Trade

Aircraft Sector Understanding on Export Credits for Civil Aircraft - Remarks made by Angel Gurría during the Signing Ceremony in Brazil

 

Remarks by Angel Gurría, OECD Secretary-General, during the Signing Ceremony of the “Aircraft Sector Understanding on Export Credits for Civil Aircraft”

Brazil, Rio de Janeiro, 30 July 2007

 

Ladies and Gentlemen,

It is a great pleasure to be here with you for the signing ceremony of the “2007 Sector Understanding on Export Credits for Civil Aircraft’ known as the Aircraft Sector Understanding (ASU). It is an unprecedented deal with many virtues, a remarkable achievement which will provide a solid new framework that will help us promote “fair-play” in a crucial sector for global progress.

Let me start by saying that this new ASU is the result of a long process of negotiations that included, for the first time, a non-OECD country: Brazil, the third largest producer of commercial aircraft with the fourth largest work-force in this sector.

The New ASU: Agreeing on “the rules of the game”

The new ASU, which was negotiated in close consultation with the private sector, will help to build a level playing field for the world’s major exporters of civil aircraft. This will be done by providing protocols that determine the most favourable financial terms and conditions that official export credit agencies may offer.

With this instrument, which replaces our 1986 framework, we seek to strengthen an international agreement on “the rules of the game” for supporting exporters, but also an efficient system for exchanging information, producing reliable data and applying peer-pressure when necessary.

In contrast with the 1986 framework, the new ASU is much broader: it includes all players in the sector (the previous arrangement did not include Brazil), and all types of civil aircraft, spare parts, engines, and associated services such as refurbishing and cargo conversion. It is more detailed regarding the rules applicable to both new and used aircraft and the financial rules to be observed. It also includes provisions to facilitate the extension of its protocols to future exporters of civil aircraft such as China or Russia, should these countries wish to join the Agreement. We are talking about a much more sophisticated tool.

Such a rich and versatile agreement will bring multiple benefits for the aircraft exporting sectors of the signatory countries. Let me mention four of them:

 

1. It will enhance the predictability and transparency of official support measures; two indispensable ingredients to ensure fair-play and to encourage further participation and innovation.

2. It will neutralize the distorting effect of support schemes, by ensuring that the overall financial cost of such support is equivalent for any buyer/borrower, regardless of the origin of such official support.

3. It will foster competition among exporters based on quality and the price of goods and services, rather than on the official support involved; thereby avoiding a “subsidy race” among the government-supported Export Credit Agencies.

4. Very importantly, it will contribute to reducing the likelihood of bilateral trade disputes and litigation in the aircraft sector by providing an open space for systematic communication and, when necessary, the ability to have recourse to active transaction-based information exchange.

 

In sum, we are introducing an innovative instrument that will add transparency, confidence and reliability to a strategic sector in international trade that is of significant value for human progress and global economic integration. This is a sector where we cannot afford the slightest short-cut in quality standards: in 2006, 2 billion  people made journeys on scheduled airlines.

The Strength of a Gentlemen’s Agreement

The fact that the status of this new ASU is a Gentlemen’s Agreement does not weaken this instrument. On the contrary, it means the ASU we are signing today is stronger because it is the product of dialogue, conviction and trust. All the signatory governments are here of their own political will in order to pursue mutually beneficial fair-play and common interest.

Our extensive experience at the OECD with peer learning, information exchange and evidence-based peer pressure confirms that participating countries reap benefits from such agreements independently of the legal form they may take.

 

Therefore, this agreement could be as strong as other official legal instruments between governments, because the parties are aware that a breach of the rules may endanger the stability of the whole understanding.

Concluding Remarks

Ladies and Gentlemen,

The negotiation and signature of this Agreement reflects the current “metamorphosis” of the OECD and its evolution into a global “hub”. We are committed to the generation of innovative policy tools to improve the global economy.

The new ASU will provide the needed solutions. It is no “magic wand”, but it is a legitimate instrument to prevent and defuse trade conflicts in a very contested and crucial sector, a new safety net against potential transaction based disputes. If we had had this agreement 15 years ago, much of the costly disputes may have been avoided or scaled down.

The OECD will dedicate all its experience and know-how as a generator of consensus and a respected source of soft law to the application and monitoring of this new international agreement that we have created together. I am convinced that with your commitment and support we will turn distrust and litigiousness into predictable and healthy competition.

Thank you very much.

 

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