Foreign-Owned Airlines Should Fly U.S. Routes

Blogger Matt Yglesias proposes that in order to promote competition in the airline industry, foreign-owned airlines should be allowed to fly domestic routes here in the United States:

Let foreign airlines fly domestic routes in the United States.

This is one of those ideas that’s so commonsensical, people tend not to realize it isn’t permitted. But if you’re wondering why it is that, say, Emirates will fly you from Los Angeles to Dubai or from Dubai to New York but not from California to the East Coast, that’s the reason. It’s illegal.

To bolster competition, you need to let foreign airlines actually operate domestic routes.

In theory this might be accomplished through the ongoing negotiations for a Transatlantic Trade and Investment Partnership. The main promise of TTIP is to open up new frontiers in cross-border trade beyond the traditional transportation of manufactured goods. And while letting EasyJet or Aer Lingus fly from Seattle to San Antonio isn’t “trade” per se, the case for it is essentially the same general case for trade—American consumers will benefit if we are allowed to purchase from a wider range of options.

Let any company—regardless of where its headquarters are or who owns it—that’s capable of flying planes safely connect any two American cities, if the company thinks it can make it work.

This is a great idea, and I hope this gets done as part of the TTIP and other trade talks.  I just wanted to comment on his statement that this “isn’t ‘trade’ per se.”  In fact, it is trade per se.  For two decades now, trade rules have covered trade in services, which can be carried out through a number of different “modes.”  I don’t want to get all technical (and believe me, this gets really technical), but when a foreign entity operates a service in the market of another country, that constitutes trade and can be part of trade liberalization commitments in trade agreements.

So, including airline trade liberalization in the TTIP would not be anything novel–it would just be good policy.