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The ‘three pillars of stagnation’: challenges for air transport reform

Published online by Cambridge University Press:  16 May 2006

CHRISTOPHER FINDLAY
Affiliation:
The University of Adelaide
DAVID K. ROUND
Affiliation:
The University of South Australia

Abstract

Various aspects of trade and investment in air transport services are regulated by a series of bilateral agreements in which rights of market access are exchanged. Industry commentators have identified this system and the associated national ownership rules as well as the prevailing attitude of competition authorities (on merger policy and on airport pricing) as the most important factors limiting adjustment in the international air transport industry. These ‘pillars of stagnation’ are examined here. Features of the bilateral agreements in aviation that are similar to those of other preferential trading agreements are noted and linked to the slow pace of policy reform in this industry. The three ‘pillars’ are not independent, and effective liberalization of trade and investment in air transport services depends on complementary regulatory reform. Options are presented on ways in which these changes might be designed and introduced, and in what sequence that might be done. Air transport services are currently excluded from the WTO's General Agreement on Trade in Services (GATS), and an important enquiry is how multilateral commitments recorded in the GATS might support reform.

Type
Research Article
Copyright
© Christopher Findlay and David K. Round

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Footnotes

This paper draws on work reported in a number of others, including one on competition policy by the authors and Findlay's work with Andrea Goldstein on foreign investment in air transport. Findlay's contribution to this paper was supported by grants from the Australian Research Council, as well as by a project on air transport regulation at the Groupe d'Economie Mondiale (GEM) at the Institut d’études politiques in Paris. An earlier version of this paper was presented to the Symposium ‘Why have a World Trade Organization? Focussing on the Welfare Effects of the Law of the World Trade Organization’, Institute for International Business, Economics and Law of the University of Adelaide and Centre for International and Global Law of the Faculty of Law of the University of Sydney, Wednesday 25 February 2004, National Wine Centre, Adelaide, and at a seminar in the Asia Pacific School of Economics and Government at The ANU on 3 May 2005. All errors are the authors'.