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Sovereignty, Politics, and U.S. International Airline Policy Alan P View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Southern Methodist University Journal of Air Law and Commerce Volume 74 | Issue 3 Article 1 2009 Sovereignty, Politics, and U.S. International Airline Policy Alan P. Dobson Joseph A. McKinney Follow this and additional works at: https://scholar.smu.edu/jalc Recommended Citation Alan P. Dobson et al., Sovereignty, Politics, and U.S. International Airline Policy, 74 J. Air L. & Com. 527 (2009) https://scholar.smu.edu/jalc/vol74/iss3/1 This Article is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in Journal of Air Law and Commerce by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu. SOVEREIGNTY, POLITICS, AND U.S. INTERNATIONAL AIRLINE POLICY ALAN P. DOBSON* JOSEPH A. MCKINNEY** We are living through a period in which internationalaviation rules must change. Privatization, competition, and globalization are trends fueled by economic and politicalforces that will ultimately prevail. Gov- ernments and airlines that embrace these trends will far outpace those that do not. The U.S. government will be among those that embrace the future.' I. THE PROBLEM A TRULY GLOBALIZED airline industry would be a market- place that is not fragmented by national boundaries, where airlines make decisions on the provision and price of services according to market conditions, and where common competi- tion, ownership, control, and safety regulations apply. To a con- siderable extent these conditions reflect the long-standing * Alan P. Dobson Professor of Politics, Dundee University, has written extensively on Anglo-American relations, the international airline system, and U.S. foreign policy. His most recent book is GLOBALIZATION AND REGIONAL INTEGRATION: THE ORIGINS, DEVELOPMENT AND IMPACT OF THE SINGLE EUROPEAN AVIATION MARKET, (2007). He is editor of the Journal of TransatlanticStudies and he chairs the Transatlantic Studies Association, which he founded in 2002. He held a Senior Research Fellowships at the Nobel Institute, Oslo, 1997; the Lenna Fellowship, St. Bonaventure University, St. Bonaventure, NY, 2005; and a Distinguished Visiting Research Professor Fellowship at the McBride Center for International Business Studies, Baylor University, Waco, Texas, 2008. He is currently writing a book on Franklin D. Roosevelt and the development of the international aviation system. ** Joseph A. McKinney, Ben H. Williams Professor of International Economics, Baylor University; Ph.D. and M.A., Michigan State University, B.A., Berea College. Formerly on the faculty of University of Virginia; Fulbright Senior Scholar to the United Kingdom and to Canada. Research support for this article from McBride Center for International Business at Baylor University is gratefully acknowledged. I Office of the Secretary, Dep't of Transp., Statement of United States Interna- tional Air Transportation Policy, 60 Fed. Reg. 21,841, 21,845 (May 3, 1995). 527 528 JOURNAL OF AIR LAW AND COMMERCE policy objectives of the U.S. government. However, in 2007, for the first time in sixty-three years, U.S. support for liberalization seemed to be weakening as it rejected the European Union's (E.U.) proposal for a transatlantic Open Aviation Area (OAA), which would have embraced both markets. 2 That rejection was ripe with irony as the United States had, for decades, berated the Europeans for subsidizing and protecting their airlines. This study examines U.S. civil aviation policy and explains the limits on its version of a liberal market, limits that set the United States at odds with globalization trends and the claims of its own 1995 policy statement.4 For the time being, the United States is not embracing the future. II. THE CONTEXT Civil aviation has operated at the interface of economics and politics since the establishment of national sovereignty over air space in 1919. 5 With civil aviation complicated by aspects of se- curity, national prestige, safety, and public service factors, the result in the inter-war period was a highly predatory series of bilateral air service agreements (ASAs). The ASAs created an environment where the strong exploited the weak and political considerations infected the airline system with a plethora of self- serving government regulations.6 During the Second World War, when the United States began to plan for a more liberal regime, the problem it had to confront was how to cut, or at least loosen the Gordian knot that tied sovereignty to the airline industry. If this problem was not addressed, the marketplace would remain fragmented, and the playing field competitively uneven. Despite this realization, government would continue- arbitrarily it seemed in commercial terms-to control prices, to insist on cabotage (the reservation of domestic flights for its own national airlines), to restrict market entry, frequency, and capac- 2 ALAN P. DOBSON, GLOBALIZATION AND REGIONAL INTEGRATION: THE ORIGINS, DEVELOPMENT AND IMPACT OF THE SINGLE EUROPEAN AVIATION MARKET 169-89 (2007). 3 See ALAN P. DOBSON, FLYING IN THE FACE OF COMPETITION: THE POLICIES AND DIPLOMACY OF AIRLINE REGULATORY REFORM IN BRITAIN, THE USA AND THE EURO- PEAN COMMUNITY 1968-94 221-235 (1995). 4 See Statement of United States International Air Transportation Policy, 60 Fed. Reg. at 21,845. 5 See generally Convention Relating to the Regulation of Aerial Navigation, Oct. 13, 1919, available at http://www.aviation.go.th/airtrans/airlaw/1914.html. 6 See generally International Air Transport Agreement, Dec. 7, 1944, 171 U.N.T.S. 387. 2009] SOVEREIGNTY, POLITICS, US. POLICY 529 ity of flights, and to insist on national ownership and control of airlines. From 1944 to 2003, the United States applied four successive strategies to try to loosen the Gordian knot and create a more open and competitive international civil aviation system. This was not altruism. The United States has a highly competitive airline industry, and there were profits to be made in the inter- national marketplace. However, U.S. policy-makers also be- lieved that other countries' airlines would benefit as well and, equally importantly, consumers would receive better, more effi- cient, and cheaper services. These were the factors that drove U.S. policy.7 A. THE CHICAGO STRATEGY: 1944 President Franklin D. Roosevelt drew the outline of a post-war international civil aviation industry and he had in mind the body of law brought into existence by Hugo Grotius' famous es- say on the freedom of the seas and hoped to transpose that doc- trine into the field of air communication.8 He wanted arrangements by which planes of one country could enter any other country for the purpose of discharging traffic of foreign origin and accepting foreign bound traffic. 9 This radical vision was presented to the Chicago International Civil Aviation Con- ference in 1944.1o The American position was based on three broad principles and what came to be known as the five freedoms of the air. The first principle was that airlines granted rights to fly between countries X and Y would have to be owned and controlled by countries X and Y."' This national ownership and control prin- ciple was more or less universally applied until the EU invented the concept of community carriers in the 1990s. 12 The second principle was that airlines should be free to offer whatever ser- 7 See DOBSON, supra note 3, at 147-78. 8 Franklin D. Roosevelt Presidential Library, Berle Papers, Box 169, Articles and Book Reviews 1964-67, folder Articles and Book Reviews 1965, The Interna- tional Civil Aviation Treaties Twenty Years Later, Columbia University (Mar. 1965). 9 Memorandum of Conversation by Adolf A. Berle, Dep't of State, U.S. Nat'l Archives, File No. 800.796/495, Nov. 11, 1943. 10 See ALAN P. DOBSON, PEACEFUL AIR WARFARE: THE UNITED STATES, BRITAIN AND THE POLrTICS OF INTERNATIONAL AVIATION ch. 5 (1991). 11 Air Services Agreement, U.S. - U.K., Feb. 11, 1946, 60 Stat. 1499 [hereinaf- ter Bermuda Agreement]. 12 Scandanavian Airline Systems (SAS) might also be seen as a kind of commu- nity carrier as it was owned and operated by more than one country. 530 JOURNAL OF AIR LAW AND COMMERCE vices they wanted between designated international gateways: there should be no pre-determination of capacity and fre- quency.13 In 1944, for example, round-trip flights from the United States to the United Kingdom (U.K.) were limited to two per week for the airlines of each country.' 4 For Americans, this seemed to unduly constrict the market and they wanted provi- sions for escalation of capacity if demand justified it. Thirdly, contrary to commonly held views, the United States rejected the idea of unfettered price competition in favor of some form of price stability.'5 As for the five freedoms, they provided for: (i) innocent passage or over-flight; (ii) technical stops for repairs or refueling; (iii) the right to pick up passengers from an airline's country of origin and disembark them in the territory of the other contracting party; (iv) the right to pick up passengers in the other contracting country and disembark them in the air- line's country of origin; and (v) the right to pick up passengers from the other contracting party and carry them forward to a third party destination. 16 The United States tried to get these freedoms accepted multilaterally, though it was recognized that the five freedoms were highly controversial and that the extent to which they would be granted would depend on bilateral discussions. At Chicago, largely because of British opposition out of fear that the United States would dominate international services, the Americans were unable to persuade the conference to adopt the commercially important third, fourth, and fifth freedoms.17 Consequently, a new commercial regime did not emerge from Chicago.' 8 The first U.S.
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