frontiers of competition policy

[Eubulides <paraconsistent@xxxxxxxxxxx>]

Brussels takes on US air

Andrew Osborn in Brussels
Friday October 10, 2003
The Guardian

European Union transport ministers yesterday set the stage for a
potentially explosive stand-off with the United States by granting the
European commission extraordinary powers to punish foreign airlines deemed
guilty of anti-competitive behaviour.

In a controversial move to shield European airlines from unfair
competition, ministers authorised the commission to levy financial
sanctions against US and non-EU airlines judged to have received unfair
government subsidies.

The scheme, which could begin next year - once it has passed the remaining
legislative hurdles - would see offending airlines hit with "equalising"
tariffs or taxes.

The initiative is the brain child of commission vice-president Loyola de
Palacio and is intended to placate the European airline industry, which
has accused US carriers of using a £10bn government aid package to slash
prices on transatlantic routes.

It is also a response to complaints that Switzerland's ailing national
airline has received unfair handouts.

The UK, represented by David Jamieson MP, voted in favour of the plan at a
meeting of EU ministers in Luxembourg. "We consider this measure to be a
useful new weapon in the EU's armoury, albeit one that is not necessarily
for immediate use," said a government spokesman.

The commission welcomed the vote, claiming it filled a legal vacuum and
would allow it to ensure fair competition. "This is a very important
agreement for our airlines, which will be put on an equal footing with
their competitors in the future," said Ms de Palacio.

Brussels argues the US already has powers to fight anti-competitive
behaviour by foreign airlines and that it is merely balancing things up.

The vote, however, comes at a time when the EU is in the throes of
negotiating a vital "open skies" pact with the US which is meant to
completely liberalise air transport between the blocs and is unlikely to
go down well in Washington.

Relations between the EU and the US are already strained, with
disagreements over steel tariffs, genetically modified food, US corporate
tax breaks and growth hormones in meat.