Open Skies: Trade Agreements Work If the Parties Act in Good Faith

Big trade negotiations with China, Mexico and Canada have dominated the news recently. But an important trade deal that didn’t get as much ink or airtime was the Open Skies agreement entered into between the U.S. and Qatar — who has a long history of providing massive subsidies to its domestic airline. Those subsidies make American domestic airlines compete not only with foreign airlines, but with their host governments and all the tax and oil revenues. This endangers airlines in America and undermines American jobs in the airline industry.
This week, the emir of Qatar will be visiting the White House to discuss a wide variety of issues including antiterrorism and security cooperation. President Trump should also make sure that Qatar’s Open Skies cheating is discussed. We must demand that Qatar lives up to its recent agreement. A friend doesn’t cheat a friend. So if Qatar wants to be treated as our friend, it must behave as our friend.
If foreign governments want to provide massive subsidies to their own airlines for flights within their own nation, that’s their business. The problem is that these massive subsidies are used to advantage their airlines in competition with our own domestic airlines — none of whom receive government subsidies. Thus, the competition is skewed and American companies and American workers are harmed. Robust competition benefits consumers, but twisted and distorted competition only benefits the cheaters. Those who play by the rules are put out of business.
Our domestic airlines can, and should compete with other airlines — foreign and domestic. Competition keeps prices low, and encourages the services, innovation, and quality that consumers desire. But when American domestic airlines must compete with foreign governments and their taxing power, it is unfair and dangerous to thriving competition and markets. Governments have almost unlimited resources. They can make decisions that lose money and will always lose money and then cover the losses with subsidies. No competitive airline in the US can follow that model. If they make choices that lose money today and will always lose money, they will be out of business in short order because they cannot call upon taxpayer funding to make up for the losses.
The Trump administration entered into an Open Skies trade agreement with Qatar about eighteen months ago to make sure that their heavily subsidized airline followed certain rules so that they couldn’t hurt American workers in the airline industry and drive American carriers — who operate without massive government subsidies — out of business. It was a good agreement — on paper. But in practice, it isn’t working out that way.
Qatar Airways is cheating on the agreement they signed. They’ve found a creative way to purchase and interest in a failing Italian regional airline and then provide it with planes and even uniforms from Qatar Airways. Now, they are scheduling additional international flights to and from the US in violation of the agreement they signed just a year and a half ago.
To put the size of the subsidies into perspective, let’s review some facts. A Hudson Institute study authored by scholar Thomas J. Duesterberg shows that since 2015, Qatar and the UAE have provided $48 billion in direct subsidies and another $4 billion of in-kind subsidies to their government operated airlines — Emirates Airlines, Etihad Airways, and Qatar Airways. Because of those subsidies, these airlines can afford to make decisions that lose money. No airline in America can operate that way. If they do, they go out of business. But Qatar airlines just gets a big check from the government’s oil and gas revenue to make up the losses.
Qatar Airways is now violating the Open Skies agreement it signed in January of 2018. One of the main points of that agreement was to prevent Qatar from using billions in subsidies to drive the American airline industry out of business.
Imagine if Congress started a government owned and taxpayer financed fast food restaurant that sold a double bacon cheeseburger meal with fries and a milk shake for a dollar. No restaurant could afford to do that. But a restaurant that has access to billions of government provided subsidies could make it work. And thus, they could drive out of business all the other fast food restaurants because they simply cannot compete with that. That is what Qatar and the UAE are trying to do with air travel.
Qatar and the UAE are American allies and we have military bases on their soil. They’ve both provided assistance in the fight against terrorism. But that can’t be the basis for giving them permission to violate trade agreements and cheat American companies out of a profit and rob American workers out of a good paying job. In fact, because they are our ally, they should be abiding by their trade agreements with us — not cheating us.