July 3, 2010
Regulatory Flights of Fancy
The American Spectator has a brief, but informative, article on current Congressional rumblings to reregulate the airline industry. See Iain Murray & Roger Abbott, Regulatory Flights of Fancy, Am. Spectator, July 2, 2010 (available here). From the lead paragraph:
In Washington, D.C., everything old is new again. Keynes is back as the defunct economist our politicians are in thrall to, wind and solar are the power sources of the future, just as they were in the seventies, and, after two decades in which entrepreneurs and industry were freed from the crippling hand of regulation, re-regulation is now the order of the day. The latest target is the domestic airline industry, and if Congress wanted to kill it off, they couldn’t be picking a better way.
July 2, 2010
WTO Panel Report on Airbus
Blog readers interested in reading the 1,076-page WTO Panel Report, European Communities and Certain Member States--Measures Affecting Trade in Large Civil Aircraft, WT/DS316/R (June 30, 2010), can do so by following this link.
Media attention on the ruling has focused on its U.S. domestic implications, specifically the House and Senate measures which would force the Pentagon to take account of illegal subsidies when choosing to award lucrative defense contracts to aircraft manufacturers. See, e.g., Christopher Drew, In Ruling, W.T.O. Faults Europe Over Aid to Airbus, N.Y. Times, June 30, 2010 (available here). Some have expressed concerns that the legislation could hurt U.S. manufacturer Boeing. The WTO is expected to issue its report on possible illegal subsidies to Boeing later this year. However, it is important to keep in mind that the total amount of subsidies Boeing is accused of receiving--approximately $20 billion--is a fraction of the $200 billion Airbus was alleged to have received from EU Member States. In the end, the WTO Panel reduced the amount to $20 billion and may push the amount down even further after it rules on the EU's forthcoming appeal. There's every reason to expect that should the WTO Panel rule against Boeing, it too will reduce the amount of accused subsidization. Even if the Pentagon is forced to take account of illegal subsidies for its contract awards, Boeing is likely to retain an advantage over Airbus in that respect.
The more interesting question is where do things go from here? The U.S. and EU had a treaty governing trade in large civil aircraft until the U.S. denounced it in 2004. Arguably, the best case scenario would be for the two sides to return to the negotiating table to hammer out a new agreement. Under a fresh bilateral, both sides could set new rules for State subsidies to their respective "national champions" which accounts for the current nature of the aircraft manufacturing sector and allows innovation to proceed without hampering competition. Neither company is going away. What must be decided is whether their operations from here on out will confer real benefits to the world community in the form of cutting-edge products or if they will become the basis for a needless, counterproductive, and potentially destructive trade war between two of the world's economic giants.
July 1, 2010
Havel on Published WTO Airbus Ruling
Professor Brian Havel was quoted in yesterday's edition of the Chicago Tribune on the implications of the World Trade Organization's recently published ruling against European aircraft manufacturer Airbus. See Julie Johnsson, Illegal Aid Enabled Airbus to Overtake Boeing, Panel Rules, Chi. Tribune, June 30, 2010 (available here).
June 30, 2010
Air Services Agreement Projector
The World Trade Organization's Council for Trade in Services recently launched its Air Services Agreement Projector which displays the relative "openess" of particular air services agreements. From the website:
The application uses information from the Quantitative Air Services Agreement Review (QUASAR), which documents developments in the air transport sector. QUASAR was devised by the WTO Secretariat.
The Air Services Agreement Projector allows the user to select bilateral air services agreements on the basis of a number of criteria, namely by signatories and regions, levels of openness, and traffic levels. Once selected, these agreements are charted on a map and the relevant underlying data is displayed.
June 28, 2010
International Air Travel and Greenhouse Gas Emissions
Blog readers may be interested in reading Benito Muller and Cameron J. Hepburn's new article, International Air Travel and Greenhouse Gas Emissions: A Proposal for an Adaptation Levy, 33 World Econ. 830 (2010) (available from SSRN here). From the abstract:
Greenhouse gas emissions from international aviation services have been increasing rapidly and are likely to continue to do so in the absence of major policy changes. At the same time, while all countries will experience impacts from climate change, developing countries are the most vulnerable. Significant financial assistance for adaptation is therefore needed for developing countries, but current proposals are inadequate. Solutions to the challenges of both aviation greenhouse gas emissions and climate change adaptation finance are thus urgently required. This paper proposes an international air travel adaptation levy that addresses both problems.