The rise of a mega bloc: Is the time ripe for an ASEAN-EU open skies agreement?
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Traffic rights and air transport agreements have traditionally been negotiated bilaterally between countries and used to further geopolitical goals. While the EU has developed supranational aviation institutions allowing for open skies within Europe, ASEAN countries have relied on consensus-building and separate agreements with external partners like China. Currently, there is no single ASEAN aviation market or common open skies policy, but negotiations are ongoing both within ASEAN and between ASEAN and external partners like the EU to further liberalize air transport and integrate markets.
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The rise of a mega bloc: Is the time ripe for an ASEAN-EU open skies agreement?
- 2. Traffic rights are negotiated on a bilateral basis Air traffic rights were viewed as an instrument of national policy and geopolitics This partly explains why even in the GATS, market access in air transport services is expressly excluded
- 3. First EU-ASEAN Aviation Summit last February 2014 in Singapore › Inter-regional integration and market liberalisation › Open skies agreement
- 4. It has no definite meaning. Proper starting point would be every State has exclusive sovereignty over its airspace “Open skies” are targeted to open access to foreign carriers To open the skies of the regional economic blocs, there is a necessary presumption that intra-regional access has been opened first
- 5. Presently, there is no ASEAN “open skies” or “single aviation market” to speak of.
- 6. “ASEAN way” of consensus-building and consultation The measures to open ASEAN’s skies themselves are not liberal enough Disjointed attempts by both member States and ASEAN itself to liberalize air transportation outside the region › Signing by Singapore and Brunei of an Air Transport Agreement (MALIAT) with other members of the APEC › Signing of an Air Transport Agreement with China in 2010 › Ongoing negotiations with other countries for the passage of similar agreements
- 7. Aviation policy has developed in the EU and ASEAN in a slightly different way. The key point is that the differing paths of development of institutions in both regions propelled the integration agenda forward in a different manner as well. › The role of supranational institutions in the EU › The role of the “ASEAN Way” of consensus- building and consultation
- 8. EU and ASEAN may decide not to proceed with the negotiation of an open skies agreement until the ASEAN Single Aviation Market has been fully completed; or Simultaneous to the talks of an open skies agreement, the EU could use the US’ strategy of encirclement by engaging in negotiations with individual ASEAN member States for the execution of open skies agreements.
- 9. The progress of the negotiations also depend on the Council of Ministers’ willingness to enter into such an agreement in the first place.
- 10. It will be the first bloc-to-bloc open skies agreement in history. It will also be the largest multilateral air services agreement in the world today Most importantly, , the EU-ASEAN Open Skies Agreement may also provide the catalyst for the abandonment of the Chicago Convention system of bilateral ASAs and completely open the global skies.
Hinweis der Redaktion
- In 1944, the Chicago Convention established a regulatory system where traffic rights were granted and negotiated upon a bilateral basis. This means that in order for a country’s carrier to operate internationally, an air service agreement with the destination country granting the former certain air traffic rights was a necessary prerequisite. Air traffic rights were viewed as an instrument of national policy and a negotiating tool to establish aviation relations only with countries considered to be “desirable” from a political and economic standpoint. Why is this so? The reality is international air transportation and geography are inseparable. Unfortunately, not all countries are created the same. Some are in ideal geographic locations while some are in the so-called end-of-line areas; some possess a vast land mass while some cover very little land area. Thus most of the countries which are geographically significant or densely populated would rather deal with other countries on a bilateral basis due to a shifting level of bargaining powers depending on which country is on the other end of the bargaining table. The Annex to the GATS on Air Transport Services states that the agreement shall not apply to measures affecting ‘traffic rights, however granted’ or ‘services directly related to the exercise of traffic rights’.
- Despite being ASEAN’s oldest dialogue partner, air transportation (more specifically, air service agreements), was not on the agenda in ASEAN and EU engagements until 2012, when the ASEAN transport ministers announced its interest to initiate negotiations for an ASEAN-EU air transport agreement. Pursuant to that, earlier this year, EU and ASEAN held its first aviation summit in Singapore. There was a consensus that inter-regional integration and market liberalisation were on the forefront as points of mutual interest and bases for future talks. An open skies agreement was the desired output.
- “Open skies” has no definite meaning. Using the principle of exclusive sovereignty over the airspace as a starting point, contracting States usually manage the extent and scope of access that the other contracting party can take and the activities it can perform in the former’s territory. Protectionist states adopt restrictive policies targeted to give foreign carriers as little access to their airspace as possible in order to preserve their national carrier’s business. Open skies operates in the opposite manner. It is rather a distinct aggregate of policies and measures all targeted to the relaxation of controls imposed upon international civil aviation with the aim to deregulate or liberalize air transportation services and promote market competition. The degrees of relaxation vary but the desired effect is to give “rise to more competition between airlines, more scope for airlines of a third country to serve on a route between two other countries, and more flexibility for airlines to develop their routes and networks as they choose.”Thus, in the context of the ASEAN and EU open skies agreement, there is a presumption that before they will open access to their respective aviation markets to the other regional bloc, the aviation market within the region has been essentially opened already. But recently, there has been a shift in terminology. It is no longer apt to simply say the EU is an open sky because this is not exactly the case. More than being merely open, the movement is now to treat every EU member country’s airspace as part of a larger whole, thus the term “single aviation market” was coined. ASEAN has also embraced this concept fully. But, the central issue in the paper would be…
- Why is this so? This paper highlights numerous possible factors..The airline industry in Southeast Asia has been coddled by national governments as a matter of national policy. This protectionist stance coupled with the lack of formal institutions make it difficult to open ASEAN’s aviation markets. Known as the “ASEAN way,” there is an emphasis within the organization on reaching consensus as much as possible. If there were any points of disagreement, they would set these aside for the next meeting and focus on the points on which they agree. Moreover, they are given the utmost flexibility; even if everyone had agreed on a certain matter, not everyone is obliged to implement it.As part of the roadmap for the integration of the travel sector, three agreements were introduced seeking to liberalize passenger services and air freight services. However, disappointingly, the agreements do not provide for the full liberalization of these air services. Under the said agreements, an ASEAN carrier can only originate or end its flight within the ASEAN region, which in aviation parlance is called “internal fifth freedom rights”. Moreover, not all ASEAN member States have ratified the agreements yet. For example, all ASEAN member States except Indonesia have ratified an agreement on liberalizing air freight services within Southeast Asia. It has now entered into force among those who ratified it. Moreover, even before the liberalization of the open skies within the region both ASEAN member States and ASEAN itself was already pursuing liberalization outside the region. As early as 2001, Singapore and Brunei had already entered into an air transport agreement with other APEC members. It is also one of the most liberal agreements to have existed as it allowed carriers to launch flights outside its own territory (7th freedom right) and even the right to cabotage which is essentially the right to fly and operate domestic flights in an another country.Also, in 2010, ASEAN as a whole entered into an agreement with China which allows China to fly to and from any ASEAN member State who has ratified the agreement and vice versa. The said agreement also grants internal fifth freedom rights which allows carriers the right to embark or disembark, in the territory of the another State, traffic coming from or destined to a third State. However the third state is limited to countries within the ASEAN region. In the same year, external connectivity was formally instituted as a goal in ASEAN’s Brunei Action Plan (BAP). Simultaneous to the process of establishing the ASEAN Single Aviation Market, concluding air transport agreements with India by 2011 and South Korea by 2015 as well as developing other air transport agreements with other partners became an integral part of the transport action plan of the region. The negotiations are still currently ongoing.These demonstrate either confusion or lack of clarity with respect to the direction that ASEAN wants to take in its air transport policy. It may also display its desire to accelerate its external connectivity even before completing its internal connectivity. Whichever is the case, no good has come out of its desire to do everything all at once. Worse, this might only end up hurting them and compromising the completion of Single Aviation Market.
- Due to lack of time, I will not be able to elaborate on the process that the EU underwent in establishing its own Single Aviation Market. What is only important to note is presently, the EU is considered to have a fully integrated aviation market internally. After an in-depth analysis of liberalization process of the two blocs, I have to come into conclusion in my paper that aviation policy has and is continuing to develop in the EU and ASEAN in a slightly different way.The reason for this is not only due to the obvious points of different historical circumstances, attitudes of member States, the extent of liberalization measures or even its sequence of implementation. The paper has found that the differing paths of development of key institutions in both regions propelled the integration agenda forward in a different manner as well.It must be noted at the outset that both the EU and ASEANmember States were very reluctant to create a single aviation marketbecause each wanted to protect their own airline industry. In the EU, the intervention of supranational institutions became necessary even to merely place air transportation within the scope of the Treaty of Rome. The necessity of such supranational institutions like the ECJ became evident once again with the European Commission’s attempt to liberalize the EU skies. Voluntary compliance by the member States was not forthcoming thus it actually became valuable that EU institutions had the power to issue decisions which were binding on the member States. Without the capability to grant incentives and enforce threats, it was highly unlikely that the EU Single Aviation Market would have come into fruition. ASEAN, on the other hand, did not need the force of law to compel its members to accept the liberalization agenda. There was a general consensus that the liberalization of air transportation was necessary for the full integration of the regional economy. The EU experience may have led the ASEAN member States to this consensus but such does not expressly appear in any official ASEAN document. However, the buck stops there. Almost two decades after the decision to liberalize the ASEAN aviation market, it is still not completed and time is running out fast. The problem is two-fold: first, ASEAN does not have supranational institutions which have the power to bind its member States in order to force compliance with liberalization measures they have agreed upon. Second (and more importantly), ASEAN will never have supranational institutions similar to the EU because their creation is contrary to the ASEAN Way. The ASEAN Way emphasizes consensus-building and consultation among the members in a group. Actions were agreed upon informally relying primarily on personal relations and peer influence instead of a well-defined set of rules. Reaching consensus became the pinnacle of cooperation; implementation became hostage to the inclinations of the member States due to the lack of binding commitments.
- Owing to the developments in ASEAN aviation relations just discussed, the future for the EU-ASEAN Open Skies agreement might diverge into two paths:The first option can be disadvantageous for both the EU and ASEAN since the more time it takes for them to conclude an open skies agreement, the more likely will the opportunity to take advantage of the network effects and increased traffic between the two regions diminish. A postponement of the EU-ASEAN negotiations must also be accompanied by a corresponding postponement of ASEAN’s negotiations with other third countries. Otherwise, passenger and air freight traffic might be captured by other third countries as air transport agreements between them and ASEAN progress and EU is left behind. The same is disadvantageous for ASEAN too not only for the loss of opportunities and net benefits; with the enormous pressure to liberalize from the EU dissipated because of the suspension, ASEAN might not reach the “tipping point” that would have been necessary for them to be spurred into implementation of their integrated aviation market agenda. The second option will probably be better for the EU but still disadvantageous for ASEAN. Similar to what happened in the EU during the time the US was implementing its encirclement strategy, the congruence of bilateral agreements in the ASEAN will potentially enable EU carriers to launch flights from any point in EU to any point in ASEAN. If EU is able to secure a significant number of fifth freedom rights within ASEAN, they will be able to connect any point in it as well. A natural consequence of this will be the establishment of multiple hubs in the ASEAN region, bleeding passenger traffic away from ASEAN’s carriers. Meanwhile, ASEAN carriers may only do so from its own territory due to the absence of seventh freedom rights between the ASEAN member States.
- The success of the agreement also depends on whether, in the first place, the European Commission will be able to secure a mandate from the Council of Ministers to start negotiations between the two blocs. It must be noted that presently EU member States still retain the right to negotiate the trafficrights bilaterally. Thus, it still remains to be seen whether the EU member States will agree to this further encroachment on their sovereignty.
- Whateverpath the negotiations would take, the conclusion of an EU-ASEAN open skies agreement is definitely an exciting prospect for the future of aviation law. An integrated EU and ASEAN aviation market will elevate international commercial aviation as it will be the first bloc-to-bloc open skies agreement in history. It will also be the largest multilateral air services agreement in the world today. Beyond these milestones, the EU-ASEANOpen Skies Agreement may also provide the catalyst for the abandonment of the Chicago Convention system of bilateral air services agreements and completely open the global skies.