[Congressional Record Volume 142, Number 97 (Thursday, June 27, 1996)]
[Senate]
[Pages S7172-S7173]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   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

[[Page S7173]]

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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