The saying goes you can depend on death and taxes as two constants in life. It may be time to add a third in the notion of governments protecting favored businesses from unwanted competition. The latest example of this is National Trade Council Director Peter Navarro’s failed attempt to stop Persian Gulf airlines from increasing service into America via fifth freedom flights.
A bit of background before getting into the nitty gritty of the issue. Emirates and Qatar and Etihad airways were hoping to do more flights from the U.S. to Europe without having to do layovers in the Persian Gulf. The major domestic carriers of American, United, and Delta (unsurprisingly) decided these flights were a bad idea and started lobbying the White House to step in. The trio of air carriers teamed up with labor unions claiming they couldn’t compete with the foreign aviation companies and accused United Arab Emirates and Qatar of providing subsidies to the Persian Gulf airlines. The Justice Department investigated from 2015 to 2016 and found no evidence whatsoever.
Victory for the Persian Gulf air carriers and consumers, right? Enter Navarro with a large white placard saying, “Not so fast.” At least, if Associated Press is to be believed.
From the start, Navarro sought to exert influence over the negotiations, pushing for stricter limitations on Persian Gulf airlines, according to half a dozen U.S. officials and other individuals involved in the dispute. They weren’t authorized to discuss the issue publicly and requested anonymity.
There is definite credence to the AP’s reporting based on a pretty confusing May 14th conference call involving Navarro and Assistant Secretary of State Manisha Singh. Via Air Transit World (emphasis mine):
“There will be no additional routes into the United States until further notice,” Navarro said. “That’s a promise that will be kept.” But he added the freeze applied only to passenger airlines, not cargo carriers. FedEx operates fifth freedom rights via Dubai, while Dubai-based Emirates Airline operates two fifth freedom routes, from Italy and Greece, to the US. Abu Dhabi-based Etihad Airways does not operate any such routes
Navarro’s statements, however, do not sync with UAE government statements, which say the Open Skies agreement remains fully intact. Nor do they fit with the side document recording main points agreed—known as the Record of Discussion—which makes no mention of route freezes or fifth freedom restrictions.
Tori Barnes of the US Travel Association, who attended the White House briefing, asked for clarification about fifth freedoms, route freezes and changes to the Open Skies agreement rights, saying the association did not see any changes in the side document. US State Department assistant secretary Manisha Singh replied, “Your rights under the agreement do not change. That is correct.”
Here’s where things get even more murky. The White House put out a statement May 17th which contradicted Navarro’s claims of a freeze:
Lastly, the UAE informed the United States that its air carriers have no current plans to begin any new commercial “Fifth Freedom” flight routes, which are of particular concern to the U.S. carriers. The understanding mirrors the one made with Qatar earlier this year.
Navarro mirrored the White House’s comments on flights in an op-ed written at Washington Examiner. It may have been because the Emirates government complained to the White House on the issue, per AP, but it also could be the White House saw Navarro’s comments and got irked he contradicted what everyone else was saying.
Here’s the big issue: portions of the White House (Navarro) were and are trying to convince Trump to prop up and protect American companies. There are going to be people who say, “Oh this is fine,” but let’s remember America is supposed to be a free market. It means all sorts of companies are supposed to be able to compete against each other, even if a foreign government happens to own said company (this is why I don’t complain about the Russian government-owned Russia Today broadcasting in the U.S.). One thing Veronique de Rugy noted in Reason is the fact those who believe in limited government and free markets should be in favor of letting private business compete against one receiving foreign subsidies.
A common error made by protectionists in this and other cases is the presumption that foreign subsidies put the United States at a competitive disadvantage. What’s notable about this misunderstanding is that it’s often asserted by the same individuals who profess to support limited government and free markets. They believe in free markets, but they don’t believe in them enough to trust that they themselves can outperform the less free nations that choose to direct economic resources via political processes.
The common reply is that they believe in free markets as long as they are “fair,” but in the eyes of too many, fairness is a euphemism for a lack of competition. It seems much likelier that they don’t really believe in markets at all. In the eyes of the protectionist, government must intervene whenever a U.S. industry appears to flounder, regardless of the source or nature of the competition. Navarro, for instance, is fully on board with the president’s latest disastrous idea of a 25 percent tariff on auto imports.
We’ve seen government play favorites far too often in our nation’s history. Uber and Lyft almost ended up being driven out of Dallas – and were temporarily knocked out of Austin and San Antonio – because taxi cab companies lobbied their fans in government walls to enact restrictions which put them ahead of ride-sharing companies. Southwest Airlines was long restricted from being able to do direct flights out of Dallas Love Field because the airlines and the city of Fort Worth succeeded in getting the Wright Amendment passed in 1979.
The domestic airlines should offer better services to consumers, instead of trying to limit the activities of competitors. The protectionists in government aka cronies should be rejected when they put forth ideas of trying to prop up their friends in business under the guise of, “protecting the American consumer and worker.” Just let the free market do its job.