a flood or fire-hose of financial favoritism, that can effectively shut out foreign carriers, in gross violation of the Open Skies Agreement.
The U.S. today has Open Skies agreements with the Middle East principalities of Qatar and the United Arab Emirates (UAE).
These nations operate their own luxurious national airlines of Qatar Airways, Etihad Airways, and Emirates, in the process granting them an estimated $50 billion in subsidies.
Their American competitors United, Delta, and American Airlines are asking how can they compete with foreign national governments bankrolling the competition with such tidal waves of dough?
Should they be getting U.S. taxpayer bailouts to compete with the taxpayers of these undemocratic countries?
Emirates upped the stakes last year by opening service from Orlando to Asia. Fifty billion poured into the direct competition, to and from a couple of small Middle East principalities, can consequently have anti-competitive effects throughout an international and even domestic web of airline routes, given the hub-and-spoke domestic networks of U.S. carriers.
This is effectively developing into a direct challenge to President Trump’s America First trade policy. How is America First when foreign governments are hosing $50 billion into direct competition with major American companies? How is America First when American workers lose their jobs or raises as a result?
The challenge is even greater because the Open Skies agreements with these nations both state, “Each party shall allow a fair and equal opportunity for the designated airlines of both parties to compete in providing the international air transportation governed by this agreement.”
How is $50 billion in cash for one side fair-and-equal opportunity for the other side?
These agreements are entered into in the first place to benefit consumers and travelers with increased competition and choice. The flood of cash into one side can lower airfares today. But once the competition is driven out, rest assured the fares will rise.
Moreover, with the anticompetitive effects feeding down into domestic feeder routes, there is a growing negative effect on domestic U.S. jobs and workers.
Former MIT research engineer William Swelbar explains: “Domestic flights to smaller airports rely on international traffic to justify their profitability and their existence. Passengers traveling from a smaller airport to Tokyo, Beijing, Stockholm or Hyderabad on a U.S. carrier or an allowance partner bolsters the network revenues on the domestic flight they take to the nearest hub. That is, the more international traffic, the more likely a domestic flight to a hub will succeed.”
Where is Secretary of State Rex Tillerson, as the State Department has jurisdiction over these Open Skies agreements? The highly touted America First Commerce Secretary Wilbur Ross could also weigh in. The new U.S. International Trade Representative also has an interest in these issues.
The answer is simple. The Trump Administration can champion free trade in this case and America First nationalism just by enforcing the current Open Skies agreements on their own terms.
There is no need to scrap those agreements entirely and renegotiate them, as Never Trump Democrat political activist and corporate lobbyist Hilary Rosen is directly and personally asking Trump to do.
Qatar is currently under international pressure for its financing of international terrorism. Some of that same pressure just needs to be brought to bear to enforce current international trade agreements as already written. America First should mean America First.
- Ferrara is a senior fellow at the Heartland Institute and a senior policy advisor at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan and as associate deputy attorney general under President George H.W. Bush
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