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“UNITED STATES-JAPAN AVIATION RELATIONS: PROGRESS OR PROTECTIONISM” mentioning the U.S. Dept. of Transportation was published in the Senate section on pages S7172-S7173 on June 27, 1996.
The publication is reproduced in full below:
UNITED STATES-JAPAN AVIATION RELATIONS: PROGRESS OR PROTECTIONISM
Mr. PRESSLER. Madam President, in recent months the Government of Japan publicly has indicated its desire to move forward in United States-Japan aviation relations by expanding air service opportunities. Given that Japan is our second largest aviation trading partner overseas and is the gateway to the booming Asia-Pacific market, these statements are encouraging news for consumers on both sides of the Pacific. Regrettably, Japan's actions speak much louder than its words.
While Japan certainly talks about progress, it has prevented any real progress from taking place by continuing to prohibit several of our carriers from serving various United States-Asia markets via Japan despite a clear right to do so guaranteed by the United States-Japan bilateral aviation agreement. In fact, Japanese negotiators seem more intent on protecting intra-Asian air service markets for Japanese carriers by blocking out United States carrier competitors than they are in opening the United States-Japan aviation market. That certainly was evident in air service talks earlier this month in Tokyo.
Japanese negotiators must make a choice. They must choose between progress or protectionism. More fundamentally, Japan must choose whether to embrace the future of global air service or unwisely cling to the past. In our ongoing air service talks with the Japanese, the United States is rightly requiring the Japanese to make that choice: Japan must meet its present obligations and stop wrongly protecting its air service markets before a new treaty can be discussed.
Other countries faced with that same decision overwhelmingly have chosen progress. Over the past 2 years, over 20 nations have signed more liberal aviation accords with the United States. No wonder. The economic benefits flowing from an opening of air service opportunities can be enormous. Our recent phased-in open skies agreement with Canada dramatically makes this point. Since that signing, the United States-
Canada aviation market has generated an additional 1 million passengers and a remarkable $2 billion in economic activity on both sides of the border. In terms of enhanced consumer choice, nearly 50 city-pair markets have received first time scheduled service and another 14 city-
pair markets have received additional competition. These benefits will surely grow as the remaining barriers are phased out. In fact, the United States Department of Transportation estimates from 1995 through 2000, the cumulative economic benefits of this accord to both countries will be $15 billion.
In contrast, some countries such as France have chosen protectionism thereby foregoing the economic benefits of further liberalization. While air service markets around France have grown significantly in recent years as those countries have opened their markets, the French air service market has been stagnant. In fact, last year combined passenger traffic at the two major Paris airports fell nearly 1 percent. Is it any wonder Air France has accumulated losses totaling
$3.3 billion since 1990, and continues to have operating costs among the highest in the world? As the French experience unmistakably shows, in today's global economy a protectionist air service policy is economic folly.
Fortunately, most countries are rejecting the protectionist path. For instance, most recently 18 member economies of the Asia Pacific Economic Cooperation [APEC] organization voted specifically to add aviation to the list of core industries designated for liberalization, and the European Union has been given a limited mandate by member States to negotiate an open skies agreement with the United States. Nevertheless, there are major United States trading partners in addition to France, such as Japan and the United Kingdom, that continue to resist change.
Madam President, in Japan's case the reasons are evident. For nearly two decades cost inefficiency has caused Japanese carriers to become less competitive and to lose their market share even on Asian and Pacific routes that are not open to significant competition. Japan's chief aviation policy makers at the Ministry of Transportation [MOT] have responded to the challenge negatively, creating operational obstacles for U.S. carriers and demanding increasingly restrictive limitations on its originally open 1952 Air Transport Agreement with the United States.
And therein lies the heart of the problem confronting the United States delegation in the aviation talks. The issue is both philosophical and economic. Japan is convinced its airlines cannot compete for Asian markets whose annual passenger volume is expected to triple--and account for more than half the world's traffic--by 2010. The United States, on the other hand, has to be concerned that, as the Economic Strategy Institute concluded recently, the loss of its competitive aviation presence in the booming Asia-Pacific market would cost this country $5 billion in trade receipts annually and hundreds of thousands of United States jobs. Incredibly, the MOT's approach--in contradiction to the Japanese Government's stated goal in virtually all other sectors--is to eliminate competition from highly cost-efficient United States airlines. In pursuit of this short-sighted policy, the MOT has threatened sanctions to penalize carriers that are only exercising their rights. Thus, Japan is caught in a trap. The restrictions it has imposed over the years have prevented its airlines from becoming more efficient, and now the MOT believes it has to protect them if they are to compete in Asia.
Nonetheless, to the United States, the MOT's intransigence poses a series of inescapable dilemmas. It cannot ignore Japan's refusal to abide by the 1952 agreement without setting a very dangerous precedent for all of our other international agreements. It cannot concede more treaty modifications or restrictions without surrendering the few rights left to United States carriers and accepting Japanese control over the United States presence in many United States/Asian aviation markets. It cannot stand passively by while Japanese carriers expand service in those very same markets to which United States carriers are wrongly denied access. And, ultimately, the United States cannot yield to Japan's protectionist policy without abandoning its long-standing commitment to the principle that open competition in a free market environment is the only way to advance the best interests of consumers, countries, communities, and carriers that together shape a global and interdependent economy.
Thus far, United States negotiators are standing firm in defending that critically important principle despite intense pressure exerted by Japan directly and indirectly. As the talks proceed, our representatives deserve our complete support. We can hope only that their efforts will lead to Japan's realization that protectionism is inevitably an obsolete trading weapon capable of serving no one but of causing great harm.
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