WTO Unlikely to Get Involved in Airlines' Subsidy Row

A senior World Trade Organization executive has quashed attempts by U.S. and European airlines to get the trade body involved in solving their high-profile international row with Middle East carriers over market access and subsidies, the Wall Street Journal reported. Only last week CEO Peter Gerber of Lufthansa Cargo had addressed the WTO to include aviation in its mechanism of checks and balances.

WTO’s Hamid Mamdouh
WTO’s Hamid Mamdouh

The three major U.S. carriers - Delta Air Lines, United Airlines and American Airlines - and European airlines Air France-KLM and Lufthansa, have urged their governments to block further market access to Emirates Airline, Qatar Airways and Etihad Airways, which they accuse of receiving US$42 billion in government backing. The subsidies allow them to compete unfairly, the critics allege, but the three Gulf carriers deny they are being subsidised.
In June, Lufthansa chief executive Carsten Spohr said the World Trade Organization could serve as a "balancing mechanism", despite the fact that the airline industry historically has been excluded from WTO rules governing global trade in services. This approach was now tabled by LH Cargo’s chief Gerber anew during a panel with leading industry members at Leipzig/Halle airport.

WTO’s Mamdouh reacts cautiously
"The sector is out of the scope of the WTO," Hamid Mamdouh, the body's director of trade in services told the recent CAPA World Aviation Summit in Helsinki. "Any solution that involves the WTO as an institution, as a negotiation forum, would have to be of a longer-term rather than short-term concern," he said. Existing WTO dispute-resolution tools could be used by others to try to resolve the issue, he added.
The paper quoted Mr Mamdouh as saying that, in order to resolve the disagreement, the parties involved first have to detail the scale of the issue. That assessment, he said, hasn't yet happened.

Abolishing ownership restrictions first
Mr Mamdouh said a fuller involvement of the WTO in air-transportation issues would be possible, but would take time and would likely require far-reaching agreements on issues that have proven contentious, including airline ownership.
The U.S. and Europe, for instance, maintain limits on foreign ownership of airlines. Those restrictions would have to be lifted since they don't comply with global trade agreements, Mr. Mamdouh said.
Changing airline ownership rules is unlikely, though. Zhihang Chi, vice president at Air China, said WTO-like rules on ownership aren't applicable to the aviation sector, which many countries see as an instrument of national policy.

Nol van Fenema

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