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Agreement in principle reached on export credits for commercial aircraft

Dec. 23, 2010, Paris, Fra. - Government negotiators have agreed in principle on new terms for state financing to support the export of commercial aircraft. The proposed terms  - following extensive negotiations at the OECD – would move fees closer to market rates and allow for regular adjustments to reflect market developments.


December 23, 2010
By Carey Fredericks

The Aviation Sector Understanding (ASU) negotiations await official approval by the participating governments  – Brazil, Canada, EU (including France, Germany, UK and Italy), Japan and the US. The Participants aim to have formal approval by January 20, 2011, with entry into force on February 1, 2011.
 
The objective of the agreement is to create and maintain a market- and risk-based fee system that produces a level playing field between manufacturers, airlines and governments.
 
The agreement, if formally approved, will unify the previous disparate financing terms and conditions between large and regional jets. It also contains mechanisms to smooth very sharp market movements.
 
There are no quantitative restrictions on export credit agency programmes.
 
The agreement includes a transition period for certain previously ordered aircraft which will be covered by existing financing terms.
 
The OECD has been at the centre of multilateral efforts to harmonize state financing of exports for more than 30 years. The Arrangement on Officially Supported Export Credits, which came in to force in 1978, plays an important role in the multilateral trading system.  It helps ensure that both OECD and non-OECD exporters compete on the price and quality of their goods and services, not on the support they receive from their governments.
 
A Sector Understanding on Export Credits for Civil Aircraft was incorporated in the Arrangement in 1986. An update in 2007 included for the first time a framework for exchange of information and the prevention or early resolution of export credit-related disputes. 
 
The recent negotiations, like those that led to the 2007 ASU, include the full participation of a non-OECD country – Brazil.