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Cablegate: Eu and Canada Reach Air Transport Agreement

VZCZCXRO4882
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHPOD RUEHROV RUEHSR
DE RUEHBS #1876 3471439
ZNR UUUUU ZZH
R 121439Z DEC 08
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHSW/AMEMBASSY BERN
RUEHMO/AMEMBASSY MOSCOW
RUEHOT/AMEMBASSY OTTAWA
RUEHSQ/AMEMBASSY SKOPJE
RUEHTI/AMEMBASSY TIRANA
RUEHGA/AMCONSUL CALGARY
RUEHHA/AMCONSUL HALIFAX
RUEHKW/AMCONSUL KRAKOW
RUEHMT/AMCONSUL MONTREAL
RUEHLN/AMCONSUL ST PETERSBURG
RUEHON/AMCONSUL TORONTO
RUEHVC/AMCONSUL VANCOUVER
RULSDMK/DEPT OF TRANSPORTATION WASHDC

UNCLAS BRUSSELS 001876

SENSITIVE
SIPDIS

STATE FOR EUR/ERA-ROCKWELL, EEB FOR BYERLY, FINSTON,
WALKET-TIGHE
MONTREAL PASS ICAO

E.O. 12958: N/A
TAGS: EAIR ECON EUN CA
SUBJECT: EU AND CANADA REACH AIR TRANSPORT AGREEMENT

1. (SBU) On December 9, the EU and Canada announced they
had concluded negotiations and initialed a comprehensive air
transport agreement. It will replace the existing network of
bilateral aviation arrangements, liberalize direct air
services between Canada and EU member states, allow cargo
carriers to fly onward to third countries, and extend
coverage to Cyprus, Estonia, Latvia, Lithuania, Luxembourg,
Malta, Slovakia and Slovenia. The agreement will come into
force upon formal signature sometime next year, most likely
before the next EU-Canada summit which is expected to be held
late in the Czech presidency, perhaps in May or June.

2. (SBU) EU officials are highlighting the possibility for
future increased foreign investment since the agreement
structure links additional market opening to greater
investment freedom. Current Canadian limits on foreign
voting equity are set at 25%, but in January Canada's
Competition Bureau recommended raising the limit to 49% -- a
move that can be taken without enacting new legislation and
something the Canadian government is likely to do. That
moment may well be delayed by month as Canada works through
its current political upheavals. At that point, additional
traffic rights will be granted including allowing cargo
carriers to operate services to third countries from the
other party without connecting to their point of origin. The
agreement envisions the possibility of two additional phases
that could lead to a full Open Aviation Area (OAA) between
the EU and Canada, with the ability to freely invest,
establish and control operations in each other's territory,
but this would require changes in the Canadian legislation.
Canada is under no commitment to do so, and it is our
understanding that there is no intention to undertake changes
anytime soon. According to news reports, Canadian pilots
adamantly oppose allowing European air carriers to provide
domestic services in Canada and to European control of
aviation companies in Canada.

3. (SBU) In line with the US-EU agreement, a joint committee
will be set up to oversee implementation of the agreement and
to provide a regular forum for discussion. The EU and Canada
have also pledged to cooperate on safety, security and
environmental issues in the aviation sector.

4. (SBU) The new air transport agreement will significantly
expand the rights of Canadian and EU carriers to operate
freely in the market. Despite the current economic situation,
it is expected to facilitate growth in trade, investment, and
tourism by providing additional opportunity, choice and
flexibility to businesses, carriers, and consumers; and by
increasing competition. In 2007, nine million passengers
traveled between Canada and the EU and the agreement should
result in increased traffic. Given the close integration of
US-Canada aviation, the new, more open, EU-Canada agreement
should benefit Americans as well.

5. (U) Additional information is available at:
www.ec.europa.eu/transport
www.tc.gc.ca

MURRAY
.

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