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Gulf carrier subsidies threaten major U.S. economic sector, draws key parallels to demise of the shipbuilding industry

By the Partnership for Open & Fair Skies

Washington, DC, July 29 - A new report says that the rapid, government-subsidized expansion of capacity by Qatar Airways, Etihad Airways and Emirates into the United States is following a historical pattern that points to dramatic and irrevocable long-term harm to a core segment of the U.S. economy. The research report, authored by Aaron Klein, a former deputy assistant secretary for economic policy at the U.S. Treasury Department, draws clear parallels from the decline of the domestic shipbuilding industry to the present-day trade dispute with the subsidized carriers. 

The paper, entitled, "Decline in U.S. Shipbuilding Industry: A Cautionary Tale of Foreign Subsidies Destroying U.S. Jobs," examines the systematic elimination of the U.S. domestic shipbuilding industry through the 1980s and 1990s as a result of subsidized foreign competition. Qatar Airways, Etihad Airways and Emirates have received more than $42 billion in subsidies and other unfair benefits from their government owners in the past decade, in violation of Open Skies agreements.

"The effects of foreign subsidization on our economy are substantial and deeply detrimental," said Klein, who also served as chief economist of the Senate Banking, Housing and Urban Affairs Committee. "Jobs that are lost do not come back. Portions of the industrial base can be eroded, devastating companies, communities, and significantly impacting our national defense."

Klein continues: "The end of a level playing field in aviation, with U.S. companies facing direct competition from subsidized foreign carriers, is remarkably similar to what happened to U.S. shipbuilders in the 1980s. If these foreign carriers are indeed successful in shifting traffic from American companies to their own, then American aviation will suffer," he writes.

The report also estimates that the effects of continued inaction could put 200,000 American jobs at risk -- a significantly higher number than previous estimates provided by the Partnership to the U.S. government agencies currently reviewing the issue. "If this foreign, subsidized capacity remain unregulated, the U.S. aviation industry will be decimated by a loss of almost 200,000 jobs, when considering losses from passenger traffic and those jobs supported by passenger aviation."

"This analysis underscores what airline employees, Members of Congress, and business and community leaders have been saying for months: the subsidized Gulf carriers are distorting the global marketplace, harming the U.S. airline industry and threatening U.S. workers' jobs," said Jill Zuckman, chief spokesperson for the Partnership. "The U.S. government must act immediately to open consultations with the governments of Qatar and the United Arab Emirates and address these Open Skies violations now."

The full report is available here.

Background on Partnership for Open & Fair Skies

The Partnership for Open & Fair Skies is a coalition that includes American Airlines, Delta Air Lines and United Airlines, along with the Air Line Pilots Association, the Allied Pilots Association, the Southwest Airline Pilots' Association, the Association of Professional Flight Attendants, the Association of Flight Attendants-CWA, the Communications Workers of America, and the Airline Division of the International Brotherhood of Teamsters. The Partnership presented a white paper, Restoring Open Skies: The Need to Address Subsidized Competition from State-Owned Airlines in Qatar and the UAE, to the U.S. government. The Partnership called on the Obama Administration to open consultations under the Open Skies agreements with Qatar and the United Arab Emirates to address the flow of subsidized capacity to the U.S., and to seek a freeze on new passenger service during the consultations.


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