Liberalizing and Integrating Aviation Markets in Northeast Asia: Prospects and Perils

Governments in Northeast Asia have undertaken numerous unilateral, bilateral, and multilateral steps to reduce tariffs and quotas in manufacturing and service sectors. These same governments have, however, been extremely reluctant to dismantle regulatory restrictions segmenting national markets and raising the cost of air cargo and air passenger transport. This paper evaluates reasons why liberalization and integration of aviation markets in Northeast Asia have proceeded so slowly and gauges prospects for future reform. It argues that a Northeast Asia Transportation Area (NATA) be incorporated into the proposed South Korea-Japan and South Korea-Japan-China free trade areas. Regional negotiations over liberalization and integration of national aviation markets should, however, be coupled with multilateral talks within the World Trade Organization framework.