By: Peter Navarro, Assisant to the President for Trade & Manufacturing Policy
This week, President Trump secured another big win for American workers and businesses. At the direction of the White House, Secretary of State Mike Pompeo, working closely with the Department of Transportation, struck a deal that resolved a three-year “Open Skies” disagreement between the U.S. and the United Arab Emirates over the UAE’s unfair subsidization of its two major airlines, Etihad Airways and Emirates Airline.
The U.S. has signed “Open Skies” civil aviation agreements with about 125 countries, including the UAE and Qatar, which are intended to facilitate the growth of an efficient, market-based international aviation system. Worldwide, these agreements have helped protect the interests of American workers and businesses, but in the case of UAE and Qatar, serious concerns were raised about their effectiveness.
According to some U.S. airlines, the oil-rich governments of the UAE and Qatar have provided their air carriers over $50 billion in subsidies since 2004. These American carriers have asserted that the subsidy-enabled dumping of airline capacity by the Gulf carriers into the U.S. market has nearly eliminated U.S. airline service to the Middle East and India.
For every long-haul route forgone by U.S. carriers, more than 1,500 American jobs are lost, they estimate. The result of this unfair competition, these U.S. airlines allege, is that Emirates, Etihad, and Qatar Airways have become among the fastest growing carriers in the world. The UAE’s Dubai airport is now one of the world’s busiest.
What these U.S. carriers have been arguing is simple: Their pilots, flight attendants, machinists, and other working men and women flying our open skies cannot compete with state-owned airlines operating outside the free and fair marketplace envisioned by the Open Skies framework. The pleas of these U.S. carriers, however, fell on deaf ears during the Obama Administration.
In contrast, the Trump White House quickly assembled a task force with representatives from the two key agencies – the State Department and Department of Transportation – along with representatives from the Departments of Commerce and Justice, the U.S. Trade Representative, and the Council of Economic Advisers. Emblematic of Trump’s America First policies, the State Department was directed to secure a new understanding with Qatar, which was consummated in January, and then with the UAE, which was achieved this week.
The contours of these two new understandings are very similar. First, the parties acknowledge that government subsidies adversely affect free and fair competition in the international aviation market. The Gulf carriers should pay their full and fair share of the costs of operating out of their international airports.
Second, the UAE and Qatar governments have committed to financial transparency and to conduct transactions based on commercial terms. Their airlines should not operate behind an opaque accounting wall that shields their government subsidies from public view. Together, these reforms should substantially curtail any unfair subsidization.
Third, both the UAE and Qatar governments have informed the U.S. that their respective carriers have no current plans to begin any new commercial “Fifth Freedom” flights. This is particularly important to the concerned U.S. carriers, as such routes involve the Gulf carriers flying from the U.S. to destinations like Europe without U.S. travelers ever landing in Qatar or the UAE.
By addressing the concerns of these U.S. carriers and standing against unfair trade practices, President Trump is keeping his own campaign promises at a record pace. He has slashed the corporate tax rate, eliminated scores of unnecessary regulations, unleashed our coal and petroleum resources, and withdrawn from bad deals ranging from the Paris Climate Accord and Trans-Pacific Partnership to the Iran nuclear fiasco. He has taken action to address threats to our national security by imposing tariffs on aluminum and steel and negotiating means to address those threats with various countries. He has also taken action to address injurious imports of solar cell and modules and washing machines, thereby stimulating significant new investment on U.S. soil. He has successfully renegotiated the deeply flawed South Korea trade pact.
Peter Navarro is the director of the National Trade Council.
Published on The Washington Examiner.