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COM (84) 311 
 
 
 
Vol. 1984/0142 
  
 
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
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amended by Regulation (EC, E uratom ) No 1700/2003 of 22 September 2003 (OJ L 243, 
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In Übereinstimm ung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.  
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COMMISSION  
OF THE
EUROPEAN COMMUNITIES
General SecretariatCOM(84) 311 final  
Brussels, 8 June 1984
FOR OFFICIAL U S E  ONLY
Recommendation for a  
COUNCIL DECISION
on the position to be adopted by the Community in the international  
negotiations on conditions governing officially-supported export
credits for aircraft
(submitted to the Council by the Commission)
C O M (84) 311 f in a l

EXPLANATORY MEMORANDUM
I. REMINDER OF THE SITUATION
1. In December 1982/ the Commission submitted comprehensive proposals  
to the Council (C0M(82)829 final) aimed at establishing a Community  
position in the international negotiations on the conditions for  
granting officially supported export credits. These proposals were  
not subjected to an in-depth examination by the relevant Council  
bodies due initially to the lengthy negotiations which'took place
on revising the OECD export credits Consensus in 1983 and subsequently  
to other pressing business related to the Arrangement and to other  
sectors. In the meantime new developments in the field of aircraft  
financing have occured which have rendered certain aspects of the  
Commission's original proposals in need of revision. With this in mind  
and with the objective of opening negotiations with our trade  
partners as soon as possible, the Commission hereby submits  
to the Council revised proposals for negotiating directives.
II. THE NEED TO OPEN NEGOTIATIONS
2. There are several reasons why it is important to make progress in the  
field of export credits for aircraft. First and foremost efforts  
must be made to honour the commitment made by Consensus Participants  
in 1982 to open negotiations with a view to concluding a sectoral  
agreement covering all aircraft. It will be recalled in this  
context that this commitment was entered into the light of the  
manifest shortcomings of existing discipline in the sector (OECD  
Standstill) and in recognition of the fact that many new aircraft  
would be coming onto the world market in the middle to late 1980's  
in order to take advantage of new sales opportunities.
3. Aside from these general considerations which apply to all aircraft,
it is important that in the specific field of wide-bodied jet  
aircraft Community competence is enforced in a matter falling
within the framework of the Community's common commercial policy
as defined under Article 113 of the Treaty. This is all the more  
essential in view of the pressure being exerted by the US to arrive  
at new financing conditions for such aircraft, some of which have  
a direct bearing on the interests of other member states.

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I I I . S T R A T E G Y  U N D E R L Y IN G  T H E  COM M ISSION'S REV ISED  P R O P O S A L S
4. Whereas in the Commission's previous proposals a ll a irc ra ft 
were include under a set of chapter headings covering the 
principal elements of the negotiation, in its  revised proposals
the Commission considers it expedient to make a clear d iffe re n tia tio n  
between large (wide-bodied) a irc ra ft and other a ir c r a f t.
The d istin c tio n  is necessary prim arily because d ifferen t financing 
practices prevail in the two subsectors. If is also in recognition 
of the fact that wide-bodied jet a irc ra ft are produced only by the 
U S  and the Community and that in consequence the most appropriate 
method of proceeding would be to envisage EC-U S negotiations.
O n  the o th er hand, smaller a ir c r a f t, for which the number of 
producers is much larg er, could be negotiated within the framewok 
of the O E C D . At a la te r stage the two "components" could be 
slo tted  together to form a comprehensive sectoral accord.
5. The division of the Commission's proposals into two parts does
not signify of course a ranking of the a irc ra ft categories in order 
of importance of reaching an agreement. It must be recognised,however, 
that in an in itia l stage progress may be sw ifter in the field  
of wide-bodied a irc ra ft in view of the advanced sta te  of discussions 
which have been taking place over a number of years between 
the four producing countries. Indeed a fa ilu re  of the Community 
to come forward with proposals quickly in th is area could have 
a number of unfavourable consequences for a ll Member S ta te s ,such 
as the withdrawal of the U S  from the O E C D  S tan d still and the 
u n ila te ra l imposition of s tr ic t conditions for financing a irc ra ft 
sales on the U S  market. Consequently the Commission believes th at 
it is in the Community's in te re st to come forward with re a lis tic  
proposals in th is sector as soon as possible. Concurrently 
negotiations should begin on smaller a ir c r a f t.

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IV. T H E  CO M M ISSIO N 'S R E V ISE D  P R O P O S A L S
A. Large a irc ra ft
6. The Commission's new proposals on wide-bodied je t a irc ra ft contain 
some important amendments compared with the proposals made in 
1982. Most importantly no d istin ctio n  is now made between the 
markets of producer and non-producer markets with the consequence 
that the scope of the agreement is extended to a ll th ird  markets. 
Likewise, for U S  sales to the Community, no d istin ctio n  should be 
made between the minimum conditions applicable to differen t member 
s ta te s .
7. Ideally the same minimum terms and conditions should apply to a ll 
th ird  markets. However it is clear from preliminary discussions 
that the U S  w ill adopt a very tough negotiating stance with 
respect to the minimum conditions to be applied for the sales of 
Airbus on the U S  market. Indeed it has even been suggested in 
some quarters that Loans supported by export credit guarantees 
and insurance would not be acceptable since these are alleged
to incorporate de facto subsidy elements.
8. In the view of the Commission it is v ita l for the future of 
Airbus Industrie that access to the U S  market on reasonable 
terms is obtained. The conditions of such access should take 
into account the financial re a litie s  facing Airbus Industrie
on world markets and the necessity for export credit guarantees 
to f a c ilita te  sales to overseas customers. At the same time the 
conditions should not place U S  competitors at a competitive 
disadvantage on th e ir ow n market. Finally, of course, the 
conditions should be compatible with international law (G A T T  
Subsidies Code) to which the U S  has subscribed.
9. It follows from the above considerations that it may be necessary 
to envisage special financing conditions for sales to the U S  and 
perhaps to other markets as well. For the present , however,
it is proposed that the Council authorises the Commission to 
negotiate minimum terms applicable to a ll markets, it being 
understood that it may be necessary -to seek supplementary ..directives 
at a later stage.

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10. Turning to other elements of the Commission’s proposal, it should 
be noted that 10 and 12 year financing options are envisaged 
with minimum in terest rates for o ffic ia lly  financed credits in 
d ollars (the currency used for most financing) linked to U S  
Treasury Bonds. The conditions for financing offers made in a 
cocktail of European currencies (FF,D M  t  sterlin g ) should be 
established so as to be fu lly  competitive with do liar-denominated 
cred its. The same principle should be adopted at a later stage 
when it may be possible to envisage granting export credits 
denominated in E C U .
11. A  new element should be the introduction of an automatic system 
for adjusting minimum in te re st rates in dollars in line with 
movements in appropriate U S  Treasury Bonds. The technical provisions 
of such a system should be elaborated during the course of the 
negotiations (including lim iting prior commitments to three months) 
so as to ensure that European offers are not undercut by movements 
in market in terest ra te s. Before the fu ll implementation of the 
automatic system and depending on the evolution of in te re st rates it 
may also be worth envisaging a tra n sitio n a l period during which 
lower rates may apply.
12. Finally, the Commission would point to the maintenance of its
proposal to the effect that the maximum amount of o ffic ia l financing 
support at minimum in te re st rates should be limited to less than 
85 %  of contract value. This proposal, which re fle c ts actual 
practices of selling wide-bodied je t a irc ra ft- has the advantage of 
lim iting potential subsidy elements. A s regards the remainder of 
the c re d it, it is proposed that o ffic ia l financing support may 
be provided but that th is should be at rates close to market ra te s. 
In the negotiations, arrangements have to be worked out which allow 
Member States to fu lly  compete with U S  o ffe rs.

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B. O T H E R  A IR C R A F T
13. With respect to smaller a irc ra ft and helicopters , the Commission 
proposes to maintain in broad terms the thrust of its  proposals 
of December 1982. Thus for the categorisation of a irc ra ft two 
subgroups should be maintained in addition to that of large a ir c r a f t. 
In th is context it could be appropriate to lis t a ll current a irc ra ft 
fallin g  within each category. P articular attention should be 
paid to the c la ssific a tio n  of the B A c  146 and F  28 and F  100 which 
sometimes compete with large a irc ra ft and sometimes with smaller 
commercial transport a irc ra ft; however, whichever category is 
eventually adopted, in the case of competition with an a irc ra ft 
c la ssifie d  in another category sim ilar terms should be permitted 
(Competition Reference Point) .
14. The most important amendment of the Commission's former proposal 
concerns the minimum in te re st rates to be applied. O n  further 
reflectio n  a unique rate of in te re st without d iffe re n tia tio n  by 
purchasing country for both categories of a irc ra ft may be more 
appropriate in view of the nature of the equipment being sold.
In th is context it w ill be recalled that "mobility" was the main 
reason for establishing a unique rate of in te re st in the O E C D  
Ships agreement. A  fo rtio ri the same principle should be adopted 
with respect to a ir c r a f t.
15. A s regards the Minimum in te re st rates that should be applied, 
the Commission considers that these should be in the order
of the minimum in te re st rates of the Consensus for re la tiv e ly  
rich countries. Such a benchmark would appear to be ju s tifie d  
in view of the preponderance of sales to such markets.
16. A s regards the other conditions of an agreement , these should 
be based where appropriate on the prevailing dispositions of the 
Consensus. O ne notable d ifference, however, should be the 
exclusion of tied  aid cred its in the a irc ra ft sector. Such a 
provision re fle c ts no more than the current p ractice of most 
O E C D  countries not to grant tied  aid cred its in th is sector.

RECOMMENDATION FOR A
COUNCIL DECISION
on the position to be adopted by the Community 
in the international negotiations on conditions 
governing officially -su p p o rted  export 
credits for a irc ra ft
T H E  C O U N C IL  O F  T H E  E U R O P E A N  C O M M U N IT IE S,
Having regard to the Treaty establishing the European Economic 
Community, and in p a rtic u la r A rticle 113 th ereof,
Having regard to the Recommendation from the Commission,
Whereas by its  D ecisionof 28 July 1982the Counci l approved on behalf of 
the Community the re su lts of the negotiations on the modif ications of the 
Arrangement on Guidelines for Off icially-Supported Export Credits and agreed in 
Annex II to that Decision to open negotiations for agreements 
on export credit terms for a irc ra ft and nuclear power statio n s;
Whereas in view of the situ atio n  of the world economy it remains 
necessary to keep wasteful competition on o ffic ia lly  supported 
export credits to a minimum and improve international cooperation 
in order to prevent a d eterio ratio n  of credit terms,
Whereas it is necessary to revise and update the Commission's 
proposals of December 1982 (C0M(82)829 fin a l);

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HAS DECIDED AS FOLLOWS:
Sole Article
In the international negotiations on the conditions governing  
officially-supported export credits for aircraft, the  
Commission shall express the Community's position in accordance  
with the directives annexed hereto.
It shall proceed in consultation with the Special Committee provided  
for in Article 113 of the Treaty, which shall assist it in its task.
For the Council
Done at Brussels,
The President

ANNEX
N E G O T IA T IN G  DIRECTIVES
. L A R G E  A IR C R A F T  
1  . S C O P E  O F  A N  A G R E E M E N T
Exports of Large and medium-sized commercial transport turbofan 
a i r c r a f t .
2. D U R A T IO N
The maximum repayment term for sales and leases shall be twelve 
years.
3. INTEREST R A T E S
(i) Notwithstanding the provisions of paragraph 4 below, the 
minimum in te re st rate for export cred its benefiting from 
o ffic ia l financing support shall be determined for each 
currency as follows :
- for the U S  d o lla r, repayment terms up to 10 years shall
be based on U S  Treasury Bonds plus an appropraite margin.
A n  additional mark-up to th is minimum rate shall be applied 
if the repayment term is extended to 12 years.
- minimum in te re st rates in other currencies shall be determined 
so as to ensure that financing offers are fully competitive 
with those denominated in U S  d o lla rs.
(ii) The minimum in te re st rates shall be adjusted autom atically 
in accordance with appropriate indicators of changes in 
market in terest rates. For the U S  d o lla r, the indicator 
shall be U S  Treasury Bonds.
C i ii) The implementation of the provisions foreseen under (i) and
(ii) above may be preceded by a tra n sitio n a l period during 
which lower rates may apply.

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4. OFFICIAL S U P P O R T
The maximum amount of o ffic ia l financing support at minimum 
rates of in terest (paragraph 3 above) may be less than 85 %  
of the contract value. Special conditions shall apply when 
the portion of the credit not covered by minimum rates is subject 
to o ffic ia l financing support.
5. C O M P E T IT IO N  R E F E R E N C E  PO IN T
In the event of o ffic ia lly  supported com petition,a i rcraft other 
than those specified in paragraph (1) above shall be able to 
benefit from the same export credit terms and conditions.
6. O T H E R  C O N D IT IO N S
(i) Cash payments before delivery shall be at least 15 %  of contract 
value.
(ii) Commitments for o ff ic ia lly  financed credits shall be valid 
for three months.
(iii) The general provisions of the Arrangement sh all apply, notably
the non-derogation clause, matching and n o tifica tio n  procedures, 
and periodical reviews.
(iv) Export credit conditions for sales of sp are-p arts, including 
engines, and second-hand a irc ra ft shall be studied.
B. O T H E R  A IR C R A F T
1  . S C O P E  O F  A N  A G R E E M E N T
Exports of small and medium-sized a irc ra ft.
These a irc ra ft should be c la ssifie d  into two categories along the 
following lines :
(i) C A T E G O R Y  II :  - Commercial transport a irc ra ft not specified in
section A  above.
- Other multi-engined turbine powered a irc ra ft 
(business and multi-engined turboprop commercial 
transport a irc ra ft)
- Multi-engined turbine powered helicopters.

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(ii) C A T E G O R Y  III :  All other a irc ra ft and helicopters
2. D U R A T IO N
The maximum repayment terms for sales and leases shall be :
(i) 7-8 years for a irc ra ft classified  in Category II;
(ii) 5  years for a irc ra ft c la ssifie d  in Category III;
3. INTEREST R A T E S
(i) In terest rates for a irc ra ft cla ssifie d  in Categories II and III shall be 
in theorder of the minimum in terest rates for rela tiv e ly  rich 
countries as specified in paragraph 3(A) of the Arrangement.
( i i )  In cases where the commercial lending rates of in te re st for the 
national currency of a Participant fa ll below the lowest minimum 
level of (i) above, the in te re st rate on export cred its financed 
in whole or in part with o ffic ia l financing support shall be 
determined in accordance with the provisions of paragraph 3(b) 
of the Arrangement.
4. OFFICIAL S U P P O R T
The maximum amount of o ffic ia l financing support shall correspond to 
that permitted under the Arrangement (85 %).
5. C O M PE T IT IO N  R E F E R E N C E  PO IN T
In the event of o ffic ia lly  supported competition, a irc ra ft competing 
with others from a higher category shall be able to benefit from the 
same export credit terms and conditions.
6. O T H E R  C O N D IT IO N S
(i) The minimum cash payment shall be at least 15 %  of the contract value, 
(ii) The granting of tied  aid credits shall be prohibited.
( ii i)  The general provisions of the Arrangement sh all apply, notably the 
non-derogation clause, matching and n o tifica tio n  procedures, the 
maximum duration of prior commitments and the annual review.
(iv) Export credit conditions for sales o f spare-parts including engines, 
and second-hand a irc ra ft shall be studied.