The Export-Import Bank, in a potentially major breakthrough for U.S. exporters, yesterday announced that the United States, France, Great Britain and West Germany have agreed to reduce government subsidies to their nations' aircraft industries.
Ex-Im Bank Chairman William H. Draper III expressed the hope that the new agreement would pave the way for similar accords on all export subsidies.
"This is a major step," said Draper. "It absolutely enhances the chances for an agreement with OECD." The Organization of Economic Cooperation and Development will hold a meeting in Paris in October to devise improvements and changes in international arrangments on export credits.
The aircraft accord came after years of balking by the Europeans, particularly the French, who derive one-fourth of their income from exports. Then three days before the Ottawa summit, Paris indicated it would be willing to change its policy.
Draper yesterday attributed the about-face to the fact that the new Socialist government of Francois Mitterrand has decided to cooperate with the capitalist countries of the West as well as to the economic realization by the French that "they can't do everything for everybody on a limited budget."
The agreement raises from 9.25 percent to 12 percent the interest rate that the Ex-Im Bank charges foreign countries and companies purchasing U.S. planes. It will also charge a one-time fee of 2 percent. The French, British and German consortium Airbus Industries will also raise its rate by 4.5 percentage points to 12 percent, but it will not charge the 2 percent fee. In exchange for the concession, the United States agreed at France's request not to extend the credit terms beyong 10 years.
Increasing the finance charges to buyers diminishes the subsidies the governments must pay to make up the difference between the low loan and high market rates. The Ex-Im Bank's recent cost of funds is 13.6 percent. Financing on the open market would mean rates of 16 percent or more.
The accord is consistent with the Reagan administration's policy of getting government out of business, said Draper.