1 Aviation agreements
| (27453)
8656/06
COM(06)169
| Draft Decision on the signature and provisional application of the air transport agreement between the European Community and its Member States, on the one hand, and the United States of America, on the other hand
Draft Decision on the conclusion of the air transport agreement between the European Community and its Member States, on the one hand, and the United States of America, on the other hand
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| Legal base | Articles 80 and 300 EC; consultation; QMV
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| Department | Transport |
| Basis of consideration | Minister's letter of 16 March 2007
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| Previous Committee Report | HC 34-xxxi (2005-06), para 4 (14 June 2006) and HC 34-xxxvi (2005-06), para 8 (19 July 2006)
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| To be discussed in Council | 22 March 2007
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Standing Committee
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Background
1.1 Since 1987 a single market for air services in the Community
has been progressively established. Community legislation has
extended the scope of this single market beyond purely economic
matters to embrace the areas of safety, security, air traffic
management, social harmonisation and the environment. The Community
has the competence to conclude air services agreements with third
countries and to require meanwhile revision of bilateral air services
agreements to eliminate provisions discriminatory against other
Member States.
1.2 The draft Decisions in this document would authorise
the signature, provisional application and conclusion of an aviation
agreement between the Community and the Member States on the one
hand and the United States of America on the other. It would be
a first-stage agreement — a step towards the Community's
ambition, shared by the Government, of an open aviation area of
the Community and the US.
1.3 The agreement annexed to the draft Decisions
would:
- remove most of the operating
restrictions in existing bilateral agreements so that any Community
airline could operate between any point in the Community and any
point in the US;
- allow traffic to be carried to or from third
countries via the other party;
- allow all-cargo flights to operate on routes
from the other party to or from any third country;
- impose no restrictions on frequency or capacity;
- impose no requirement to seek Government approval
of tariffs or fares;
- remove current illegalities in the bilateral
agreements between Member States and the US, which prevent airlines
from other Member States from operating to the US;
- eliminate many other restrictions and controls
currently contained in bilateral agreements;
- protect consumers from anti-competitive behaviour;
- provide for either side to be able to request
consultations to discuss consumer protection issues;
- apply up-to-date provisions on safety and security;
and
- allow the Community and Member States to take
measures to protect the environment from the impacts of aviation.
1.4 The agreement would not allow Community airlines
to carry traffic within the US nor relax the prohibition on Community
airlines of acquiring effective ownership of a US airline. The
agreement includes wording about suspension of its application
to Gibraltar airport.[1]
1.5 When we considered this document in June and
July 2006 we accepted that a first-stage agreement is all that
is likely to be attainable at present. And we noted with approval
the caution with which the Government was considering the agreement,
particularly in relation to value of a possible Final Rule, which
would set out how the requirement that a US carrier must be under
"the actual control of US citizens" was to be interpreted,
which was expected from the US Department of Transportation. But
we said that before considering the document, which remained uncleared,
further we should like to hear from the Government as to its conclusions
following issue of the Final Rule and its consideration of the
package with Community partners. In particular we wanted confirmation
that:
- UK airlines would be, if not
better off, at least no worse off than under the present bilateral
arrangements; and
- the agreement was based on truly reciprocal benefits.
1.6 We noted also that the Government:
- wished to take account of the
extent to which the agreement seemed likely to assist the eventual
delivery of the full open aviation area agreement sought by the
Community, the prospects for securing a better deal now or in
the near future, and the possible consequences and disbenefits
of not concluding an agreement;
- was currently in discussion with the Governments
of Gibraltar and Spain about the possibility of a new agreement
concerning Gibraltar Airport, which it hoped might in due course
lead to Spain lifting its block on Community aviation measures
applying to Gibraltar; and
- confirmed that in the interim the current bilateral
arrangements between the UK and US would need to remain in force
in respect of Gibraltar.[2]
The Minister's letter
1.7 The Secretary of State for Transport (Douglas
Alexander) writes now about developments since we last reported
on this matter. First the Minister:
- reminds us that in June 2006
consideration of the draft agreement by the Transport Council
was suspended, pending conclusion of the US Department of Transportation's
consultations on its proposed Final Rule on foreign control of
US airlines;
- says that, following opposition from the US Congress,
the proposed Rule was subsequently delayed and then, in December
2006, withdrawn;
- continues that the Transport Council then asked
the Commission to enter into further negotiations with the US
as soon as possible with a view to seeking further elements to
ensure a proper balance of interests; and
- concludes that further negotiations held between
January and March 2007 have resulted in a revised draft first-stage
agreement that is to be presented to the Transport Council on
22 March 2007.
1.8 The Minister tells us that the main elements
of the draft first-stage agreement remain as before, but that
new aspects added as a result of the latest discussion include:
- clarification of the rights
for Community investors to own US airlines (within the limits
of existing US legislation);
- measures to facilitate Community ownership of
third country airlines;
- the Community reserving the right to introduce
new limits on US investment in Community airlines on a reciprocal
basis;
- provisions on franchising and branding that will
help Community airlines or other companies to develop a presence
in the US market;
- a commitment from the US that this agreement
will qualify Community airlines to apply for antitrust immunity;
- some limited additional rights for Community
carriers only to operate passenger services from the US to other
destinations (that is seventh freedom services — the right
to carry passengers or cargo between two foreign countries without
continuing service to the carrier's own country;
- some limited access for Community carriers to
certain types of US Government- financed traffic under the "Fly
America" programme, with a commitment to consider further
access in the next stage; and
- a list of agreed priority items for second-stage
negotiations, and a right for parties to withdraw rights under
the agreement if no second-stage agreement has been signed within
a defined timetable.
1.9 The Minister says the Government expects the
Commission and Presidency to commend the revised agreement to
the Council for its approval. The Council will not be asked to
make a formal decision on signature or ratification of the agreement
at this stage, and will not therefore be considering the actual
draft Decisions. However, the Presidency has indicated that it
will be seeking "political decision" from the Council
to proceed on the basis of the current text, with a view to possible
signature at the EU-US Summit on 30 April 2007.
1.10 The Minister continues that there are strong
views both for and against the draft agreement amongst UK interests,
that the Government has been in close discussion with interested
parties since these negotiations began in 2003, particularly so
in recent weeks, and that it has listened carefully to their views.
He states that he cannot pre-empt the discussion in the Transport
Council by setting out the Government's intentions or its negotiating
position in detail. But he comments that:
- it remains the Government position
that the final goal must be a fully-liberalised open aviation
area, covering European and US markets, within which airlines
are able to operate freely as regards routes, schedules, fares,
ownership and control, based on commercial decisions and fair
competition in an open market;
- the deal currently on the table would go some
considerable way to delivering these objectives, but falls short
in certain areas, particularly as regards the liberalisation of
ownership and control restrictions;
- at the same time, the Government is aware of
the current political realities within the US and of the benefits
for consumers and other interests that the current deal would
deliver; and
- what the Government and other Member States will
need to consider at the Transport Council is whether a phased
approach is possible — one which unlocks some passenger
and other benefits now, but also ensures that there is a clear
mechanism in place, with real incentives on both sides, to make
early progress to achieving the fully open market that remains
the ultimate objective.
1.11 Finally, on Gibraltar the Minister reminds us
that the current exclusions of Gibraltar from a range of Community
aviation legislation are to be lifted over the next two years
under a Gibraltar Airport Agreement, which forms part of a wider
agreement between the UK, Gibraltar and Spanish Governments reached
on 18 September 2006.[3]
The Transport Committee
1.12 On 8 March 2007 the Transport Committee announced
that it was holding an inquiry into the revised first-stage agreement
and on 14 March 2007 we asked that Committee to let us have as
soon as possible an opinion, under Standing Order No. 143 (11),
on the new text in regard to whether:
- UK airlines would be, if not
better off, at least no worse off than under the present bilateral
arrangements;
- the agreement is based on truly reciprocal benefits,
particularly in the absence of provision allowing Community airlines
to carry traffic within the US and of relaxation on the prohibition
of Community airlines acquiring effective ownership of a US airline;
and
- such benefits as might arise from this first-stage
agreement are enough to balance the risk that a more beneficial
second-stage agreement would not emerge within a reasonable time-scale.
1.13 We are grateful to the Transport Committee for
responding very quickly, on 20 March 2007. In summary in its response
to our questions, which we annex, the Committee says that it takes
the view that:
- UK airlines collectively would
be no better or worse off under the proposal than they are at
present;
- the agreement is not based on truly reciprocal
benefits. It is "convinced that the draft Agreement is imbalanced
and lacks reciprocity. It would benefit American interests to
the detriment of the broader European interest and to the detriment
of the UK national interest in particular"; and
- such benefits as might arise from this first-stage
agreement are not enough to balance the risk that a more beneficial
second-stage agreement would not emerge within a reasonable time-scale.
"The benefits to UK and European airlines and broader interests
from the draft Agreement are practically negligible. In contrast,
the benefits that will accrue to American airlines from the opening
up of European airports—particularly Heathrow—are
immense. To offer up these benefits with only the vague promise
that talks will resume, on the flawed presumption that the US
will shift a negotiation position which has been entrenched for
over thirty years, would be extremely unwise."
Conclusion
1.14 Clearly, the original agreement presented
by the Commission with the draft Decisions was, without the hoped
for Final Rule on ownership of US airlines, unacceptable. Equally
clearly the revised agreement is, as the Minister implies and
the Transport Committee makes explicit, not a great improvement.
It seems to us that a decision on whether to accept this first-stage
agreement depends crucially on whether there is a reasonable prospect
of a more beneficial second-stage agreement. Some, including the
Transport Committee, hold strongly there is not such a prospect.
And we hope and expect that the Government will give considerable
weight to this view in deciding its approach to the Transport
Council discussion.
1.15 In these circumstances we are sure the House
would have wished for more time to consider this matter, both
in the light of the documents presented by the Commission and
of the final outcome of the Transport Committee's inquiry. We
understand the wish to be able to feature signature of this agreement
at the EU-US Summit, but we are disappointed that the Commission
and the Presidency have chosen to ignore the spirit, if not the
letter, of Protocol No 9 of the Treaty and rush this onto the
agenda of the forthcoming Transport Council.
1.16 Nevertheless, even though the proposed "political
decision" may soon effectively settle the terms of the new
agreement, we recommend that the matter be debated in European
Standing Committee before the Summit on 30 April 2007. However
we accept that the Secretary of State is unable to reveal his
negotiating position before the Transport Council discussions
and understand that he may just judge it in the best interest
of the UK to concur in the "political decision". So
we agree that the Minister may, in accordance with paragraph (3)
(b) of the Scrutiny Reserve Resolution of 17 November 1998, and
if appropriate, so concur.
1 "… application of this Agreement to Gibraltar
airport is understood to be without prejudice to the respective
legal positions of the Kingdom of Spain and the United Kingdom
with regard to the dispute over sovereignty over the territory
in which the airport is situated; application of this Agreement
to Gibraltar airport shall be suspended until the arrangements
in the Joint Declaration made by the Foreign Ministers of the
Kingdom of Spain and the United Kingdom on December 2 1987 enter
into operation." Back
2
See headnote. Back
3
See HC Deb, 17 October 2006, col. 48-49WS and HC 41-i (2006-07),
para 13 (22 November 2006). Back
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