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Open Skies To Japan And Beyond



We've heard it all before. Trade relations between the U.S. and Japan are bad again. The U.S. imposes a $100,000 tithe on each Japanese container ship to protest the high cost of unloading American ships in gang-run

Japanese ports. Treasury Secretary Robert E. Rubin warns that Japan should raise domestic demand to boost its anemic economic growth and not rely solely on a weak yen and exports to America. After cars, insurance, electronics, shipping, chips, and telecommunications, what's left to argue about? How about aviation?

On the altar of compromise, the Clinton Administration appears poised to sacrifice its Open Skies policy and the principle of free trade in the air by cutting a deal that carries a very high cost--restrictions on the ability of American carriers to fly from Japan to the rich markets of East and Southeast Asia. This is one instance where Washington shouldn't cave in. In the 25 Open Skies agreements Washington has signed so far, all restrictions on flights between the U.S. and other countries were lifted. The most competitive airlines have picked up market share. Since deregulation, U.S. carriers have tended to be among the most efficient in the world, and Open Skies have been great for them. Even without Open Skies, they have done well (page 35).

Under a 1952 aviation agreement, Japan Airlines, Northwest, and United Airlines have the right to fly the U.S. and Japan route and then from Japan to the rest of Asia. Tokyo thinks the 1952 agreement is unfair and wants to include All Nippon Airways and curb access by U.S. carriers to the lucrative Japan-East Asia and Japan-Southeast Asia markets. In exchange, Tokyo is willing to add flights to Japan for Delta, Continental, and American Airlines. Good deal?

No way. The solution is not more regulated trade but free trade. Open Skies does just that. A compromise deal would be a terrible precedent, undermining the Open Skies agreements already signed as well as ongoing negotiations with Britain. Compromise also would send the wrong signal to the mercantilists in Beijing and the rest of Asia watching how Japan deals with the U.S. This is one time where the U.S. should stand on principle--the principle of free trade.

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