International Trade:

Long-Term Viability of U.S.-European Union Aircraft Agreement Uncertain

GGD-95-45: Published: Dec 19, 1994. Publicly Released: Jan 6, 1995.

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Pursuant to a congressional request, GAO reviewed the 1992 bilateral aircraft agreement between the United States and the European Union (EU), focusing on the: (1) extent to which the agreement has proved viable in operation; (2) potential impact of changes in government support on the competitiveness of the U.S. civil aircraft industry; and (3) efforts of the United States and EU to extend coverage of the agreement to other nations with aerospace industries and to related aerospace products.

GAO found that: (1) certain provisions of the bilateral agreement are the source of ongoing disagreement between the United States and EU; (2) the bilateral agreement has been in effect for too short a period to discern any definitive changes in government support to the U.S. civil aircraft industry; (3) if European government support is reduced due to the constraints on direct support, the U.S. civil aircraft industry will benefit; (4) U.S. negotiators have indicated that the indirect support provisions, as negotiated, should not affect U.S. research programs; (5) the United States and EU view such countries as Japan, Russia, and China as potential competitors in the market for large civil aircraft; (6) the United States and EU have tried to make the agreement multilateral by encouraging other countries with aerospace industries to agree to limits on government support similar to those in the bilateral agreement; (7) although no new multilateral agreement on aircraft has yet been reached, multilateral negotiations on aircraft are continuing under the General Agreement on Tariffs and Trade; and (8) it is not likely that a new multilateral aircraft agreement will be reached in the near future, since such agreements are not viewed by other countries as being in their best interests.

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