Liberalization of air transport services

Introduction Air transport, at least, the direct provision of the service, is currently excluded from the provisions of the General Agreement on Trade in Services (GATS) by a special annex. However the GATS also contains a provision that the Council for Trade in Services shall review periodically, and at least every five years, developments in the air transport sector and the operation of this Annex with a view to considering the possible further application of the Agreement in this sector. A review of the current treatment of air transport began in 2000 and participants were unable to reach agreement in December 2000 on how to proceed. A fundamental desire by many members to retain the current bilateral system of air traffic rights was an important consideration, although important technical issues revolved around the coverage of the exclusion. Although there does not appear to be much support for abolishing the annex, many members are interested in ways to improve the operation of this important sector (WTO 2001). While many of the recent changes in the sector, such as the formation of airline alliances, clearly have some important advantages, there are also significant concerns about issues such as market power at hub airports, and the asymmetries associated with some “open skies” agreements. This chapter outlines the features of the current arrangements for the regulation of trade and investment in the sector. It reviews some routes to reform, including the multilateral track and options for dealing with air transport in the GATS.