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Gulf subsidies threaten major U.S. economic sector, writes former U.S. Treasury official, drawing parallels to demise of shipbuilding industry

new report says that the rapid, government-subsidized expansion of capacity by Qatar Airways, Etihad Airways and Emirates into the United States is following a historical pattern that points to dramatic and irrevocable long-term harm to a core segment of the U.S. economy.

The research report, authored by Aaron Klein, director of the Financial Regulatory Reform Initiative at the Bipartisan Policy Center and a former deputy assistant secretary for economic policy at the U.S. Treasury Department, draws clear parallels from the decline of the domestic shipbuilding industry to the present-day trade dispute with the subsidized carriers. 

The paper, entitled, “Decline in U.S. Shipbuilding Industry: A Cautionary Tale of Foreign Subsidies Destroying U.S. Jobs,” examines the systematic elimination of the U.S. domestic shipbuilding industry through the 1980s and 1990s as a result of subsidized foreign competition. Qatar Airways, Etihad Airways and Emirates have received more than $42 billion in subsidies and other benefits from their government owners in the past decade, in violation of Open Skies agreements.

“The effects of foreign subsidization on our economy are substantial and deeply detrimental,” said Klein. “Jobs that are lost do not come back. Portions of the industrial base can be eroded, devastating companies, communities, and significantly impacting our national defense.”

Klein continues: “The end of a level playing field in aviation, with U.S. companies facing direct competition from subsidized foreign carriers, is remarkably similar to what happened to U.S. shipbuilders in the 1980s. If these foreign carriers are indeed successful in shifting traffic from American companies to their own, then American aviation will suffer,” he writes.

The report also estimates that the effects of continued inaction could put 200,000 American jobs at risk -- a significantly higher number than previous estimates provided by the Partnership for Open & Fair Skies to the U.S. government agencies currently reviewing the issue. “If this foreign subsidized capacity remains unregulated, the U.S. aviation industry will be decimated by a loss of almost 200,000 jobs, when considering losses from passenger traffic and those jobs supported by passenger aviation.”

Delta is a member of the Partnership for Open & Fair Skies, which has emphasized that subsidized Gulf carriers are distorting the global marketplace, harming the U.S. airline industry and threatening U.S. workers’ jobs. Sixty Delta front-line employees took this same message to Capitol Hill in June when they visited more than 200 Congressional offices to urge the U.S. government to open talks with the governments of Qatar and United Arab Emirates. 

“The end of a level playing field in aviation, with U.S. companies facing direct competition from subsidized foreign carriers, is remarkably similar to what happened to U.S. shipbuilders in the 1980s. If these foreign carriers are indeed successful in shifting traffic from American companies to their own, then American aviation will suffer.” 

 
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