Brazil joins OECD countries in landmark pact on civil aircraft export credits


30/07/2007 - The world’s major civil aircraft exporting countries, including OECD countries and Brazil, announced a landmark agreement limiting government support for export deals in an effort to end acrimonious trade disputes and encourage manufacturers and airlines to focus on price and quality rather than on financial packages of government support.

The agreement, covering all types of civil aircraft, from jumbo jets to small planes and helicopters, concerns the interest rates, loan guarantees and other conditions applied to export credits for aircraft sales. Signatories include both OECD countries and Brazil, which is not an OECD member and is joining a pact of this kind for the first time.

OECD Secretary-General Angel Gurría hailed the accord as a breakthrough in international trade diplomacy. “We are delighted that this agreement, in a highly competitive sector, has been concluded under the auspices of the OECD,” he said. “We are particularly pleased to see Brazil joining other leading world producers and exporters of civil aircraft in making this agreement possible.”

The civil aircraft sector is one of the most competitive in world trade. While the rivalry between big passenger jet producers regularly makes headlines, competition is equally fierce for sales of smaller short-haul aircraft.

The agreement replaces a pact dating from 1986 whose provisions had become outdated and which did not include Brazil. “By creating a level playing field in official support for export deals, the agreement will focus competition for sales of civil aircraft on price and quality instead of on levels of government support,” Mr. Gurría predicted.

Brazil’s participation is significant because it is the first time that any non-OECD country joins OECD countries in a trade pact relating to export credits. The agreement forms an annex to the OECD’s Arrangement on Officially Supported Export Credits; this Arrangement, first concluded in 1978, limits official subsidies for export credits and has long been recognized as one of the foundation stones of fair competition in world trade.

Brazil will benefit like other participants from the provisions of the agreement, which took more than two years of tough negotiations to finalise. “These negotiations succeeded because the main governments involved in export financing in the aircraft sector were willing to reach compromises  to deter future trade distortions,” Nicole Bollen, a senior Dutch finance ministry official who chaired the discussions, said. “OECD provided the right kind of platform and environment to enable negotiators to achieve tangible results”

In addition to Brazil, signatories to the agreement are Australia, Canada, Japan, Korea, New Zealand, Norway, Switzerland, the United States and the European Community, representing the 27 European Union states. The agreement sets maximum repayment periods and minimum risk premium rates and interest rates in financing by official export credit agencies of sales of commercial aircraft. In recent years, official export credit support for civil aircraft sales has covered deals valued at between USD 7 billion and USD 10 billion annually.

By signing up to the agreement, aircraft exporting countries guard against the threat of possible trade suits over allegations of unfair subsidies. The agreement is drafted in such a way as to allow other countries that may in the future become big civil aircraft exporters, such as Russia and China, to join it if they wish.

For further information, journalists are invited to contact the OECD's Media Division (tel: + 33 1 4524 9700).