Abstract
The fact that market access in air transport does not come under the Annex to the General Agreement on Trade in Services of WTO, and the prevailing bilateral air services regime between States, which essentially precludes a totally liberalized air transport system, has led to protectionism for the past 70 years of regulated air transport. Although there are some open skies agreements between States, they have tended to ensure bilateral reciprocity for the most part. The subsidy issue between the United States carriers and the carriers of the United Arab Emirates (Emirates and Etihad) as well as Qatar Airways is the latest dispute where the United States’ carriers claim that the governments of Qatar and the UAE have granted over $40 billion in concealed subsidies such as direct cash injections, interest free loans with no payment obligations, shareholder advances, significant related party transactions not at arm’s-length, and subsidized infrastructure, as well as other unfair business practices, such as bans on unions. The US carriers claim that they are losing market share as a result of this exploitation which is causing the loss of hundreds of jobs. This article examines the issue in the context of market access and WTO rules.
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Notes
- 1.
- 2.
Ibid.
- 3.
IAG CEO and former head of British Airways, Willie Walsh, said he “doesn’t see any evidence” that Gulf carriers receive huge state subsidies from their national governments. See No evidence Gulf carriers get ‘artificial support’, says Willie Walsh http://www.arabianbusiness.com/no-evidence-gulf-carriers-get-artificial-support-says-willie-walsh-564516.html#.VBUzWsWSxMg. Also, Interview: Maurice Flanagan, Emirates Airline, by Shane McGinley, July 27, 2010. See http://www.arabiansupplychain.com/article-4587-interview-maurice-flanagan-emirates-airline/2/.
- 4.
See Flanagan, Ibid.
- 5.
Walsh, supra note 3, Ibid (this chapter). For a general overview of civil aviation in the UAE, see Abeyratne (2008), pp. 3–15.
- 6.
Super Connecting the World – The Advance of Emirates, Etihad and Qatar, latterly Joined by Turkish Airlines looks set to continue, The Economist April 25, 2015, 60–61 at 61.
- 7.
Benitah (2001), p. 1.
- 8.
ICC Policy Statement: The need for greater liberalization of international air transport Prepared by the Committee on Air Transport, Document n° 304-2/23 Rev.3, 1 December 2005 at 5.
- 9.
ICAO News Release, ONCE-A-DECADE ICAO AIR TRANSPORT CONFERENCE CONVENES, MONTRÉAL, 18 March 2013.
- 10.
Supra, Chap. 1, note 5.
- 11.
- 12.
The home page of the World Trade Organization (hereinafter referred to as WTO) succinctly summarises its nature and scope: There are a number of ways of looking at the World Trade Organization. It is an organization for trade opening. It is a forum for governments to negotiate trade agreements. It is a place for them to settle trade disputes. It operates a system of trade rules. Essentially, the WTO is a place where member governments try to sort out the trade problems they face with each other. See https://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm. The World Trade Organization (WTO-OMC) came into being on 1 January 1995 and along with it entered into force the General Agreement on Trade in Services (GATS). The GATS Annex on Air Transport Services applies trade rules and principles such as most-favoured nation (MFN) treatment and national treatment to three specific so-called “soft” rights, namely, aircraft repair and maintenance, selling and marketing of air transport, and computer reservation system services. It excludes from the application of the GATS “services directly related to the exercise of traffic rights”. Pursuant to an earlier ministerial decision, the WTO-OMC launched in 2000 the first review of the operation of this Annex with a view to considering possible extension of its coverage in this sector. During the review, which continued into 2002, there was some support to extend the Annex to include some additional “soft” rights (for example, ground handling) as well as some aspects of “hard rights” (for example, air cargo, non-scheduled and multi-modal transport). However, there is no global consensus at this stage on whether or how this would be achieved. See also, https://www.wto.org/english/docs_e/legal_e/26-gats_01_e.htm.
- 13.
Former specialized agency of the United Nations. It was established in 1948 as an interim measure pending the creation of the International Trade Organization. However, plans for the latter were abandoned and GATT continued to exist until the end of 1995. Members of GATT were pledged to work together to reduce tariffs and other barriers to international trade and to eliminate discriminatory treatment in international commerce. The eighth, or Uruguay round, of GATT negotiations, which began in 1986 with 15 negotiating groups, was long stalemated by the issue of agricultural subsidies maintained by the European Community. The agreement that resulted (1994) from the Uruguay round led to the creation (1995) of the more powerful WTO. However, the GATT framework remained in place for a 12-month transition period.
- 14.
In May 2003 The United States called for WTO to appoint a panel of judges to go into the claim of the United States that European governments were illegally subsidizing Airbus Industrie, the Toulouse based manufacturing consortium which builds the Airbus range of aircraft. See Abeyratne (2005), pp. 379–395.
- 15.
!5. U.S. SS 1.
- 16.
United States v. Sital Sales Corp, 274 U.S. 268 at 275–76.
- 17.
A.E. Kahn, Airline Deregulation, The Concise Encyclopaedia of Economics, Library of Economics and Liberty. See http://www.econlib.org/library/Enc1/AirlineDeregulation.html.
- 18.
[1991] OJ L 300/48, 31.10.2001.
- 19.
Commission Decision 94/698/EC, 6 July 1994.
- 20.
See Report COM (2001) 574 Final. The Report contained a discussion on the consequences of the 9/11 attacks on the air transport industry.
- 21.
The decision was taken pursuant to the Treaty on the Functioning of the European Union (TFEU) Article 108.1 and 108.2 of which provide that The Commission is authorized to, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It can propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market, or that such aid is being misused, it is obligated to decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.
- 22.
Commission v. Hellenic Republic, Case C-415/03.
- 23.
The Treaty of Rome, officially the Treaty establishing the European Economic Community (TEEC), is an international agreement that led to the founding of the European Economic Community (EEC) on 1 January 1958. It was signed on 25 March 1957 by Belgium, France, Italy, Luxembourg, the Netherlands and West Germany.
- 24.
Brussels South Charleroi Airport (BSCA) was at the time a public sector company contracted by the Walloon Region, which has managed the airport under a 50-year concession agreement.
- 25.
Decree of the Walloon Government of 16 July 1998 laying down the fees to be levied for the use of airports within the Walloon Region, Moniteur Belge of 15 September 1998. See 2004/393/EC, Commission Decision of 12 February 2004, reproduced in the Official Journal of the European Union, L 137/1 (30.4.2004) at p. 2.
- 26.
For an indepth discussion of the Ryanair case see Abeyratne (2004), p. 585.
- 27.
GATS seeks to liberalize trade regarding the provision of services. It deals with, and provides for two types of obligations—general and specific. The former relates to obligations of States and the latter to commitments made by States. Also, The GATS Agreement identifies and makes provision for specific services through its various annexes. The Air Transport Annex of GATS currently includes aircraft repair and maintenance services; the selling and marketing of air services; and computer reservations systems. Notwithstanding the profile of the Annex, a certain ambivalence pervades the interpretation of inclusionary elements in the Annex and their application. This is evident in the fact that only a few WTO members have committed to the three activities. Only three aspects of air transport are included under the GATS umbrella: computer reservation systems; sale of air transport and repair of aircraft and components.
- 28.
- 29.
- 30.
See generally, Market Access: Unfinished Business, Post Uruguay Round Inventory and Issues, World Trade Organization, Special Studies 6:2001 at pp. 99–105.
- 31.
Article III of GATS requires each party to publish promptly all relevant laws, regulations, administrative guidelines and all other decisions, rulings or measures of general application, by the time of their entry into force.
- 32.
GATT’s national treatment philosophy provides foreign services and services suppliers with treatment no less favourable than that accorded to a country’s own services and service suppliers.
- 33.
Since GATS is an Annex to the GATT agreement it should be noted that the provisions of GATS are governed by those of GATT and that both documents incorporate the same basic principles.
- 34.
Under the WTO agreements, countries cannot normally discriminate between their trading partners. If one state grants another a special favour, it would have to do the same for all other WTO members.
- 35.
Article II of GATS. Article XVI extends the MFN principle to market access.
- 36.
Article XXIII on dispute settlement is considered to be well balanced and equitable and provides that if any Party should consider that another Party fails to carry out its obligations or commitments under the agreement, it may make written representations or proposals to the other Party or Parties concerned and the latter should give sympathetic consideration to the representations or proposals so made. If no satisfactory settlement could be arrived at, the GATT agreement provides for a formal dispute settlement procedure in Articles XXII and XXIII.
- 37.
- 38.
Article 1.1.
- 39.
Cunningham (1999), p. 6.
- 40.
Sykes (2003), p. 8. http://www.law.uchicago.edu/Lawecon/index.html.
- 41.
Tsuyoshi Kawase, State Support for Aircraft Development and the WTO Rules on Subsidies: On the occasion of the rollout of the first Mitsubishi Regional Jet, http://www.rieti.go.jp/en/columns/a01_0409.html.
- 42.
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds267_e.htm#top. Also, https://www.organicconsumers.org/old_articles/corp/cotton042904.php On 16 October 2014, Brazil and the United States notified the DSB that, in accordance with Article 3.6 of the DSU, they had concluded a Memorandum of Understanding, and agreed that this dispute was terminated.
- 43.
- 44.
- 45.
- 46.
Article 15 of the Chicago Convention states inter alia that every airport in a contracting State which is open to public use by its national aircraft shall likewise … be open under uniform conditions to the aircraft of all the other contracting States. The like uniform conditions shall apply to the use, by aircraft of every contracting State, of all air navigation facilities, including radio and meteorological services, which may be provided for public use for the safety and expedition of air navigation.
- 47.
Article XVI provides that any subsidies affecting exports to and imports from Members should be notified in writing. Members should recognise the deleterious impact of subsidies and avoid their general and specific use.
- 48.
The International Air Transport Association is a trade association of the world’s airlines. These 250 airlines, primarily major carriers, carry approximately 84 % of total available air traffic.
- 49.
- 50.
Ibid.
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Abeyratne, R. (2016). Market Access and Subsidies in Air Transport: The US-UAE Debate and WTO. In: Competition and Investment in Air Transport. Springer, Cham. https://doi.org/10.1007/978-3-319-24372-6_6
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