Strategic Liberalization Policies in Bilateral and Multilateral Settings: The Case of China and Vietnam

Abstract

While the trend towards air transport liberalization is global in scope, variance in its patterns of depth is shaping the regulatory geography of the industry. Particularly, the signing of the EU-US Open Skies Agreement and the potential for a Trans-Atlantic Open Aviation Area have increased the relative competitive advantage enjoyed in the global ‘north-west’ of Europe and the United States. The increase in competitiveness caused by regulatory relaxation is in turn causing, inter alia, patterns of regionalization in the ‘eastern’ and ‘southern’ states of varying degrees. The push towards intra-regional liberalization is further reinforced by the regionalization of production processes and tourism, increasing the relative demand for intra-regional transport networks. In many instances, the desire to protect the air service sector for national participants may thus inhibit development of the larger economy. This problem is exacerbated by the recognition of the principles of participation and efficiency in the Chicago Convention. The potential conflict between these objectives is nowhere more apparent than in the emerging markets of East Asia. This paper critically analyses the position of two emerging markets, China and Vietnam, and the legal regimes governing their air services sectors. It does so by first reviewing the current processes in the restructuring of air transport regulation. It then analyses the current liberalization process in both China and Vietnam, looking at both commonalities and critical distinctions between the two. Next, analysis turns towards the air services agreements between China, Vietnam, the US, and the Association of Southeast Asian Nations (ASEAN). These agreements evidence a process of power bargaining, a process which may be counterproductive to developing equitable air transport networks and efficient markets. Finally, this paper offers critical guidance on developing a process of phased liberalization with increasingly more competitive partners so as to support overall economic growth.