Fear of Flying: Aviation Protectionism and Global Growth

Reduction of trade barriers has led to global economic growth, but tight restrictions and regulations on how people and goods reach markets still hamper the expansion of international commerce. Nowhere are the obstacles greater than in the skies above. Forty percent of the world's trade, by value, now travels by air. Forty percent of those crossing national borders arrive by air, with the percentage much higher in advanced growth regions. International travel accounts for half of all revenue passenger miles. Over the next decade, most estimates suggest, the travel industry will double its already sizable contribution to worldwide economic growth.

With the increasing importance of efficiently and economically transporting people and goods by air, an overarching international regime to govern air transportation -- akin to the World Trade Organization (WTO) and its role in trade in goods and services -- could bring enormous benefits. But no such regime exists. In fact, not a single international flight may take off or land without a bilateral agreement between the countries in question. This is true even if all the air carriers and airports involved are owned by private concerns. Bilateral aviation agreements often stipulate the number of flights, the routes, and the number of airlines that may serve specific markets. Worldwide, there are more than 1,200 such agreements in force today.

While the world is moving away from managed and protected trade in most goods and services, the air transportation by which people and products reach destinations and markets is still heavily regulated and often fiercely protected. This antiquated and costly state of affairs dates back to the United States' failure at the end of World War II to achieve the goal of open skies as part of a liberal postwar order. Other governments opposed the concept because the United States was then the only country capable of mounting a global air transportation effort. Resistance to U.S. domination of the airways was reinforced by the sense of countries still at war that control of the skies was a critical security issue.