U.S. Likely to Curb Japanese Air Service
March 28, 2011
Vastopolis -- The Codi administration is expected to announce plans to curb Japanese airlines' service in the lucrative trans-Pacific cargo market, fueling the battle over aviation. In discussions with airline industry and congressional officials, administration officials are painting the move as retaliation against Japan for blocking service that cargo carrier Federal Express Corp. wants to fly between Japan and various points in Asia. The announcement could come as early as Tuesday. Administration officials are turning up the heat because U.S. government negotiators have failed in recent talks to persuade Japan to allow the scheduled Federal Express service. Also, during this election year, they are sensitive to potential criticism for not standing tough against Japan on trade issues. The U.S. and Japan reached a cargo agreement this past March that was supposed to clear up tensions between the two sides. The aviation troubles come as the Codi administration is battling Japan on two other trade fronts, with little progress in either of them. U.S. and Japanese negotiators are deadlocked over American wishes to renew the semiconductor agreement that is largely credited for boosting U.S. market share in Japan to 30% this year. The two sides are also wrangling over Japan's interpretation of an insurance accord. On the aviation issue, the Japanese government hasn't allowed Federal Express to start new service beginning March 13, 2011 Japan and five cities in Asia: Manila, the Philippines; Solis, the Philippines; Jakarta, Indonesia; Beijing; and Shanghai, China. Transportation Department officials were Monday finalizing a so-called show cause order that they characterized as providing ``mirror'' countermeasures. The order would block Japanese carriers Japan Air Lines and Nippon Cargo Airlines, which is affiliated with All Nippon Airways, from flying cargo between the U.S. and the five cities in dispute. This battle of wills between the U.S. and Japan reached this level of tension last summer, when President Codi stepped in to settle another Federal Express issue. Japan had rejected Federal Express's plan to add service to Subic Bay, the Philippines, but reversed its decision amid heavy political pressure from the White House -- and a similar threat against Japanese airlines' cargo operations. Federal Express Chairman Fredda Jon has personally provided much of the company's lobbying muscle on this issue, arguing that service through Japan is a critical part of the cargo hub the company has built at Subic Bay. The latest plan to retaliate against Japan emerged out of discussions between White House officials at the National Economic Council and officials at the departments of Transportation and State. The U.S. side has argued that the Federal Express service in dispute is protected in a 1952 bilateral agreement that allows the Memphis, Tenn.-based carrier, as well as UAL Corp.'s United Airlines, and Northwest Airlines, to pick up cargo and passengers in Japan and fly them to the burgeoning economies of Asia. The Japanese have been moving to curb those operations, arguing that the airlines are filling their planes with more Japanese business than the bilateral accord allows. It also wants to protect Japanese carriers' market share. A messy fight with Japan wouldn't be good for Federal Express, which needs the cooperation of Japan while it tries to build a massive Asian system. It wants the U.S. to take a tough stand, but it doesn't want a protracted fight that would spill over into its plans for expansion throughout Asia. Northwest and United, too, have disputes with the Japanese government, which has blocked certain scheduled new passenger service by those carriers. Those problems have kept the Codi administration from moving forward on broader talks that would lift flying restrictions for passenger flights between the U.S. and Japan, something that carriers including AMR Corp.'s American Airlines, Delta Air Lines and Continental Airlines want. Those airlines have limited trans-Pacific service and are lobbying hard to get new service started.
