U.S.-E.U. Open Skies Deal and Its Implication for the Liberalization of International Air Transport Services: A Chinese Perspective

• Author: Gong Yu
• Position: Ph.D. in International Law; Assistant Professor of Xiamen University Law School
• Pages: 129-157

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I Introduction

Air transport plays a crucial role in facilitating international commercial transactions. With the acceleration of economic globalization, the movement of goods and personnel worldwide has become more and more frequent, which leads to an increasing demand for international air transport services. Although the WTO multilateral trading system has made noticeable achievements in liberalizing trade in services since the Uruguay Round negotiations, the main body of international air transport services is still dominated by traditional bilateral arrangements, most of which are characterized by protectionism and restrictionism.

The United States emerged as the world’s dominant aviation power after World War Ⅱand went to great length to promote the liberalization of international air transport services. During the Chicago Conference of 1944, the U.S. proposed a free-market philosophy in which airlines of all nations would have relatively unrestricted operating rights on international routes, but it was then too ambitious to be popular. 1As the Chicago Conference failed to formulate a comprehensive multilateral framework for international air services liberalization, bilateral regimes based on protectionism and reciprocity became prevalent.²

Following the successful deregulation of its domestic air transport regimes in 1970s, the U.S. began to export Open Skies policy into international level through a strategy of “divide and conquer,”which gave rise to much controversy within the European Union (EU).3 After undertaking an arduous journey, the U.S. and the EU eventually signed an Open Skies Agreement on 30 April 2007. This historic deal opened up air services between the EU and the U.S. by removing all caps on routes, prices, and the number of weekly flights between the two markets.⁴ Compared with the slim prospects of the Doha Round air transport services negotiations, the U.S.-EU Open Skies deal not only heralded a new era in transatlantic aviation, but also strengthened the path-dependence of air transport services liberalization. Faced with global aviation competition, ChinaPage 131need to make a strategic choice on the basis of its actual conditions and specific interests.

II An Overview of the Regulation of International Aviation

A The Legal Status of Airspace above State Territory

From the inception of aviation activities of mankind, the legal status of airspace above state territory has become an unavoidable question in international law, especially when airplanes fly across the state boundaries. Could the aircraft from one state freely enter the airspace of another state and land on its territory? If not, what restrictions might be imposed?⁵ To answer these questions, European scholars initiated a heat debate on the issue of state sovereignty over airspace in early 1900s, and contributed a wide divergence of thought to this topic. Some scholars, influenced by the rule of freedom of the high seas, advocated the absolute freedom of air navigation, arguing that aircraft should be free to fly at any altitude without any right of control in the subjacent states.6 While others, influenced by traditional notions of sovereignty, advocated that a state had absolute sovereignty over all airspace supra-adjacent to its territory.⁷ Between these two extreme positions, there also appeared various intermediate schools of thought, such as the “limited altitude”theory and “limited sovereignty”theory.8

In 1910, when various states met at the International Conference on Air Navigation in an attempt to define airspace sovereignty in international law, opinions of the Unite Kingdom and France regarding “regimes of the air”diverged sharply, and the Conference failed to achieve its objectives.⁹

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World WarⅠdid much to advance aviation technology, as well as to demonstrate the incredible destructiveness that air power could wreak during all-out war. Accordingly, the need for a state to protect itself prevailed over the advantages to be gained from freedom of commerce by air.¹⁰ When the first multilateral treaty concerning air law was signed following the 1919 Paris Peace Conference, two decades of debate over territorial airspace ended with a formal recognition under Article 1 of the treaty that “every Power has complete and exclusive sovereignty over the air space above its territory”,¹¹ which insured the right of all states under international law to regulate and control all aviation activities in their sovereign airspace.

B The Chicago Conference and the Five Freedoms of the Air

As World WarⅡentered its final stages, the major powers realized the need to make another attempt to establish a multilateral framework for the future growth and regulation of international aviation. With this in mind, representatives of fifty-two nations gathered at the International Civil Aviation Conference in Chicago in November of 1944. Initial optimism for a comprehensive multilateral agreement of air transport services soon faded, however, as economic and political rivalries emerged between a number of the Conference’s more prominent members, particularly the United States and the Unite Kingdom.¹²

The United States, recognizing that much of its military fleet would soon be converted to commercial use, pushed for a free-market system that would allow U.S. carriers to capitalize on their impending competitive advantage.¹³ To this end, it spared no effort in lobbying for the multilateral exchange of the “Five Freedoms”of air transport, which could be summarized as follows:

(1) The freedom of an airline to fly over the territory of another country without landing (often referred to as freedom of transit).

(2) The freedom of an airline to land in another country for non-traffic purposes, such as refueling or maintenance, without offering any commercial service to or from that point.

(3) The freedom of an airline to carry passengers, mail and cargo from its own country of registry to another country.

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(4) The freedom of an airline to carry passengers, mail and cargo from another country to its own country of registry.

(5) The freedom of an airline to carry passengers, mail and cargo between two countries outside its own country of registry as long as the flight originates or terminates in its own country of registry.¹⁴

However, this ideal was not in line with the opinion of the United Kingdom and the majority of the developing countries who considered this policy as a threat to their economic interests as they felt that they were not in a position to compete with the more competitive American airlines. Fearing that the more powerful American aviation industry would dominate the international market in an unregulated free-market environment, the United Kingdom and most other states proposed the creation of an international authority to coordinate international air transport, which would be responsible for distributing routes and determining capacities, frequencies and fares.15

Up to the time of the signing of the Convention on International Civil Aviation [hereinafter the Chicago Convention] on 7 December 1944, the states attending the Chicago Conference were still unable to eliminate their divergences and agree upon a multilateral solution as to the exchange of air freedoms. The Chicago Convention, which laid the foundation for the international aviation regulation of the post-war era, reaffirmed that “every State has complete and exclusive sovereignty over the airspace above its territory,” 16 and required that international air transport services should “be established on the basis of equality of opportunity and operated soundly and economically.” 17 As the embodiments of the above principle, Article 6 of the Chicago Convention made it clear that “no scheduled international air service may be operated over or into the territory of a contracting State, except with the special permission or other authorization of that State.” 18 In the light of this statement, the development of any scheduled international air service would necessitate further agreement (either multilateral or bilateral) among the states.19 As scheduled flights account for the overwhelming majority of international air transport services, the significance of Article 6 is self-evident.

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As an effort to provide a multilateral solution to the problems derived from Article 6, the Chicago Conference proposed two other multilateral agreements: the International Air Services Transit Agreement and the International Air Transport Agreement. The first Agreement was for the exchange of the first two freedoms of the air (the freedom to fly across the territory of another state without landing and the freedom to land for non- traffic purposes) among contracting states, 20 and the latter was for the exchange of all “five freedoms,”which include not only the first two “technical freedoms” , but also the three “commercial freedoms.” 21 While the number of...