U.S., EC Sign Accord to Limit Aircraft Subsidies : Aviation: The pact is viewed as placing greater restraints on the European nations than the United States, particularly regarding support for Airbus Industrie.
In an apparent boon to U.S. aircraft firms, the United States and the European Community signed an agreement Friday limiting government subsidies and other aid to makers of commercial airliners designed to carry more than 100 passengers.
The accord will take effect immediately for both the huge, four-nation European consortium that builds the Airbus and two U.S. firms, Boeing and McDonnell Douglas.
While the agreement to curtail subsidies applies to both sides, it was viewed as placing greater restraints on the European nations than on the United States.
“This agreement represents an important achievement in leveling the playing field for the U.S. aircraft industry, our leading manufacturing export sector,” said Michael H. Moskow, acting U.S. trade representative.
The announcement marked the final step in resolving a six-year dispute over American claims that Britain, France, Germany and Spain were providing improper subsidy payments to the Airbus firm, giving it an unfair advantage in the hotly contested battle for the multibillion-dollar jet airliner market.
The issue became a symbol of the fierce competition between the American firms, which dominated the world market for airliners in the past, and the European consortium, whose Airbus has carved out a major share of the business.
As the American trade deficit widens, the importance of aircraft sales overseas increases because it has a positive effect on the balance of trade. Last year, for example, the United States shipped $7 billion worth of large jet airliners to the European Community and imported $1.3 billion worth of these planes from EC countries.
Boeing has about 60% of the world market, but Airbus has estimated that it will get more than a third of new aircraft orders in the next two decades. Most of Airbus’ growth has come at the expense of McDonnell Douglas, which is struggling to retain a foothold in the market.
Boeing Chairman Frank Shrontz called the agreement a milestone. He said that although Boeing would have “preferred a ban on all government support for commercial airplane programs,” the pact “makes significant progress” toward that goal.
The signing Friday completed negotiations begun in January that led to a tentative accord on the basic provisions of the pact on March 31. The highlights include:
* A ban on all direct government support to Airbus Industrie for future production, sales and marketing, as well as a freeze on previous subsidy commitments.
* A limit of 33% on government aid for development costs of new aircraft. In the past, the European governments have provided as much as 75% to 100% of such costs.
* Strict conditions for repayment of development funds advanced by governments, with interest charges set at levels closer to market rates than in the past.
* Greater disclosure of information on government commitments and payments to Airbus and similar data on repayments, so outsiders can tell if the agreement is being violated. The total amount of government aid for the development of new aircraft, along with the percentage that aid represents of the overall cost, also will be disclosed under the accord.
* A stronger ban on incentives to other governments to buy aircraft, such as offers to extend foreign or military aid in return for purchases.
* Limits on benefits from indirect government support to aircraft firms, with caps of 3% of the value of annual industrywide sales and 4% of the value of each firm’s annual sales.
U.S. and EC officials will meet twice a year to settle disputes arising under the agreement. The accord provides that either side may withdraw after one year but must give 12 months’ notice of its intentions.
