EC PROPOSES REGULATION TO IMPOSE DUTIES ON FOREIGN SUBSIDIZED AIRLINES
The European Commission has proposed a regulation that would allow the Brussels-based body unilaterally to impose duties on subsidized foreign airlines.
The European Commission said it acted “to fill the legal vacuum to react against unfair competition from subsidized third-country competitors in the airline sector.”
The new regulation will address subsidies as well as unfair pricing practices by third-country competitors resulting from non-commercial advantages granted by their governments.
The World Trade Organization and the General Agreement on Trade in Services have no agreed rules to redress trade distorting effects of subsidies in the international air transport industry, nor does the WTO provide rules on unfair pricing practices of state-controlled air carriers.
“Therefore, multilateral trade instruments do not allow for adequate protection in this area,” the European Commission said.
The EC noted that certain countries, including the United States, have already introduced instruments to deal with unfair competition from subsidized airlines. “For instance, in the United States, since 2000, the Secretary of Transportation is allowed to take action to eliminate ‘an activity of a government of a foreign country or another foreign entity, including a foreign carrier’ when this is considered an ‘anticompetitive practice against an air carrier’,” the EC said.
The commission proposes to allow the imposition of duties on those air carriers from third countries benefiting from subsidies. Duties will be calculated on the basis of the amount of aid granted to those airlines, and “will not be higher than necessary to remedy the damage caused to community carriers,” the EC said. If the third-country carriers are state-controlled, duties will also be imposed to offset any unfair pricing practices resulting from other non-commercial advantages granted by governments.
Under the proposed regulation, the EC would commence an inquiry after receiving a complaint from the air transport industry, for example from a European airline.
In the maritime transport sector, the European Commission already has an applicable regulation to deal with unfair pricing practices, Council Regulation (EEC) No. 4057/86 of 1986.