CELEX: 51992PC0222
Language: en
Date: 1992-05-25
Title: Proposal for a COUNCIL DECISION concerning the conclusion of an Agreement between the European Economic Community and the United States of America on trade in large civil aircraft

COMMISSION OP THE EUROPEAN COMMUNITIES
                                    C0M(92) 222 final
                                    Brussels, 25 May 1992
                         Proposal for a
                        COUNCIL DECISION
       concerning the conclusion of an Agreement between
              the European Economic Community and
                  the United States of America
               on trade in large civil aircraft
                 (presented by the Commission)
 ---pagebreak---                         EXPLANATORY MEMORANDUM
   By decision of 4 February 1991, the Council authorised the
   Commission to open negotiations both with the United States of
   America and with other Parties to the 6ATT Agreement on Trade in
   Civil Aircraft in order to conclude new arrangements governing
   trade in civil aircraft.
2.  In accordance with this decision and with the detailed negotiating
   directives adopted by the Council and in consultation with the 113
   Committee, the Commission held negotiations with the United States
   which on 31 March 1992 resulted in the enclosed agreement.
   The enclosed agreement corresponds closely with all points in the
   negotiating directives. In particular the scope of the agreement
   has been limited to large civil aircraft. In this regard, since it
   was not possible to reach a satisfactory definition in terms of
   seating capacity, explicit reference is made to aircraft produced
   in the Community      by  the Airbus consortium. Moreover,      the
   Commission considers that a balanced set of disciplines has been
   introduced covering both indirect and direct support.
   In Article 12 of the Agreement, both the United States and the
   Community re-affirm their determination to achieve revision of the
   GATT Civil Aircraft Agreement. As foreseen in the above-mentioned
   Council decision, the Commission now expects this multilateral
   process to be launched immediately in conjunction with the United
   States Government.
 ---pagebreak---                      PROPOSAL FOR A COUNCIL DECISION
           concerning the conclusion of an Agreement between
                     the European Economic Community
           and the Government of the United States of America
                    on trade in large civil aircraft
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the          European   Economic
Community, and in particular Article 113 thereof,
Having regard to the proposal from the Commission,
Whereas the Agreement      negotiated  between  the European     Economic
Community and the Government of the United States of America on trade
in large civil aircraft in Brussels on 31 March 1992 should be
approved,
HAS DECIDED AS FOLLOWS:
                                Article 1
The Agreement    between the European Economic Community         and  the
Government of the United States of America on trade in large civil
aircraft is hereby approved on behalf of the Community.
The text of the Agreement is attached to this Decision.
                                Article 2
The President of the Council is hereby authorised to designate        the
person empowered to sign the above Agreement in order to bind         the
Community.
Done at Brussels                                  For the Council
                                                   The President
 ---pagebreak---                            AGREEMENT
                  CONCERNING THE APPLICATION
      OF THE GATT AGREEMENT ON TRADE IN CIVIL AIRCRAFT
Between the     European   Economic  Community  (hereinafter
referred to as "the EC") and the Government of the United
States of America (hereinafter referred to as "the US") on
trade in large civil aircraft,
Recognising   the need to promote a more          favourable
environment for international trade in large civil aircraft
and to reduce trade tensions in the area,
Recognising that the disciplines in the GATT Agreement on
Trade in Civil Aircraft should be strengthened with a view
to progressively reducing the role of government support,
Recalling the principles and objectives agreed upon by
representatives of the US and of the EC at their meeting
held in London on 27 October 1987,
In pursuit of their common goal of preventing trade
distortions resulting from direct or indirect government
support for the development and production of large civil
aircraft and of introducing greater disciplines on such
support and of encouraging the adoption of such disciplines
multilaterally within the GATT,
Noting their intention to act without prejudice to their
rights and obligations under the GATT and under other
multilateral agreements negotiated under the auspices of the
GATT,
THE EC AND THE US HAVE AGREED:
 ---pagebreak--- Article 1
Government-Directed Procurement, Mandatory Sub-contracts and
Inducements
With respect to issues concerning Article 4 of the GATT
Agreement on Trade in Civil Aircraft ("Aircraft Agreement"),
the Parties      agree  to   act  in conformity    with   the
interpretative note to Article 4 of the Aircraft Agreement
contained in Annex I of this Agreement.
Article 2
Prior Government Commitments
Government    support  to   current   large  civil   aircraft
programmes, committed prior to the date of entry into force
of this Agreement, is not subject to the provisions of this
Agreement except as otherwise provided below. The terms and
conditions on which such support is granted shall not be
modified in such a manner as to render it more favourable to
the recipients; however, de minimis modifications shall not
be deemed inconsistent with this provision.
Article 3
Production Support
As of entry into force of this Agreement, Parties shall not
grant direct government support other than what has already
been firmly committed for the production of large civil
aircraft. This prohibition shall apply both to existing and
to future programmes.
 Article 4
 Development Support
4.1  Governments shall provide support for the development
     of a new large civil aircraft programme only where a
     critical project appraisal, based on conservative
      assumptions, has established that there is a reasonable
     expectation of recoupment, within 17 years from the
     date of first disbursement of such support, of all
     costs as defined in Article 6(2) of the Aircraft
     Agreement, including repayment of government supports
      on the terms and conditions specified below.
 ---pagebreak--- 4.2  As of entry into force of this Agreement, direct
     government support committed by a party for the
     development of a new large civil aircraft programme or
     derivative shall not exceed:
     a)   25 per cent of that programme's total development
          cost as estimated at the time of commitment (or of
          actual development costs, whichever is lower);
          royalty payments on this tranche shall be set at
          the time of commitment of the development support
          so as to repay this support at an interest rate no
          less than the cost of borrowing to the government
          within no more than        17 years    from   first
          disbursement, plus
     b)   8 per cent of that programme's total development
          cost as estimated at the time of commitment (or of
          actual development costs, whichever is lower);
          royalty payments on this tranche shall be set at
          the time of commitment of the development support
          so as to repay such support at an interest rate no
          less than the cost of borrowing to the government
          plus 1 per cent within no more than 17 years from
          first disbursement.
    These calculations shall be made on the basis of the
    forecast of aircraft deliveries in the critical project
    appraisal.
4.3  Royalty payments per aircraft shall be calculated at
     the time of commitment of the development support to be
     repaid on the following basis:
     a)   20 per cent of aggregate payments calculated in
          accordance with Article 4.2 above are payable on
          the basis of the delivery of a number of aircraft
          corresponding   to   40  per   cent  of    forecast
          deliveries;
     b)   70 per cent of aggregate payments calculated in
          accordance with Article 4.2 above are payable on
          the basis of the delivery of a number of aircraft
          corresponding   to   85   per  cent  of    forecast
          deliveries.
 ---pagebreak---  Article 5
 Indirect Government Support
5.1  Parties shall take such action as is necessary to
     ensure that indirect government support neither confers
     unfair advantage upon manufacturers of large civil
     aircraft benefiting from such support nor leads to
     distortions in international trade in large civil
     aircraft.
5.2  As of entry into force of the Agreement, identifiable
     benefits to the development or production of any of the
     products covered by this Agreement, net of recoupment,
     derived from indirect support shall not exceed in any
     one year:
     a)  3 per cent of the annual commercial turnover of the
         civil aircraft industry in the Party concerned for
         the products covered by this Agreement, or
     b)  4 per cent of the annual commercial turnover of any
         one firm in the Party concerned for the products
         covered by this Agreement.
5.3  Benefits from indirect support shall be deemed to arise
     when there is an identifiable reduction in costs of
     large civil aircraft resulting from government-funded
     research and development in the aeronautical area
     performed after the entry into force of this Agreement.
     Where it can be demonstrated that the results of
     research and development have been made available on a
     non-discriminatory   basis to large civil         aircraft
     manufacturers of the Parties, benefits deriving from
     such   technologies   shall    be    excluded   from   the
     calculation in paragraph 5.2.       However, identifiable
     benefits   may   result   when    large   civil   aircraft
     manufacturers are responsible for, or have early access
     to, the conduct or results of such research.
     If a Party has reason to believe that other indirect
     supports provided by a government are resulting in
     identifiable reductions in the costs of large civil
     aircraft, the Parties shall consult with a view towards
     quantifying such reductions and including them in the
     calculation described above.
 ---pagebreak---      Benefits from indirect support resulting from the
     technology obtained through government-funded research
     and development or through other government programmes
     shall normally be calculated in terms of the reduction
     in the cost of research and development and in the
     reduction in the cost of the production equipment or
     production process technology.
Article 6
General Purpose Loans
Parties shall assume no liability for specific loans that
aircraft manufacturers make or make available, through
direct loans, guarantees, or otherwise, to airlines, other
than through    official export credit financing consistent
with the Large Aircraft Sector Understanding of the OECD
Understanding on Official Export Financing.
Article 7
Equity Infusions
Equity infusions are excluded from the scope of this
Agreement. Equity infusions will not, however, be provided
in such a manner as to undermine the disciplines in the
Agreement.
Article 8
Transparency
8.1  To   the    extent    necessary    to  ensure    effective
     implementation    of   this   Agreement,   Parties   shall
     exchange on a regular, systematic basis, all public
     information of a kind governments make available to
     their respective national elected assemblies relating
     to matters covered by this Agreement and its Annexes.
     Such public information will include at minimum the
     total amount of government support for new development
     projects and its share of total development costs,
     aggregate data on disbursements and repayments relating
     to direct government supports for commercial aircraft
     programmes, the annual commercial turnovers of the
     civil aircraft industry as specified in Article 8.5 b
     and the aggregate amounts of identifiable indirect
     benefits     received     by    large    civil    aircraft
     manufacturers.
 ---pagebreak--- 8.2 Furthermore,     with    regard    to    prior    government
    commitments    for    large   civil   aircraft    programmes
    described in Article 2, a complete list of such
    commitments by the Parties to this Agreement already
    disbursed or committed shall be separately provided,
    including    information    on   the   type   of   repayment
    obligation and the planned period of repayment. Annual
    disbursements     and   repayments    relating    to   these
    programmes on an aggregate basis shall also be notified
    to the other Party for each government providing these
    supports. In addition, a Party shall notify the other
    Party to this Agreement of any changes which render the
    terms and conditions of such support commitments more
    favourable to the recipient, including: changes in the
    repayment period; failure to repay the support; or
    reduction of the scheduled repayments.
8.3 Furthermore, with regard to future large civil      aircraft
    programmes, Parties shall provide, at the           time of
    government     commitment,     the    following     specific
    information in relation to development support      for each
    of the governments providing such support:
          the total amount of government support;
          the share of government support as a percentage of
          estimated total development cost;
    -     the anticipated return to the government;
          the planned period of repayment of government
               support; and
          the forecast number of planes on which the
          calculations made in accordance with Article 4.2
          are based.
8.4 In the course of the consultations provided for under
    Article 11 of this Agreement, Parties shall exchange
    information on government commitments and support for
    each    of  the governments      providing    such   support
    including but not limited to:
    - any changes which render the terms and conditions
       more favourable to the recipient, including: changes
       in the repayment period; failure to repay the
       support; or reduction of the scheduled repayments;
       and
 ---pagebreak---     - annual   disbursements  and   repayments   on a per
      programme basis for new programmes launched in
      accordance with Article 4. Such information will be
      provided at the first regular consultation taking
      place at least twelve months after the end of the
      year in which the disbursements and repayments are
      made.
8.5 In the course of consultations under Article 11,
    a)   Parties   will    on  an   annual   basis   provide
         information on new government-funded research and
         development undertaken or initiated during the
         previous year     and on ongoing research and
         development projects in the aeronautical area,
         including per programme details on those projects
         in which large civil aircraft manufacturers
         participate.   This shall include information on
         the area of activity and the amount of government
         funding for such projects.
    b)   Parties will provide information on identifiable
         benefits derived from indirect supports for each
         large civil aircraft programme.
    This will include recoupment per programme received
    from large civil aircraft manufacturers. The following
    specific information will be provided on an annual
    basis for each of the governments providing such
    support:
         1) the annual commercial turnover of the civil
             aircraft industry in the Party concerned in
             relation to products covered by the Agreement;
         2) the annual commercial turnover in relation to
             products covered by the Agreement of each firm
             in the Party concerned which manufacturers
             products covered by the Agreement; and
         3) the total amount of indirect benefits as
             defined in Article 5.2 for the civil aircraft
             industry in relation to the products covered
             by the Agreement and for each firm involved in
             the manufacture of such products.
8.6 If a Party considers that additional information
    directly   relevant   to the    implementation  of the
    provisions of this Agreement is necessary, such
    information will be provided upon duly motivated
    request.
 ---pagebreak--- 8.7  Parties shall upon duly motivated request provide at
     the time of commitment of new development support non-
     proprietary   information    on   the    critical   project
     appraisal in so far as this relates to the provisions
     of Article 4.1.
8.8  Any information not in the public domain, which a Party
     may provide, shall at the request of the Party
     providing    the    information,    be     considered    as
     proprietary.    A recipient government shall take all
     measures necessary to ensure that information thus
     designated not be disclosed to anyone outside that
     government even after expiry or termination of the
     present   Agreement.        In    addition,     proprietary
     information shall not be used in possible trade
     disputes except for the purposes of confidential
     internal   government   discussion     and   decisions   in
     relation to the implementation of the Agreement.
8.9  Parties shall, unless otherwise indicated, exchange the
     information specified above on an annual basis.         Any
     disagreement concerning information to be provided
     pursuant to this Article shall be resolved through
     consultations under Article 11.
8.10 Parties shall provide information on new infusions of
     equity or changes in equity positions by governments
     into firms engaged in       civil aircraft production,
     including the amount and type of equity provided.
8.11 Parties will encourage firms engaged in the manufacture
     of large civil aircraft to increase the public
     disclosure of disaggregated financial results of their
     civil aircraft operations through the separation of
     reporting on military and civilian aircraft operations
     and the adoption of lines of business financial
     reporting. These disaggregated financial results would
     at a minimum be expected to include information on
     sources   and    uses  of    funds    including    specific
     information on revenue, operating income, net assets,
     capital investment and government equity infusions.
8.12 Nothing in this Agreement shall be construed to require
     any contracting Party to furnish any information the
     disclosure of which it considers contrary to its
     essential security interests.
 ---pagebreak--- Article 9
Exceptional Circumstances
9.1      Where, as a result of an unforeseen, exceptional
         situation, the survival of a significant proportion of
         the civil aircraft                  manufacturing activities in one of
         the Parties1 and the continued financial viability of
         the company or the division of a company responsible
         for such civil aircraft manufacture are put in
         jeopardy, that Party may derogate temporarily from the
         disciplines laid down in this Agreement.                                             In this
         context, the disaggregated financial results of civil
         aircraft operations will                       be reported publicly by that
         company or division2.                          This derogation may not be
         invoked, however, in respect to the disciplines
         applying to the launch of new civil aircraft programmes
         as specified in Article 4.
9.2      The Party concerned shall provide notice of its
         intentions to the other Party and an opportunity for
         prior consultations unless it is prevented from doing
         so for legal reasons and shall in any event notify the
         other Party immediately of its reasons for invoking
         this Article and fully disclose the specific measures
         which it has taken, including the amount and nature of
         the measures, and their expected duration.
9.3      Specific measures taken by a Party in accordance with
         this Article:
         a)       shall be limited in scope and duration to the
                  extent           strictly             necessary           to        remedy        the
                  difficulties referred to in paragraph 1;
         b)       shall be designed to return as quickly as possible
                  the beneficiary company to commercial viability;
         c)       shall          take        due         account          of      the         possible
                  implications for other large civil aircraft
                  manufacturers and shall avoid depressing prices on
                  the world market for civil aircraft by the
                  manufacture of inventory for which no firm order
                  exists.
 1
   For the purposes of this paragraph, "Parties" shall be deemed to include any of the individual Member
States of the EC.
2
   These disaggregated financial results would at a minimum include information on sources and uses of
funds including specific information on revenue, operating income, net assets, capital investment and
government equity infusions.
 ---pagebreak---                                                        10
 9.4      If, after consultations pursuant to Article 11, a Party
          determines that the action taken under this Article
          significantly              undermines               the objectives                of this
          Agreement, it shall have the right to suspend some or
          all of the provisions of this Agreement or to terminate
          it within 15 days of the conclusion of consultations.
Article 10
Avoidance of Trade Conflicts and Litigation
 10.1 Parties shall seek to avoid any trade                                           conflict on
         matters covered by the present Agreement3.
10.2 They will not self-initiate action under their national
         trade laws with respect to government supports granted
         in conformity with this Agreement for as long as this
         Agreement is in force.                               However, nothing in this
         paragraph shall prevent a Party from abrogating this
         Agreement on grounds of non-compliance by the other
         Party.
10.3 In order to avoid trade conflict they will strongly
         encourage private parties to request the use of the
         provisions of Article 11 to resolve any disputes on
         matters covered by this Agreement.                                        If, however,
         private petitioners request that action be taken under
         national laws on matters covered by this Agreement, the
         petitioners' government will immediately inform the
         other Party and offer to enter into consultations in
         accordance with Article 11.                              The Party against whom
         such action is brought shall have the right either to
         suspend the application of some or all the provisions
         of the present Agreement or to terminate the Agreement
         15 days after the conclusion of consultations.
10.4 In the conduct of any investigations of trade
         allegations concerning                          products covered by this
         Agreement that have been initiated under national trade
          laws as the result of private petitions, Parties shall,
         consistent              with         their            law        take       account            of
         representations concerning compliance with the terms of
         this Agreement.
?
   Action with respect to "matters covered by the present Agreement" refers to trade actions relating to
direct and indirect government support as defined by this Agreement. It does not include actions relating
to dumping, intellectual property protection, or anti-trust or competition laws.
 ---pagebreak---                               11
Article 11
Consultations
11.1 Parties shall consult regularly and, in any case, at
     least twice a year, to ensure correct functioning of
     the Agreement.
11.2 A Party may request consultations on any development
     related to the functioning of the present Agreement.
     Such consultations shall be held not later than 30 days
     following the date on which the request is received.
11.3 Parties agree to seek to resolve any disputes within
     three months of the date of the initial request for
     consultations. Consultations will not be deemed to be
     concluded for the purposes of Articles 8 and 9 of this
     Agreement before this three-month period has expired.
Article 12
GATT Agreement on Trade in Civil Aircraft
12.1 The Parties shall propose jointly to other signatories
     of the Aircraft Agreement that disciplines along the
     lines of those laid down in the present Agreement and
     the   interpretative  note   given   in   Annex  I   be
     incorporated into the aforementioned GATT Agreement.
     The Parties shall also propose that the improved
     dispute settlement provisions agreed in the Uruguay
     Round be used to resolve any dispute arising out of the
     implementation of the new Aircraft Agreement.
12.2 The Parties shall make their utmost efforts to ensure
     that these or similar disciplines are incorporated into
     the Aircraft Agreement or adopted by key signatories at
     the earliest possible date, and also to expand the
     coverage of the disciplines provided by this Agreement
     to all of the products covered in the Aircraft
     Agreement.
12.3 If multilateralisation has not been achieved in one
     year, the Parties shall review the question of the
     continued application of this bilateral Agreement.
 ---pagebreak---                               12
Article 13
Final Provisions
13.1 This Agreement shall enter into force on the date of
     its acceptance by both Parties.
13.2 This Agreement may be amended by mutual consent of the
     Parties to take into account any new situation which
     may arise including possible amendments to the Aircraft
     Agreement.
13.3 One year after the entry into force of this Agreement,
     either party may withdraw from the Agreement.      If a
     Party wishes to withdraw from the present Agreement it
     shall notify the other Party in writing of its
     intentions. The withdrawal shall take effect 12 months
     after the date on which the notification was received.
 ---pagebreak---                                                       13
                                                                        ANNEX I
INTERPRETATION OF ARTICLE 4 OF THE
GATT AGREEMENT ON TRADE IN CIVIL AIRCRAFT
BY SIGNATORIES OF THE AGREEMENT
Article 4 of the GATT Agreement on Trade in Civil Aircraft
 ("the Agreement") deals with three specific issues:
         government^directed procurement (paragraph 2)
         mandatory sub-contracts (paragraph 3)
         inducements (paragraph 4)
ARTICLE 4-1
Paragraph 4.1 states the general principle, applicable
throughout Article 4, that purchasers of civil aircraft4
should be free to select suppliers on the basis of
commercial and technological factors.
ARTICLE 4.2 (Government-Directed Procurement)
This paragraph states that "signatories shall not require
airlines, aircraft manufacturers, or other entities engaged
in the purchase of civil aircraft, nor exert unreasonable
pressure on them, to procure civil aircraft from any
particular source, which would create discrimination against
suppliers from any signatory".
This means that signatories must abstain from imposing
preference policies in favour of or against the suppliers of
one or more signatories.
Unreasonable government pressure relating to the selection
of suppliers by airlines, aircraft manufacturers or other
entities engaged                  in the purchase of civil aircraft
("purchasers") is also prohibited. "Unreasonable pressure"
is any action favouring products or suppliers, or which
influences procurement decisions in a manner which creates
discrimination against suppliers from any other signatory.
4
  For the purpose of the Annex, "civil aircraft" is defined as in Article 1 of the GATT Agreement on
Trade in Civil Aircraft.
 ---pagebreak---                               14
The signatories agree that the following are examples of
practices which are not considered as exerting unreasonable
pressure:
     the participation of government or former government
     representatives on the boards of wholly or partly
     government-owned purchasers but only if they act in the
     best commercial interest of the purchaser concerned,
     and do not influence procurement decisions in a manner
     which creates discrimination against suppliers from any
     other signatory.
     government    decisions     concerning    safety    and
     environmental considerations.
ARTICLE 4.3 (Mandatory Sub-Contracts)
The first sentence states that "signatories agree that the
purchase of products covered by the Agreement should be made
only on a competitive price, quality and delivery basis".
This means that signatories will not intervene to obtain
favoured treatment for particular firms and that they will
not interfere with the selection of vendors in a situation
where vendors of different signatories are competing.
By emphasising that the only factors which should be
involved in purchase decisions are price, quality and
delivery terms, the signatories agree that Article 4.3 does
not permit Government-mandated offsets. Further, they will
not require that other factors, such as subcontracting, be
made a condition or consideration of sale. Specifically, a
signatory may not require that a vendor must provide offset,
specific types or volumes of business opportunities, or
other types of industrial compensation.
Signatories shall not therefore impose conditions requiring
subcontractors or suppliers, to be of a particular national
origin.
The second sentence of this paragraph states that "in
conjunction with the approval or awarding of procurement
contracts for products covered by this Agreement a signatory
may... require that its qualified firms be provided with
access to business opportunities on a competitive basis and
on terms no less favourable than those available to the
firms of other signatories." This means that a signatory
may require that the manufacturer not discriminate against
the signatory's qualified firms with respect to any bid
opportunities and to the evaluation of any competitive bids
made by those firms.
 ---pagebreak---                               15
Article 4.4 (Inducements)
This paragraph states that "signatories agree to avoid
attaching inducements of any kind to the sale or purchase of
civil aircraft from any particular source which would create
discrimination against suppliers from any signatory".
This means that signatories shall refrain from the use of
negative or positive linkages between the sale or purchase
of civil aircraft and other government decisions or policies
which might influence such sale or purchase whenever there
is a competition between suppliers of signatories.        The
following is an agreed illustrative, non-exhaustive list of
such prohibited inducements:
     rights and restrictions relating to        the   airline
     industry such as landing or route rights.
-    general economic programmes and policies, such as
     import   policies, measures    aiming  at   changes   in
     bilateral trade imbalances, policies on alien workers
     or debt rescheduling.
-    development assistance programmes and policies, such as
     grant aid, loans and infrastructure financing; it is
     understood that the use of such assistance for the
     purchase of civil aircraft does not fall under this
     category to the extent that the granting of these funds
     is not conditional on such purchase taking place.
-    defence and national security policies and programmes.
Without prejudice to Article 4.3, this also means that
signatories shall not intervene in any way, nor exert any
direct or indirect pressure on other governments or any
entity involved in procurement decisions, including the
establishment of any link of a negative or positive
character between decision concerning the procurement of
civil aircraft and any other issue or action in any other
area which might affect the interest of the importing
country.
ARTICLE 4.2 and 4.4 (Political Representations)
All participants of signatories in the domestic political
decision-making process shall not take any action, including
but not limited to political representations, pressure or
inducements to other governments or foreign airlines, which
would be contrary to Article 4 as interpreted in this Annex.
Signatories shall draw the participants' attention to this
interpretation of Article 4, and shall also use their best
efforts to assure that the participants do not take such
action.
 ---pagebreak---                               16
                                       ANNEX II
For the purposes of the present     Agreement  the  following
definitions shall apply:
1.   "large civil aircraft"
     With respect to such aircraft produced in the US by
     existing manufacturers of large civil aircraft and in
     the European Community by the Airbus consortium, or
     their successor entities, all aircraft, as defined in
     Article 1 of the GATT Agreement on Trade in Civil
     Aircraft, except engines as defined in Article 1.1(b)
     of the Aircraft Agreement, that are designed for
     passenger or cargo transportation and have 100 or more
     passenger   seats   or    its   equivalent    in   cargo
     configuration.
2.   "derivative" means an aircraft model the major design
     elements of which are derived from a prior aircraft
     model.
3.   "total development cost" as referred to in Article 4.2.
     The following cost items, incurred prior to the date of
     certification, are those which may be taken into
     account in assessing the "total development cost"
     referred to in Article 4.2.
          preliminary design
          engineering design
          wind-tunnel, structural, system  and
          laboratory tests
     -    engineering simulators
          equipment development work, except for work
          directly financed by equipment and engine
          manufacturers
          flight tests, including associated ground support,
          and analysis necessary to obtain certification
          documentation required for certification
 ---pagebreak---                              17
   -    the cost of manufacture of prototypes and test
        aircraft, including spares and such modifications
        as may be necessary to obtain certification, less
        the estimated fair market value of flight aircraft
        after refurbishment
   -    jigs and tools, except machine tools, for use
        on specific programmes.
4. "production"
   All manufacturing, marketing and sales activities other
   than those described under point 3 above with the
   exception    of   official    export   credit      financing
   consistent with the Large Aircraft Sector Understanding
   of the OECD Understanding on Official Export Financing.
5. "indirect government support"
   Financial support provided by a government or by any
   public body within the territory of a Party for
   aeronautical    applications,   including   research     and
   development, demonstration projects and development of
   military   aircraft, which provide       an    identifiable
   benefit to the development or production of one or more
   specific large civil aircraft programmes.
6. "direct government support" means any financial support
   provided by a government or by any public body within
   the territory of a Party which is provided:
   (1)  for specific large civil aircraft programmes or
        derivatives or
   (2)  to specific companies to the extent that large
        civil aircraft programmes or derivatives directly
        benefit.
7. "royalty   payment" means      repayment   of    a   certain
   predetermined    amount   of   development    support    per
   aircraft delivered.
 ---pagebreak---                                                                      ISSN 0254-1475
                                                              COM (92) 222 final
                                                      DOCUMENTS
EN                                                                             07
                                 Catalogue number: CB-CO-92-232-EN-C
                                                             ISBN 92-77-44492-4
Office for Official Publications of the European Communities
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