Friday, July 20, 2007

Financial Times Editorial Comment: Open skies deal is clouding over fast

Financial Times Editorial Comment: Open skies deal is clouding over fast
Copyright The Financial Times Limited 2007
Published: July 17 2007 19:35 | Last updated: July 17 2007 19:35

Henry Kissinger famously asked who he should phone if he wanted to talk to Europe. After Congress’s latest go at unpicking the hard-won “open skies” agreement to liberalise transatlantic aviation, European Union negotiators may be asking who they should have called in Washington to get a reliable commitment out of the US.

The deal, signed in April after years of laborious on-off talks, marked a real advance towards an open aviation market. Allowing US airlines to fly to any point in Europe, and vice versa, it promised much-needed industry consolidation and better transatlantic services.

Yet it was at best a lopsided compromise, giving US operators the right to fly between EU member states while their own domestic market remained closed. It could be justified only by the US commitment to complete second-stage negotiations by 2010, intended in particular to allow greater foreign investment in American airlines.

But no sooner was the treaty signed than the newly opened skies were clouding over, with squabbles breaking out over the scope of second-stage talks and the US, more recently, crying foul over European proposals to force carbon emissions trading on international airlines.

The US Congress, moreover, by proposing even tighter restrictions on the involvement of foreign airlines and investors, now threatens to undermine both the substance of the existing treaty and its development into reciprocally liberal arrangements. Its pre-emptive strike was entirely predictable: spurred by union complaints, Congress has consistently fought to block any extension of foreign ownership.

But US proponents of liberalisation must be careful not to cede too much to a protectionist lobby. If Congress succeeds both in eroding the benefits of the original deal, and in hampering further liberalisation, Jacques Barrot, the EU transport commissioner, will find it impossible to defend a deal that was always questionable, as it hinged on expectations of better things to come.

He will be under pressure to take a tough line from the UK in particular, which agreed only reluctantly to open Heathrow to competition and is already issuing loud reminders that Europe can withdraw benefits granted to US airlines if there is no new accord by 2010.

Europe is unlikely to adopt such drastic measures. But the US would risk an agreement that is much to its own advantage, and that of consumers, if it allowed matters to escalate. Meanwhile, as it gears up for the next round of negotiation, the EU should learn to leave fewer hostages to fortune.


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