Mar 25, 1991

EC SEEKS REVISION OF CIVIL AIRCRAFT CODE IN GATT.

GENEVA, 21 MARCH (TWN) – The European Community sought Thursday negotiations, within the framework of the Tokyo Round GATT Agreement on Trade in Civil Aircraft, which among other things provides for elimination of all tariffs on aircraft, including parts.

The move has been triggered by the U.S.-EC dispute over subsidy to the European Airbus industry.

The U.S. complaint about alleged subsidy provided by Germany to Daimler-Benz over airbus to compensate for exchange rate variations has been referred to a panel of the subsidies code for adjudication. The EC has sought reference in the panel terms of reference to the provisions of the aircraft code, which talks of the special factors, involved in the civil aircraft industry.

The EC has long been contending that while the U.S. has been agitating over the European subsidy for production and exports, it has ignored the much higher levels of subsidy available to the U.S. industry, in terms of research and development and other costs, through the military and space programmes.

In calling for negotiations for revision of the civil aircraft’s code, the EC has said that subsidies for production should be prohibited, but government subsidies for development of new aircraft should be permitted subject to some conditions:

* Government has a reasonable expectation of recouping all the costs within a given period of time, and

* The support was only for a given percentage of the programme's total development costs and abides by specific terms and conditions.

The EC also wants provisions in the code to prevent government financial backing through R & D and purchase of military aircraft a practice that has been of great benefit to Boeing and McDonnell Douglas which over the years have been able to "recycle" aircraft or parts developed for military and space uses into civil aircraft.

In the discussions Thursday in the civil aircraft code committee, the EC also reported on its bilateral consultations with the U.S. (as sought by Japan) and said that while it had been useful in narrowing some differences, it had also indicated the need for clearer disciplines in the code.

The EC proposal for renegotiations of the code, to be undertaken and completed within the time for Uruguay Round negotiations, was received coolly by the U.S. which reportedly said it was difficult to see what could be achieved in multilateral talks when bilateral talks had not been able to resolve differences.

Among the other 22 signatories, Japan said it would look at the EC proposals and agreed that both direct and indirect support should be discussed including support provided by military programmes. Sweden for the Nordics saw merits in multilateral negotiations on these matters.

The committee reached no conclusions.