International air transport is governed by guidelines established in 1944, when war-torn European states blocked American proposals for open international aviation; a system that allowed protection of national carriers was adopted. In this new century, it is time to revisit the laws governing international aviation.
In this study, Brian Hindley discusses the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO) and the possibility of new international aviation rules. Traffic rights—which carriers can fly where—are the necessary core of any agreement, but they are expressly exempted from the disciplines of the GATS. This creates a unique opportunity for the industry to craft agreements outside the WTO, and then potentially negotiate special provisions for itself within the WTO.
But problems remain. The dispute-settlement process continues to frustrate many carriers, especially U.S. airlines, and it does not seem likely that WTO disciplines will quickly be applied to aviation. In the search for a new organizational basis for international aviation, however, the WTO cannot be ignored.
A more promising candidate for WTO action is the aviation-intensive sector of express delivery. When the Doha Round resumes, Mr. Hindley believes that WTO agreements facilitating express delivery will be feasible. Apart from the intrinsic benefits for the world economy, these agreements would be a valuable introduction to the WTO for international aviation in general.
Trade Liberalization in Aviation Services is one in a series of new AEI studies on negotiations to liberalize trade in services. Each study focuses on a particular service sector, identifies the major obstacles to liberalization in that area, and presents policy options for trade negotiators and interested private-sector participants.
Brian Hindley is Emeritus Reader in Trade Policy Economics at the London School of Economics. He is a consultant on trade-policy matters to a number of international organizations and businesses, including the European Commission, the World Bank, and the Organisation for Economic Co-operation and Development.