you're reading...
Aircraft Parts

Don’t Panic: Why the Election Results Should Not Undermine Aviation Business

I have been watching the election results here in China (I am in China for an MRO & Aftermarket Conference in Shanghai). Before the election results began to roll-in, I flipped through the Chinese language channels and passed a news station that had a graphic of Donald Trump with a collection of speech bubbles. Every speech bubble was filled with the word “China” in English. I could not understand the newscasters, who spoke in Chinese, but it was clear that they were expressing concern over what a Trump victory could mean for China. This sentiment, in different forms, has been expressed to me by colleagues from both Asia and Europe, who wonder what President Trump could mean for international business.

This is a legitimate concern. CNN reported that trade was one of the three most important ‘exit poll’ issues that people think Donald Trump will be able to address as President (along with immigration and terrorism). As a candidate, President-elect Trump has expressed his desire to “tear-up” a number of international agreements, including NAFTA and the (as-yet unimplemented) Trans-Pacific Partnership.

But for our industry – for aviation – the level of concern should be a little different. International transactions involving aircraft and their parts are generally governed by the Agreement on Trade in Civil Aircraft (ATCA). No one is talking about eliminating this agreement.  Part of the reason that this agreement is likely to be safety from the new Administration’s ‘red pen’ is because the US has always enjoyed a favorable aerospace trade balance.

ATCA expresses that aircraft and their parts will cross international borders free of tariffs.  They will also pass free of technical barriers to trade (that is, technical regulations and standards will be non-discriminatory, will remain focused on safety, and will not create unnecessary obstacles to aviation trade).

So the agreements like NAFTA and TPP that permit free trade in goods are unnecessary to most of the aviation industry because so many aircraft parts are already insulated from the limits that NAFTA and TPP would proscribe for other goods.

There are parts that fall outside of the scope of the ATCA. You can see a discussion of these parts here.  Some of these parts may still be subject to tariffs; and tariffs on these parts could have been lowered or eliminated by agreements like NAFTA and TPP.  Repudiation of such agreements could lead to continuation or implementation of tariffs on these parts.  But most aircraft parts remain within the tariff-protected category of ATCA.

Probably the biggest concern is not a legal issue, nor an issue of how the new Administration will pursue trade agreements with the US trading partners; rather the most significant issue will be the psychological fall-out of unrelated trade issues.  If the US imposes restrictions on the import of unrelated Chinese goods, then this could adversely affect the desire of Chinese buyers to purchase aircraft parts from America.  While this may not be a limit directly related to the regulatory policies of the new Administration, it reflects a real-world concern; but we can address this real world concern with real-world remedies.

The best way to address these concerns is to reach out to your trading partners – let them each know that you remain committed to the relationship – and let them know that you are going to work to ensure that your government remains open to your business relationships.  Let them know that the new Administration will likely have significant affects on US policy; but it is less likely to affect aviation.  In fact, the FAA Administrator serves a five-year term in order to better insulate the FAA Administrator from political concerns that might interfere with the FAA’s safety focus.  Unlike the Assistant Administrators, who are political appointees, the FAA official in charge of safety regulations (and the bilateral agreements which affect trade) is a member of the Senior Executive Service.  She is not subject to summary dismissal by the President.  Because of this, the  Trump Administration will be unlikely to immediately affect the FAA’s senior leadership that impact the way that the FAA handles international aircraft parts transactions.  So ‘business as usual’ is a very real possibility.

MARPA will do its part, as well. We will continue to work with the US Commerce Department on policies that advance the interests of the community of FAA-approved aircraft parts producers.  We will also continue to work with the FAA leadership on the technical and safety issues that can affect trade in civil aircraft parts.  And we will continue to let our trading partners know that PMA parts are safe, FAA-approved components that can be trusted to keep aviation safe.

In the immortal words of Douglas Adams, “Don’t panic.”

Advertisements

About Jason Dickstein

Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.

Discussion

No comments yet.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: