kets that impair a foreign carrier's ability to compete; and 4) subsidization and state ownership of airlines (Kasper, 1988, pp. 2-3).
Bilateral restrictions indicate that without the consent of a sovereign state, an airline lacks the right to carry traffic to or from that nation's territory, and airlines typically obtain such rights through bilateral agreements negotiated between national governments whose airlines wish to provide such services. Such agreements govern entry, capacity, traffic, fares, and routes, and they are often the most formidable barriers to liberalized trade in air services:
The extension of the sovereignty concept to traffic originating or arriving within national boundaries encourages countries to trade access to each other's traffic. Under these circumstances, countries that generate a large volume of traffic (the "haves") are strongly motivated to protect "their" traffic from the "have nots" in order to preserve it for trading to other "haves" in exchange for access to their larger traffic pools. (Kasper, 1988, p. 3)
Domestic regulatory policies may exclude foreign airlines from domestic markets or restrict their ability to compete effectively in those markets. These constitute a substantial barrier to liberalized trade in international air services because with the right neither to enter foreign domestic markets nor to establish an airline in a foreign jurisdiction, otherwise efficient airlines may be prevented from attaining the economies of scale and scope necessary to compete successfully in world air services markets. Ancillary market restrictions in related markets can also impair the competitiveness of international air services markets, and the existence of government-owned or sanctioned monopolies for the provision of airport facilities and services and for computerized reservations services has created serious disputes between the United States and Italy, France, Germany, and the Unite...