Costs, distributional issues, and protection

¶ … Distributional Issues and Protection

With the amounting forces of globalization and their multitude of effects, such as the growing threat of cheap exports, several national products lost their competitive strength. In order to revive this feature, governments have implemented a wide series of protective regulations, such as tax deductions or plain financial subsidies. Despite the forwarded benefits of a protected industry, fact remains that the practice also gives birth to several cost and distributional issues.

On the one hand, protectionism is an unethical practice which reduces the competition within the respective field. Take for instance the airline industry. Within both Europe as well as the United States of America, the governing powers have, in one way or the other, controlled airline traffic. Probably the most relevant example in this sense is given by the reduced numbers of airline operators who are allowed to offer transatlantic flights. Within the U.S. then, airline operators to offer national flights have to be all American. Generically speaking, the control of the government over the airline industry should have ended with the abolishment of the Civil Aeronautics Board in 1985. It nevertheless continues, in a less obvious and more bureaucratic way, under the supervision of the Federal Aviation Administration (Cleveland and Jared, 2002). But the continued protection of the airline industry implies a wide series of effects, as will be presented throughout the following paragraphs.

The World Trade Organization recognizes the growing presence of low cost airline service providers at the global level. Their presence translates into an increased consumer access to traveling. Nevertheless, as these low cost airline companies are subjected to a series of restrictions meant to protect the few large airline service retailers, the access to the population is back to being restricted. This means that average and below average individuals who wish to travel to and from further distances cannot do so. Consequently, this materializes in a series of loses. In terms of financials, the United States is not able to receive tourists, who would spend their money within the country. Examples in this sense include the reduced activity within the hospitality industry, restaurants or other tourism related sectors. Additionally, there is the cost pegged to the loss of the incomes generated by currency exchange operations (World Trade Organization, 1998). All in all, airline protectionism generates financial loses through an ineffective distribution of resources and demand.

These costs first affect the American retailers, and then the federal budget, due to reduced tax impositions of lower profits. Additionally, it is generally accepted that the financial loses pegged to these reduced touristy operations are far greater than the money saved by a controlled and protected national airline industry. "Aviation protectionism pulls customers away from the whole travel and tourism chain -- from hotels, resorts, car rentals, computer reservations systems, entertainment, cultural attractions and all the rest of our industry" (World Tourism Organization, 1994).

A second loss refers to the reduced ability to sustain cultural experiences, as the number of tourists to and from the United States is restricted by financial criteria. This could easily translate in not only social and individual loses, but also issues related to the country's ability to acquire knowledge on the culture and civilization of other global regions. Additionally, it could also cost the United States as it would limit its inhabitants' abilities to share knowledge with specialists in other countries, include their own expertise, and as such sustain the development of their native country.

A protected airline industry has the third impact of reducing the quality of the products and services offered to the customer. This is generically possible due to the reduced levels of competition, which allow airline operators to rely on the services they offer, rather than striving to improve their offering. This translates into reduced development opportunities for the industry. For instance, we now witness a growing focus on environmental protection, as well as a growing terrorist threat; the airline industry is nevertheless one of the greatest pollutants and one of the primary targets of terrorist attacks. Reduced competition means that airline organizations will not strive to research and integrate fuel efficient aircrafts, nor will they invest more in safety. Such issues have tremendous impacts. For once, pollution leads to global warming, which requires increased sums of money to be counteracted. Terrorist attacks also generate financial loses as they destroy buildings and human lives. In the aftermath of the 9/11 attacks, the city of New York witnessed a redistribution of the human resource, as the direct result of its loss of hundreds of financial specialists, real estate agents and so on.