The Ship Hasn't Sailed on the American Aviation Industry -- Yet

In the decades after World War II, the American commercial shipbuilding industry was a roaring economic force. Companies such as Bath Iron Works in Maine, which built destroyers that fought in the Pacific and helped lead the Normandy invasion, were thrumming engines of local and regional economies. But since 1980, 40 percent of all jobs in American commercial shipbuilding have disappeared, leaving devastated communities from Maine to Pennsylvania to Louisiana asking: What happened?

While the collapse of the U.S. shipbuilding industry had many causes, a driving force in its downfall was the massive subsidies from the governments of Japan, South Korea and China to their shipbuilders. Once the world leader in commercial shipbuilding, our country is now an afterthought; today, less than one-third of one percent of commercial ships are made in America.

Today another key American industry faces the threat of subsidized foreign competitors: aviation. There is a clear parallel between the forces that sank the American commercial shipbuilding industry and the threat to U.S. passenger airlines. The demise of the shipbuilding yard and its hundreds of thousands of middle-class jobs is a cautionary tale - and one we may be doomed to repeat if the U.S. government fails to properly act.

Foreign governments in the Persian Gulf are subsidizing their national airlines to compete with U.S. carriers, undermining the free and fair market principles of our Open Skies aviation agreements. All told, state-owned Qatar Airways, Etihad Airways and Emirates have benefited from more than $42 billion in subsidies in just the past decade from the governments of the United Arab Emirates and Qatar. Their governments' largesse is stacking the deck against the working men and women of the American aviation industry.

The stakes are real: losing just one daily non-stop international route between the United States and the Gulf costs almost 2,000 American jobs. Even if that service is replaced by a Gulf carrier, 1,700 American jobs will still disappear, according to a new paper I wrote for the Partnership for Open and Fair Skies. Altogether, if the impact of Gulf carrier subsidies results in only one-quarter of the impact the U.S. shipbuilding yards sustained, then we face the loss of almost 200,000 jobs.

Aviation jobs, like shipbuilding jobs, are quality, middle-class jobs. They pay wages that can propel an entire family into the middle class. Benefits from these industries extend beyond their employees. Cities and communities that are home to airport hubs generate tremendous economic benefits that resonate far beyond the transportation hub, as increased travel provides a boon to other local industries. All of these benefits are on the chopping block when American companies face unfair competition subsidized by foreign treasuries.

But we don't have to rely solely only on estimates and projections to anticipate the effect that foreign subsidies will have on the American aviation industry. We have our own experience to inform our actions. If history tells us anything, it's that we cannot sit back and watch while foreign governments pump billions of dollars into their state-owned enterprises to get ahead unfairly.

If the United States wants to remain competitive in the global economy, it is critical - now more than ever -- for our government to step up and tell foreign governments that it's time to play by the rules. Our Open Skies agreements permit our government to open consultations with the Gulf States to address concerns that arise -- and there is no reason not to do so immediately.

We must use every available mechanism of bilateral and international law to aggressively ensure that Open Skies agreements are being honored and unfair competition is thwarted.

We've seen foreign subsidies destroy good middle-class American jobs before. But now we have the opportunity to learn from our country's history and write our own future. Let us avoid duplicating the mistakes of the past and secure a better future for the hardworking employees of the American aviation industry. Let's keep America where it belongs: as the global leader in passenger aviation.

Aaron Klein is a former Deputy Assistant Secretary of Treasury and Chief Economist of the Senate Banking, Housing and Urban Affairs Committee.

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