Segment 2 Of 2 Previous Hearing Segment(1)
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THE EUROPEAN UNION'S EFFORT TO BAN HUSH-KITTED AIRCRAFT
Thursday, September 9, 1999
House of Representatives, Subcommittee on Aviation, Committee on Transportation and Infrastructure, Washington, D.C.
The subcommittee met, pursuant to call, at 10:30 a.m., in room 2167, Rayburn House Office Building, Hon. John J. Duncan, Jr. [chairman of the subcommittee] Presiding.
Mr. DUNCAN. Good morning. I would first like to welcome everyone to the hearing this morning and call this meeting of the Aviation Subcommittee to order.
This hearing, of course, is to learn as much as we possibly can about the current status of discussions regarding the European Union's proposed regulation that would ban or bar the addition of hushkits in certain reengined aircraft from use in Europe, if not operated there before May 4 of the year 2000. This is despite the fact that these aircraft meet the most stringent FAA and international noise standards. The regulation purports to be environmental in nature, but no data has been produced that would substantiate this assertion.
In addition, this regulation circumvents International Civil Aviation Organization standards, the organization that we refer to as ICAO, by imposing a regional noise standard that is at odds with current ICAO standards. ICAO of course is an internationally recognized organization that sets and makes international aviation policy. This proposed regulation implements a new standard different from current ICAO standards. ICAO has sent a letter to the EU Council stating that the EU proposed regulation is inconsistent with ICAO standards, and that its environmental benefit has not been fully evaluated or substantiated.
As a result of this proposed regulation, the House passed H.R. 661, a bill that would ban the use of the Concorde if the European Union implements the regulation. The Concorde is much noisier than any other aircraft that would be prohibited by the EU regulation. This bill, introduced by Congressman Oberstar and cosponsored by Congressman Shuster, Congressman Lipinski and myself, passed the House with almost no opposition. Shortly after this, the EU agreed to defer implementation of their regulation and hold discussions with the U.S. on this controversy.
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This is an extremely important issue for U.S. Aviation interests. Industry officials tell us that the proposed rule could cost up to $2 billion. This figure includes loss of sales of aircraft and engine parts, loss of sales of hushkits, and reduced fleet value.
We are going to hear today from the administration on its efforts to get this regulation repealed. Ambassador David L. Aaron, Under Secretary for International Trade, is here from the Commerce Department to discuss the status of current discussions and the trade aspects of this issue. Accompanying him are Mr. David Marchick from the State Department to discuss ICAO issues; and a man that we all know, Mr. David Traynham from the FAA, who has been dealing with this issue from the aviation perspective.
In addition, John Douglass, President and CEO of the Aerospace Industry's Association of America, will testify on the effect of this proposal on the manufacturing industry. Mr. John Meenan, Vice President for Industry Policy for the Air Transport Association, is here to discuss the airlines' perspective. Finally, Mr. John Dugan, representing a group of hushkit manufacturers, is here to talk about what has happened to his industry as a result of the proposal.
We invited the European Union to testify, but they felt that they could not testify before Congress. However, in an attempt to be fair about this, I will be meeting with representatives of its delegation this afternoon, and I invite other members of the subcommittee who are interested in this to join me. I thank all of the witnesses for taking time out from what I know are very busy schedules to be here today. This should be a most informative hearing, and I look forward to your testimony.
I now call on the ranking member of the subcommittee, my good friend, Mr. Lipinski.
Mr. LIPINSKI. Thank you, Mr. Chairman, for holding this hearing today.
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The European Union's efforts to ban hushkitted aircraft is an important issue that is worthy of this subcommittee's attention. In addition, the hushkit regulation is representative of an even larger problem that also deserves the attention of this subcommittee.
On April 29, 1999, the European Council of Ministers adopted a regulation that will, in effect, ban the operation of former Stage 2 aircraft that have been modified either with hushkits or new engines to meet Stage 3 international noise standards.
The Europeans claim that the hushkit regulation is needed to provide noise relief to residents living around crowded airports in crowded European cities. However, the European Union has not provided any technical evidence that would demonstrate any improved noise or emissions climate around airports as a result of this rule.
This is not an environmental regulation, as the Europeans suggest. Rather, this regulation is unfair unilateral action that discriminates against U.S. Products and severely undermines international noise standards set by the International Civil Aviation Organization. By unilaterally establishing a new regional standard for noise, the EU is taking local control over an international issue. In addition, the EU has done this in such a way that the regulation most adversely impacts U.S. Carriers, U.S. Products and U.S. Manufacturers.
The House of Representatives has already expressed its strong opposition to this misguided regulation by passing H.R. 661, the bill introduced by my good friend and colleague, Mr. Oberstar, which would ban the operation of the Concorde in the U.S. Passage of H.R. 661, I believe, showed Europeans that the United States is serious about protecting U.S. Aviation interests against unfair, unilateral trade actions. As a result, the effective date of the EU regulation was postponed to May 2000 in an attempt to accommodate the concerns of the United States.
Yet, although the implementation date was delayed for a year, the regulation was adopted and is now law. As a result, the regulation is already having a negative economic impact on U.S. Aviation. The regulation has raised serious doubts about the future market for hushkitted and reengined aircraft which, in turn, has already lessened the value of these aircraft and has put a halt to new hushkit orders. This is why the EU regulation must be completely withdrawn.
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My understanding is that the European Parliament will not consider withdrawing the regulation until significant progress is made on Stage 4 aircraft, the next generation noise standard. The U.S. is already working with the EU through ICAO on finding and implementing a Stage 4 noise standard.
Let me state for the record that the United States is fully committed to the development of a Stage 4 noise standard. However, it is difficult to move forward towards a new noise standard while the EU hushkit regulation is still on the books. With its hushkit regulation, the EU has ignored its prior agreement with ICAO and has developed its own regional restriction. Given this, it will be nearly impossible to convince the 185 countries of ICAO to agree to a new noise requirement on aircraft. Why would any carrier in any country want to invest in Stage 4 aircraft if any country in the world can also impose its own restrictions on aircraft? It doesn't make any sense.
Mr. Speaker, it is obvious that the EU hushkit regulation raises many significant issues that will no doubt be addressed in today's hearing. However, as I stated at the beginning of my statement, the hushkit regulation is representative of a much larger problem. The U.S. Aviation industry is under attack by aggressive European nations that are joining together to promote European aviation and aviation products at the expense of U.S. products and manufacturers.
The most obvious example, of course, is Airbus, the European aircraft manufacturer. Throughout its history, Airbus has benefited from substantial governmental aid. This governmental aid has been a major factor in Airbus' success. In fact, because of financial government support, Airbus has been able to significantly increase its market share against Boeing, and the subsidies are not only going to Airbus, but also to European suppliers of components for Airbus aircraft. In fact, the European Commission recently approved a subsidy for a French avionics company for the development of a system that will directly compete with a system already supplied by Honeywell, a U.S. company. This helps explain why the U.S.'s share of Airbus aircraft has declined over time and why Airbus now relies on European suppliers for 80 percent of its components.
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Unfortunately, this is only the tip of the iceberg. There are many, many other examples of how the Europeans have used their complex legislative and regulatory system to promote European aviation interests at the expense of the United States. I will be happy to discuss the other examples with Members of this subcommittee at any time. However, it is time that the U.S. sends a clear signal to the Europeans that we will not tolerate unfair trade actions aimed at our aviation industry. Aviation is a global industry, but it cannot continue to be if the Europeans continue to promote their own interests at the expense of the U.S. aviation industry. This hearing today, I hope, is just the first step in carefully examining the EU-U.S. aviation relationship.
I thank you, Mr. Speaker, and I thank you very much for indulging me in my opening statement, but I thought it was important to get a lot of these things on the record. Thank you.
Mr. DUNCAN. Well, thank you very much, Mr. Lipinski.
Mr. LIPINSKI. I talked so long it sounded like Oberstar. I understand that.
Mr. DUNCAN. Does anyone else wish to make an opening statement? Anyone else? Any other Member wish to make an opening statement?
All right. We will proceed then with the first panel, and the first panel consists of Ambassador David L. Aaron, Under Secretary for International Trade of the U.S. Department of Commerce; Mr. David Marchick, who is Deputy Assistant Secretary for Transportation Affairs of the State Department; and Mr. David Traynham, Assistant Administrator for Policy, Planning and International Aviation with the Federal Aviation Administration.
As always, we proceed with the witnesses in the order listed on the call of the hearing, and that means, Ambassador Aaron, we will proceed with you first. You may give your statement.
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TESTIMONY OF AMBASSADOR DAVID L. AARON, UNDER SECRETARY FOR INTERNATIONAL TRADE, ON BEHALF OF THE U.S. DEPARTMENT OF COMMERCE, THE U.S. DEPARTMENT OF STATE, AND THE FEDERAL AVIATION ADMINISTRATION; DAVID MARCHICK, DEPUTY ASSISTANT SECRETARY FOR TRANSPORTATION AFFAIRS, UNITED STATES DEPARTMENT OF STATE; AND DAVID TRAYNHAM, ASSISTANT ADMINISTRATOR FOR POLICY, PLANNING AND INTERNATIONAL AVIATION, FEDERAL AVIATION ADMINISTRATION
Ambassador AARON. Thank you very much, Mr. Chairman. In particular I would like to thank you and the members of the committee for holding this hearing. I am pleased to be here, and I want to applaud your leadership in focusing attention on this extremely important issue.
The Commerce Department strongly opposes the European Union hushkit regulation because it discriminates against the United States, has caused economic injury to U.S. Companies, and will not reduce aircraft noise. It threatens further injury by jeopardizing the future of international standard setting for the aviation industry.
The essence of this issue, Mr. Chairman, is one of compliance by the European Union to standards established by the International Civil Aviation Organization, which we usually refer to as ICAO. The Chicago Convention under which ICAO standards are established has been signed by the United States, EU Member States, and over 100 other countries. The hushkit regulation does not recognize the aircraft that are fully compliant with the most recent and most rigorous aircraft noise standards established by ICAO. The European Union has elevated its regional interests above those of the international community.
It also appears that the regulation was very carefully crafted to target restrictions on U.S. Manufactured products while leaving untouched aircraft and aircraft engines produced by the European Union. The regulation in essence prohibits the future registration and operation in the European Union of aircraft that have been modified with aircraft engine hushkits, which are essentially mufflers to suppress noise, or through reengining the replacement of old, noisy engines with newer, quieter manufactured engines. However, no restrictions are imposed on an aircraft powered by engines that have a bypass ratio of at least 3 to 1. Bypass ratio, by the way, refers to the air that enters into an aircraft engine and in effect goes around the thrust-producing turbine in the center of the engine that produces combusted air and fuel. If you have ever gotten on an airplane and you looked in the engine, you can see right through the engine. It is that empty space, that air that goes around the engine that constitutes the bypass ratio.
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Now, the use of this ratio as opposed to a performance standard, the use of this design standard is extremely troubling. The selection of this particular bypass ratio is both discriminatory and trade restricting, and I have a chart illustrating this.
Mr. Chairman, on this chart, we have first of all bypass ratio engine, bypass ratio on this access, the horizontal access and we have cumulative aircraft noise decibels on the vertical access. Essentially what happens here is that they have drawn a line right here at 3. Everything on this side that is reengined or hushkitted is prohibited. Everything on this side is allowed. I think you can see quite clearly, here are the various aircraft that are no longer—would no longer be permitted under this regulation, with the exception of the MD–80, which is not reengined or hushkitted, and therefore it is not affected. All of these aircraft in combinations of U.S. Engines, U.S. airframes, would be prohibited.
Now, what is interesting about this is that these engines and aircraft, these engines and aircraft are just as noisy or noisier in this case over here, but they are permitted. Again, let me just say, these are just as noisy as these, but they are allowed. These are even more noisy than these, but they are allowed. What is the distinction here between these two? All of the aircraft on this side of the line are U.S. That is the difference. Right here, on the line but just to the right of it, are two combinations of British engines and aircraft which are permitted. They could not have drawn the line more carefully.
So aircraft operators in Europe and elsewhere as a result of this regulation which has been adopted, as pointed out by Mr. Lipinski, these aircraft, rather U.S. operators, have delayed or canceled orders for U.S. aircraft noise suppression equipment as a result of the mere existence of this regulation. U.S. Manufacturers have lost more than $1 billion in potential exports of hushkits and reengining programs. U.S. airlines, which have a lot of hushkitted aircraft, have suffered a loss of at least $500 million in depreciated resale value of noise modified aircraft in the U.S. fleet, because, according to these rules, they could never be sold in a situation where they would have to fly into Europe.
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Since I began speaking out on this issue almost a year ago, Mr. Chairman, Secretary Daley and I have raised U.S. concerns frequently, both with EU Commission members and the EU Member States. The EU Council earlier this year adopted the hushkit regulation, but postponed its implementation until May 2000. We welcomed that opportunity to continue consultations aimed at a settlement of U.S.-EU differences. The United States agreed to accelerate work on the development of a more stringent Chapter 4 noise standard in ICAO. We are actively encouraging U.S. Industry to support this effort, and they are doing so. We have also asked the EU to withdraw the regulation. We have abided by our commitment. To date, however, the European Union has not been prepared to make an unconditional commitment to withdraw the regulation. They have referred to the possibility of holding the regulation in abeyance somehow, pending the outcome of the ICAO Chapter 4 discussions. However, as I indicated earlier, we have found that the very existence of the regulation, even though not implemented, acts as a guillotine, hanging of U.S. Industry, deterring sales of U.S. equipment.
The U.S. Aerospace industry is very much in the U.S. trade picture. We had a trade surplus of $40 billion in aerospace products last year in the face of our worst trade deficit in history. The hushkit regulation is disturbing because it closes doors to the largest export market for U.S. aerospace manufacturers. This is one of the largest, if not the largest, trade issue we have faced with the European Union.
I am concerned that if the EU hushkit regulation is not withdrawn, the outlook for genuine relief from aircraft noise through ICAO as opposed to cosmetic measures such as this regulation will, in fact, be diminished. Withdrawal of the regulation will reduce trade tensions, avoid the necessity of the United States having to consider initiating action to protect U.S. trade interests, either through measures under the World Trade Organization or in ICAO, such as Article 84, or as provided by U.S. legislation.
I would hope that the new commission being seated in Brussels will be able to take a fresh look at this issue, not replow the old ground, and move forward promptly with steps to begin the process of withdrawal of this pernicious regulation. I would be pleased to respond to any questions you may have.
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Mr. DUNCAN. Well, thank you very much, Ambassador Aaron, for a very fine statement, and your testimony does really highlight the very great economic impact this is already having and the potential for even greater harm. So it is a very, very important issue.
Our next witness will be Mr. David Marchick. Mr. Marchick.
Mr. MARCHICK. Thank you, Mr. Chairman.
Mr. Chairman, members of the committee, thank you for holding this hearing today on the important subject of the European Community's ''nonaddition rule'' for hushkitted and reengined aircraft. Your involvement and leadership has been critical to our efforts to encourage the European Union to first postpone implementation and now to withdraw this discriminatory legislation. For that we thank you.
This dispute has been particularly troubling because it has arisen with our closest allies and strongest trading partners, and while we benefit from this strong relationship with the European Union, it has been frustrating, to say the least, to find ourselves in yet another pernicious trade dispute with the Europeans.
Mr. Chairman, in coordination with our colleagues at other departments and the National Economic Council of the White House, the State Department has used every opportunity available at every level of government to voice our strong objections to the European Commission, the European Parliament, and each of the 15 Member States of the European Union. This issue is so important that the President raised it with heads of State during the NATO summit, and you all recall that we had a lot going on during the NATO summit with our European allies. For him to talk about bypass ratios and hushkit regulations shows the importance of this issue. Likewise, Secretary of State Albright and our ambassadors have repeatedly and forcefully raised the issue with European governments at every level. Let me discuss a little about where we go from here.
As I described earlier, the administration has spared no effort to fight this rule, and we will continue to do so through negotiations and through high-level diplomatic channels. While our differences with the EU are significant, we believe there still is a chance to reach a negotiated solution and hope that the incoming European authorities, as Ambassador Aaron said, will take a fresh look at this issue.
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But as we work cooperatively with the European Union, we are not standing idle on other fronts. Indeed, we are actively preparing to take appropriate action should the EU fail to take steps towards ultimate withdrawal of the regulation. This means keeping all options on the table, from legislative options that you have initiated, to filing a complaint with the WTO, to filing a so-called Article 84 challenge under the Chicago Convention. And while we believe the administration should retain its flexibility in deciding when to resort to these options, we do appreciate the opportunity and we intend to consult with this committee and other Members of Congress every step of the way.
The administration is actively considering the issue of filing a complaint under the dispute settlement provisions of Article 84 of the Chicago Convention. Indeed, last month, State Department lawyers were instructed to begin drafting an Article 84 legal challenge in the event that our negotiations with the EU did not succeed. And, earlier this week, I spoke to the President of the ICAO Council, Dr. Kotaite, to inform him of this hearing, Mr. Chairman, and also of our serious consideration of an Article 84 challenge. As you said in your statement, Dr. Kotaite already called the hushkit regulation inconsistent with ICAO standards, has concluded that the EC adopted the regulation without an adequate cost-benefit analysis, and called on the EU to protect the integrity of the ICAO process.
As this committee well understands, an Article 84 case is an extraordinary measure that would symbolize our significant and serious differences with the European Community. It has only been used three times, Mr. Chairman, in the 55 year-old history of the ICAO, each time between nonfriendly parties like Indian, Pakistan or Cuba and the United States. So the fact that we are considering this issue so seriously demonstrates the resolve that we have.
In making the determination as to whether and when to file the complaint, the administration will consider a number of factors, including the likelihood of success on the merits, whether a challenge will help obtain withdrawal of the regulation, and the views of Congress, industry, and interested parties. And while we are committed to working cooperatively with the European Union, the EU must understand our resolve and the potential consequences of their failure to address the issue. An Article 84 decision against the EU could result in the loss of European countries' voting rights in ICAO and undermine European influence on a wide variety of important global civil aviation issues.
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European officials have stressed to us the complexity of their legislative process. We understand that it takes time. But we want and hope to see continual progress at each step in their legislative process. Our industry is already experiencing the negative impact of this legislation, as Ambassador Aaron outlined. Time is of the essence.
Mr. Chairman, let me close by thanking you again for holding this hearing. As you know, my colleagues and I have remained in close touch with you and your staff and are committed to continuing to do so. Thank you very much for this opportunity.
Mr. DUNCAN. Thank you very much, Mr. Marchick. Very fine statement.
Mr. Traynham.
Mr. TRAYNHAM. Thank you, Mr. Chairman, Congressman Lipinski, Members of the Subcommittee. It is a pleasure to be back here today to discuss the status of the United States' negotiations with the European Union on their nonaddition regulation. As it has been said, this regulation, if implemented, would have the effect of freezing the number of certain hushkitted aircraft permitted to operate within the EU at 1999 levels, despite the fact that such aircraft meet the ICAO standards.
The regulation is currently scheduled to be implemented in May 2000, one year later than was originally anticipated. This delay is a direct result of high-level discussions between the U.S. and the EU that have taken place thus far. I would say that we have come to recognize that simple delay is almost tantamount to implementations because of the market effect that that has on the aircraft.
The Federal Aviation Administration recognizes the interests of Congress in this matter, and we are very appreciative of the support this Committee has provided us to date.
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At the outset, let me say that having worked closely with many of you for a number of years, I appreciate your interest in and dedication to reducing the effects of aircraft noise on Americans whose quality of life is adversely affected by it. Members of this Committee are more aware than most of just how important noise issues are to impacted communities. Congress has been integrally involved in funding noise mitigation efforts, as well as requiring the phase-out of Stage 2 aircraft, an effort that will be completed at the end of this year.
The history of dedication to the reduction of aircraft noise gives you a very good perspective for understanding the motivation of the European Union to try to protect its citizens from unwanted noise, and the political sensitivity of constituent perceptions that noise mitigation efforts are not being pursued aggressively. The FAA, under the leadership of Secretary Slater and Administrator Garvey, is committed to working with the EU within ICAO to develop a new noise standard by the next ICAO assembly in the year 2001. In this way, as opposed to the hushkit regulation, meaningful noise mitigation plans can be considered, decided upon, and implemented globally. This process will permit all members of ICAO to benefit equally to agreed-upon noise mitigation efforts and this will prevent the balkanization of noise regulations.
The U.S. is currently working with the European Commission on what we call a joint declaration. That is intended to present an agreed-upon set of principles to enable an accelerated effort for the development of a new noise standard, as well as an outline of a transition plan for implementing such new standards that includes an appropriate level of protection, economic protection, for the existing Stage 3 fleet. The joint declaration would form a common basis for the U.S. and EU that will facilitate this effort within ICAO. It is the view of the United States that a key tenet of this joint declaration is the withdrawal of the regulation affecting hushkitted and reengined aircraft.
Although the Commission agrees with the principles contained in the draft joint declaration, we have been told that it would be very difficult politically for the Commission to ask for the withdrawal of the EU regulation unless a new noise standard is adopted by ICAO, a goal that is not expected before the year 2001. The Administration believes that the current progress of work within ICAO on the new noise standard should be sufficient at this time to enable the Commission to initiate legislation and withdraw the regulation.
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For example, the technical definition of the parameters for a new noise standard is expected to be completed this month. Proposed transition scenarios are expected to be ready for evaluation by next month. The necessary information on cost-benefit analysis of these different transition scenarios is expected to be completed by mid next year. This groundwork would result in our ability to move forward on formal recommendations on the next noise standard for action in the ICAO Council in 2001. The U.S. industry has indicated a willingness to work within the ICAO structure, and there is no reason to believe at this time that this schedule will slip or this work will not be accomplished.
The Administration contends that this situation gives the Commission sufficient assurance at this time to enable them to submit legislation to withdraw the EU regulation. For instance, we have people in London today working in the ICAO committee on new noise standards. So you can see this work continues, it is not something that is waiting to happen. It is ongoing, and we think the Europeans should place their faith in it.
The Administration recognizes that there remains the possibility of an impasse on the joint declaration if the Commission does not begin the process to withdraw the EU regulation. Consequently, as Mr. Marchick indicated, several retaliatory responses are currently under discussion within the Administration. At this point, it is the Administration's position that we keep our options open as to which of the responses would be preferable at the appropriate time.
Based on ongoing consultations with the Commission, the Administration does not favor taking retaliatory action at this time. We are pursuing a discussion-negotiation approach. We are moving forward to finalize this joint declaration with the Commission, and our initial progress on establishing a new noise standard within ICAO is on track.
The Administration believes that only in the event that our ongoing consultations break down should the United States pursue retaliatory action. At this time, we believe retaliatory action would likely result in the hushkit rule not being withdrawn. I will lead discussions tomorrow with officials of the European Commission to further discuss this issue. They, as I believe you are aware, are in Washington today, and I believe you have an opportunity to meet with them this afternoon, and I would strongly urge that you do so, so that you can get their perspective and they can get yours.
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As outlined in Mr. Aaron's statement, there are numerous factors that must be considered as we progress with our negotiations. For FAA, our ultimate goal and one that I believe is very attainable is to get the EU rule withdrawn, to develop an agreed-upon noise standard by the year 2001, and to develop a workable, agreed to transition plan that has an appropriate level of economic protection for the existing Stage 3 fleet. This must all be done to the greatest extent possible cooperatively, so as not to compromise our excellent relations with the European states, the United States' position of influence on international aviation issues, or the overall integrity of the ICAO process.
Mr. Chairman, again, I thank you for this opportunity to discuss this important issue with you, and I would be happy to answer any questions you may have.
Mr. DUNCAN. Thank you very much, Mr. Traynham. It is very obvious when you look at the chart from Ambassador Aaron that this is an active trade war aimed squarely at the United States, when I think our briefing paper says over 1,600 large aircraft, all U.S. aircraft, are affected and no European aircraft are affected, and certainly you hit the nail on the head when you said delay is tantamount to implementation. So that sort of sums it up.
We will go for the first round of questions to Vice Chairman Sweeney.
Mr. SWEENEY. Thank you, Mr. Chairman. If I can, I would like to seek unanimous consent to revise and extend my remarks and I will submit a statement for the record, but I want to thank you for your assertive leadership on this issue, and I want to thank the panel members for their great testimony today.
Ambassador Aaron, you detailed some of the economic impacts and you also spoke in your testimony of the new Commission being seated in Brussels and the hope that we have that they will take a fresh look at this issue.
Can you rate that for us? What are the odds of that happening?
Ambassador AARON. Well, I think there is some possibility that that can happen. I think that this has become a more complex issue in the last 6 months because of the changed relationship that exists between the European Parliament now and the European Commission now on this issue, and not only is this regulation a regulation which has been adopted by the parliament, but the parliament has joint responsibility or authority in this area. So it has become a more complicated issue.
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But I was encouraged by the report that when the new Commissioner for Transportation Issues who succeeded Mr. Kinnock appeared before the European Parliament, and she was interrogated rather strenuously just like our appointees are questioned, this issue did not come up. So I take heart that this is not the make-or-break issue that sometimes it has been portrayed to us from the standpoint of the European Parliament. So I hope that there is some elbow room here for the new commission to take a dispassionate look and recognize that essentially this was a mistake, and it is a mistake that needs to be rectified for the future good of both sides of the Atlantic.
Mr. SWEENEY. Ambassador and Mr. Marchick, I would ask this question of both of you. What would your best advice to the Congress be at this point in terms of moving aggressively or not so aggressively on legislation? What would you like to see us do in order to help facilitate the withdrawal?
Ambassador AARON. I guess I would say let, we have three Davids here, by the way, so it might be a little confusing. But I think we need to keep our powder dry, but we need the powder, so that would be my recommendation to you.
Mr. MARCHICK. I would agree. I think you are doing what needs to be done. We need the additional pressure; we need to demonstrate that Congress is serious about this issue and upset about this issue, and I think the fact that you are holding this hearing and that there are legislative options on the table demonstrates that. But I think that what we would hope is that we would have a little time to work with the Europeans, keep you informed. If things go well, the problem will go away; if things don't go well, then we should come back up here and talk to you.
Mr. SWEENEY. Thank you. Mr. Traynham, the EU alleges that the hushkit aircrafts are noisier; the U.S., our own industry experts allege that the hushkits are quieter. How do we reconcile those differing opinions, and it really gets to the root of Ambassador Aaron's chart in terms of how objective this regulation is. Can both of these statements be true? Can both sides have some grain of truth in them in terms of the standards?
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Mr. TRAYNHAM. Well, I think the chart demonstrates the situation. Some hushkitted aircraft are quieter than the nonhushkitted aircraft, and vice versa. The problem we have with the hushkit rule that the EU has put out is that it has picked the technology or design in which to try to regulate noise. Our approach is 'Let's measure noise, not technology.' So we are oriented toward performance regulations, and that is what we are going to try to achieve in the ICAO process.
Mr. SWEENEY. OK. Thank you.
Mr. DUNCAN. Thank you very much. Mr. DeFazio.
Mr. DEFAZIO. Mr. Chairman, I came in late and other people are here ahead of me, so you should recognize them first.
Mr. DUNCAN. Mr. Ehlers.
Mr. EHLERS. Thank you, Mr. Chairman.
Mr. DEFAZIO. I mean on this side, Mr. Chairman.
Ms. DANNER. Mr. Chairman, we were thinking of another Democrat.
Mr. EHLERS. Thank you, Mr. Chairman.
You made the comment, Mr. Marchick, that you wanted us to provide you powder, and we will certainly be happy to do that. This is a grossly unfair system that is being developed over there. But this is not the first time. We are familiar with this, but it has almost always been with agricultural products before, and we have seen this happen over and over, to try to bypass the free trade or fair trade agreements that we may have, no matter what sort or what manner, and impose restrictions in a meaningless way, and frankly, I am sick and tired of it.
We have had to deal recently with the problems in Great Britain with genetically modified foods, and admittedly the people there are very concerned about that issue, but then you have to ask the question, who stirred them up and got them excited about eating genetically modified food when, in fact, most of the world is eating them quite regularly with no ill effects. We have a similar situation here, but that chart is a masterful chart and illustrates very dramatically how discriminatory the regulation is.
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I think we have to fight it tooth and nail. We simply cannot stand still for things like this. I, for one, believe the entire Congress is fully prepared to engage in any type of activity that will equal the playing field if they persist in going forward with this.
I do have to comment, I often fly an A–320 aircraft. I happen to prefer the 757, but that is neither here nor there. I live near an airport, and naturally the non-Stage 3 aircraft do make a lot of noise, but of the others I find the DC–9s and the 727s are quieter than the A–320. The A–320 has a very annoying noise, and although the sound level may not be greater, it certainly is more piercing. So if we want to start analyzing noise levels, it would not be at all hard to disqualify the A–320 from serving our airports in the United States on the basis that they provide more annoying and piercing noise than the hushkitted DC–9s or the 727s. What the Europeans are doing is a grossly unfair approach on their part. We simply cannot tolerate it, we cannot stand for it, and we have to make that very clear to them.
I don't have a question, I just wanted to make that statement and get that on the record. We absolutely have to fight this tooth and nail. Thank you very much.
Mr. DUNCAN. Thank you. Ms. Danner.
Ms. DANNER. Thank you, Mr. Chairman.
First, I need to address this to my colleague. Yes, Vern, you are a lot closer than anyone over there, because actually you were going in the very direction I was going in and that is with regard, and the Ambassador mentioned WTO. WTO has said that Europe should be accepting our beef, for example, that is altered with hormones, and certainly genetically engineered corn and soybeans are an issue, and they seem to ignore that. With regard to the beef restriction, we of course now have restricted the importation of truffles and pate and some other things that you and I have on our dinner table regularly to compensate for the fact that they won't accept our beef.
My question would be what would lead us as a government to think that the European Union would respond any more appropriately with regard to this issue than they have to the issue of importation of the beef and our corn and soybeans. They ignore the WTO; why would we not think that they would ignore ICAO?
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Ambassador AARON. Well, I think that we don't know whether that—I mean that could happen. I mean, and indeed by passing this regulation they have ignored ICAO, and the president of ICAO has made it clear that the regulation is inconsistent with ICAO. So we are in the process now of trying to walk this cat back. The question is, is there any prospect that that will happen.
I have to say that I think in—earlier this summer, we, in the course of various informal consultations and discussions, it looked more promising than it does, for example, today. It looked like they understood the importance of withdrawing it and the need to find a way for them to do that, but they also wanted some assurances that we are serious about Chapter 4 noise standards and moving to a Chapter 4 world. So there was, it seemed to us, the makings of a deal here. Unfortunately, in the last several weeks, there seems to be some waffling on this.
Now, we don't know whether that is because a new commission is coming in and all bets are off until people get into office, that sort of thing, or exactly what the situation is.
I am going to Brussels next week, I will be meeting with the senior officials there and trying to ascertain the answer to the question that you posed to me.
Ms. DANNER. Thank you very much.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Ms. Danner. Mr. Metcalf.
Mr. METCALF. Thank you, Mr. Chairman.
To begin with, I agree with Mr. Ehlers. This is a very serious matter for this country, very serious. In his testimony today, industry asserted that there is no clear consensus position as to how to best proceed on the part of the administration with respect to this issue. Is this true? Do you agree with that?
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Ambassador AARON. No, I don't. I think we are quite unified, and I call on my colleagues here to comment. But it is very clear. We believe this regulation must be withdrawn; we also believe we need to move with dispatch towards higher noise standards, and that is the essence of our position. And if that doesn't happen, if this regulation is not withdrawn, we believe that we will have to move towards some of the sanctions that have been discussed, the sanctions or other actions that have been proposed. We think there really is a consensus here.
Mr. METCALF. Well, thank you. That is encouraging.
Mr. Marchick, you state that the European officials have stressed the complexity of their legislative process. Do you have an opinion of when the EU must act in order for the regulation to be repealed, and what steps are involved?
Mr. MARCHICK. We have spent a lot of time with this issue, Mr. Metcalf. I don't think it is overstating it to say that the EU legislative process is confusing, but if you look at the various steps, which includes the Commission, which is the executive body, they have to propose legislation. The Council, which is the Member States, the ministers from each of the Member States act on the legislation, and the Parliament has coequal status in considering the legislation.
It is our view that the legislation needs to start sometime this fall, perhaps as early as October, and the first significant step will be a report that the Commission makes to the Council on their view of the hushkit regulation and where to go.
Now, just as in the Congress, legislation in the European Union can evolve as it goes through the process, and we—so we would expect as the legislation evolves and as we get farther along in the process, that there would be greater affirmative steps towards withdrawal; that there would be an increase in the level of precision of the Commission's objectives in terms of withdrawals, and that there would be a signal to the market as early as possible that they are on the path towards withdrawal, because the market is already punishing U.S. hushkit manufacturers and U.S. airlines that have hushkitted aircraft, and they are already experiencing injury, and we want that to end as quickly as possible.
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Mr. METCALF. OK. That was sort of my next question. The regulations apparently already caused considerable commercial damage to U.S. companies, and more economic harm is threatened.
You know, I am not really a free-trade-type person, but a fair-trade-type person. And apparently, this does not look like fair—it seems that this is restrictions based on other things than legitimate things. So, you know, this is a sensitive issue, and I guess I am sort of a hard-liner on this. I would say well, there are—this is a two-way street. If they intend to do these things, I would think of some sort of retaliation after, but not until we find out if they are really serious. If they are going to really drag their feet, then I think we should do something. Otherwise, we can wait a little while, but our companies are being hurt right now, and either we are going to have fair trade or we are not.
Mr. MARCHICK. As Ambassador Aaron said, this is one of the clearest acts of discrimination against the United States that I have seen in my seven years within the administration. We have lots of problems, as Ms. Danner and Mr. Ehlers discussed, with the European Union on a range of issues, but this is perhaps the most pernicious, both in terms of the actual written legislation, which clearly favors European industry, but also in terms of the broad impact. United Technologies gave us this chart, which is the clearest chart I have seen, it is clear as day, where the blue aircraft are the U.S. aircraft that are affected by this legislation, and the red are the Europeans. So you can see that it was drafted with one thing in mind, and that is to protect European industry and to have an impact, a negative impact on U.S. industry. That is why this is such a serious issue.
Mr. METCALF. So you are saying that the department is doing everything that it can. It appears to me that we are trying to be too nice.
Mr. MARCHICK. Our preference would be not to retaliate. Our preference would be to have a negotiated solution. And all the Davids in the government are working on this. I think we need to give that process a little more time, and if it doesn't work, then we should come back to you and discuss other options.
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Mr. METCALF. Such as what is a little more time? I mean can you give a time frame?
Mr. MARCHICK. I think we need to start to see progress this fall, and the legislative process in the European Union needs to start. It is a long process, but they need to at least get it going.
Mr. METCALF. Thank you.
Mr. TRAYNHAM. If I could just make a comment, your first question dealt with the complexity of the EU process, and I think we all agree that our process is quite complex as well. The difference is when the EU promulgated its hushkit regulation, they never did this, they never had a hearing, they weren't transparent, you find out about things after the fact. So there is a key difference other than complexity on this.
Mr. METCALF. That would make me very suspicious. Thank you very much.
Mr. DUNCAN. Thank you very much, Mr. Metcalf.
Mr. Boswell.
Mr. BOSWELL. Thank you, Mr. Chairman. I too would extend my appreciation for you having this hearing and getting into this very serious matter. We all understand that. You have done a good job, Mr. Ambassador, to point that out.
I just kind of stand back and try to look at this from a global perspective in which we all have to do. We are moving into a new era. It is not really new, we are there, we have arrived. Because of high-speed electronics and everything else, the world has shrunk, not geographically, but in those senses. And a visit to the Chicago Board of Trade here months ago, I asked a question, how long does it take a transaction to take place that might be on the other side of the world? Three seconds. Well, that is not good enough, because there is three seconds where nobody really has ownership, so what are you going to do? They are demanding it to be one second, and we will get there. Wow. Well, we think about the noise levels and the Concorde and how badly people want to move so quickly and we even have the technology to go faster than that, but there is all this environmental piece in it, and on we go.
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I would further emphasize, my colleague made a great statement from Michigan a little bit ago, with agricultural tariffs, the European Union is going to challenge us, no question about it. They are doing it there. Their subsidies to their farmers, they are taking a tack towards, they are going to subsidize about 40 percent of their family farmers, and they have set a goal. It is going to have a big impact on us.
I agree with those that have spoken previously, we have just got to push back and say, this is different than anything than we have run into. The world has shrunk, we have all of these different areas of dealing with this business, and it is going to take a lot of effort, and I have no doubt that you have put forth the effort. I think I hear that, but I don't think that we on this side of the table ought to be surprised that it is going to be hard sledding. It is going to be very hard sledding, and I hope that the sanctions and the combative side of it is the last resort. Some of us have been on the combative side of things and that is not a good way to go if you can avoid it.
I had an interesting discussion with one of the ambassadors; Senator Grassley does a thing where he has the ambassadors here. Quite a large group now, every other year comes out to our State and I was asked to help host for a day, and I really enjoyed that. We were talking about the agriculture situation, the disparity there. We could have talked about this, we could have talked about a lot of things, and I will just leave the person nameless for the moment, but he had always shown interest in the fact that I was concerned about the disparity in agriculture, going into the Seattle talks this fall, and like this 40 percent plus tariffs on our agriculture products, industrial, electrical and all of that kind of stuff is, you know, minimal, 4 percent or less, and I said, you know, what are we going to do? What are we going to do? I just threw this out as a thought. We just went through a period of years and years of Cold War, where two superpowers took each other on to see who could break who, and it came to a conclusion, the Soviet Union became broke, and you know, we had a little to pay for it too, we have a $5.6 trillion debt. I am not saying we did the right thing, I am not saying we did the wrong thing. We probably had to do it.
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Now, my comment to him was and my point is, are we going to do these other things too, to which trades can out stand the other one? That would be the most foolish thing we could possibly do in the world community. We talk about globalization, we have some real growing pains to go through. So my feelings go out to you, you got a terrible challenge, but you have to do it, and we have to be here somehow to be in a supportive role and not be overly critical. We have got to make progress.
You know, I have the faith in human nature that as we talk about this and we go forth genuinely, and I know you will, that they feel the same way. Do they want to take us on on this issue to see who could win, or would they rather resolve it and make it fair. And so I am not surprised at seeing other things happening that we are challenged here. So I would just encourage you to appreciate you got a big hill to climb, and I agree with my colleagues, we have to climb it, we have to start, but we can't expect, I don't think we can expect it to resolve itself in minutes. It is going to take more than that.
So my appreciation of your task is there and go forth with enthusiasm and using all of your skills you have developed, and do come back to us, and what can we do to help? Because we have contact with people. I had this experience that I just shared a little bit of, and you know, we are going to have to be allied with you folks to be sure that we have fairness and justice here and remembering that we are not only in a global economy, we are a global community. It is tough. We have to learn some new ways to do things.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Boswell.
I believe Mr. DeMint was the next one here on our side. Mr. DeMint.
Mr. DEMINT. Thank you, Mr. Chairman. I had a chance over the break to spend some time in Europe and hear a lot of the European speakers, the European leaders from many countries talk, and it was sobering to a degree to realize how inwardly focused the European Union is. They talk about European trade much more than global trade, and while I think they are important partners to us, I certainly came back recognizing that we need to stand up for our country and it is clear to me they feel some sense of urgency on this issue, the political leaders. The other important issues that we have, while they want us to respond immediately to any concerns they have with us, and while we don't need to be reactionary, while we reduce the noise level of our aircraft, I think we need to increase the noise level on our problems with them.
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We need your suggestions, I believe, on what appropriate sanctions might be necessary, that these are on the table and clear, and that perhaps your advice as to should we set dates to make our position a lot more clear to them, because they are not taking us seriously at this point, and they feel that delay gives them inroads, as you know, and you know this better than me. But I am not satisfied after hearing today, except that it is a problem, and that it is being addressed. But I would certainly like more ideas from your side of the desk as to how we can increase the noise level, the sense of urgency on their side, because it is costing us money and it is eroding our ability to trade overseas. I don't know if any of you want to make a comment or a response to that.
Ambassador AARON. I will give a partial response and then I am sure the other Davids would like to as well.
I think one of the things that you can do in addition to the things that you have done already, which I think have been very important and very instrumental, and I want to particularly thank Representative Oberstar for his initiative in this regard, and in holding this hearing, the chairman's actions in that regard are extremely important. There are representatives of the European Union here in town this week. I think you need to make clear that our patience is not unlimited. Indeed, our patience is not even long or even medium. Our patience is, in fact, short on this issue. That is an important step.
Secondly, the contacts that you have with the European parliamentarians, and I know that some of you do have these contacts, you need to give them the same message. I think that one of the issues and one of the points that comes out of this is something that perhaps this institution wants to take aboard is that there needs to be closer contacts between the two parliamentary groups, and while that is not the subject for this hearing, I think it is one of the lessons of this particular issue, and increasingly is proving to be an issue that needs to be addressed.
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Mr. MARCHICK. Could I just respond very briefly.
One thing I think we need to do is to keep this issue in perspective of the overall U.S.-EU relationship. We have over $1 trillion of trade and investment per year with the Europeans. One in 12 industrial jobs in the United States is supported by European companies, and in our States, 41 of the 50 States, Europeans are the largest investors. So we benefit enormously every day from this relationship. But when we have problems, they are big ones and they are tough, and this is one of the examples of that, and I think that we are doing our best to try to fix it. We are just as impatient, and we want to get it done, we are frustrated, as you are, and I think that working together we can solve it, and if we can't, then maybe there should be stronger steps.
Mr. DUNCAN. Thank you very much.
Mr. Sandlin.
Mr. SANDLIN. Thank you, Mr. Chairman. I would like to just join my colleagues in saying that it is clear that the EU is creating a regulatory framework that is discriminatory toward American industry and I think we should take a very hard line against them. If retaliation is necessary, that is what is necessary. You say it is a big problem, it is not really a big problem, it is pretty darn clear to me, it is pretty clear who is taking it, and it is us. I appreciate the fact that all the Davids want to work things out, but all the Maxes from Texas think that the Europeans don't have any incentive. It is difficult to negotiate when the other side has no incentive.
I would like to know from the ambassador, I mean what degree of confidence do you have that any sort of discussions will lead to a repeal or some sort of satisfactory resolution at this point, based upon how they have performed to this point. I just don't see that they have an incentive to make any change whatsoever, and I don't see them continuing to say we are going to discuss, discuss, discuss is leading anywhere.
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Ambassador AARON. Well, I think we are making some progress. As I indicated somewhat earlier, that progress has slowed down in recent weeks, and we don't know precisely the reasons. It could possibly be that the new commission is coming on board, they need to be briefed up, the new commissioners need to take the right position.
You know, one possibility here that might meet your concerns would be for us to report back to you in let's say six weeks, eight weeks, something like that, and so that you can get a sense, we can get a sense, and the European Union understands that this is not an infinitely stretchable exercise.
Mr. SANDLIN. I think they are on our last nerve. I mean not only is it not stretchable, I mean I understand it now. I understand it when somebody is putting a bad deal on me and I would like to know at what point do we say that further discussions are unproductive and we go to a formal method of complaining. Because I think that is the only way we are going to show our resolve. If they don't have it now, they are not going to get it. And it is something that doesn't take six weeks or 10 weeks; it is something that takes five minutes to understand. I think we really need to have a hard line against them.
When do you think we are going to say this is unproductive and we are going the formal route?
Ambassador AARON. Well, I do think we need to let the new commission get into office and have an opportunity to address this issue. And I think following that, we should be in a much clearer position. As I indicated earlier, I will be going to Brussels roughly a week from today to talk to senior official level people there. The Commissioners will still not be in place, but to try to get an idea of exactly where we stand on this issue.
Mr. SANDLIN. Well, if they don't withdraw it, what are we going to say about Stage 4 negotiations?
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Ambassador AARON. Well, I think it raises very serious questions about it. Now, we obviously have our own interests in improving noise performance of aircraft. So from that standpoint, we ought to be pursuing our own policy. But insofar as our confidence that the ICAO process will amount to anything, if this regulation is not withdrawn, it simply tells us that it doesn't matter whether we agree with the Europeans and ICAO, because they will go off and do whatever they please any way.
Mr. SANDLIN. And that is what they are doing now. And delay is only a continuation of our policy, it is hurting American industry right now. Delay is nothing, delay is only harmful. I think that they need to get the message that they need to understand we are tough negotiators, we know what the deal is, they are taking advantage of us and we want change now, and if we don't get it, I think we need to go the formal route and whatever retaliation we need to take against them, we need to do it. We need to be tough with them.
Thank you.
Mr. DUNCAN. Thank you very much, Mr. Sandlin. Dr. Cooksey.
Mr. COOKSEY. Thank you, Mr. Chairman. One quick question, David. Is there one European country of the EU that is really driving this problem? I have one specific country in mind, or are they unified?
Ambassador AARON. Well, my impression, and maybe David Traynham can also comment on this, my impression from our bilateral discussions is that the Member States are actively seeking some solution to this issue, and that is why I think we need to let that process go forward along with the arrival of the new commissioners. I think there perhaps is a pretty clear recognition in some of the Member States of the shortcomings of this regulation and that modifications are required, and I think we need to let that process go forward a little bit.
Mr. COOKSEY. OK. In response to your—another question based on your response. Is there one member State that does not recognize that this is unfair?
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Ambassador AARON. Well, I think there are some Member States, and in this case—well, first of all, I would say that all of the Member States are concerned about the noise problem in Europe. I mean I don't think that is a question, and I think that is understandable. There are some who focus on that issue more exclusively than others, and they are not necessarily the big States.
Mr. COOKSEY. Who are they?
Ambassador AARON. Well, I think one of the countries that has been particularly troublesome in some regard has been the Netherlands, and they are—it is a tiny country with a big airport that has had some safety problems, and so there are concerns there. But I would say that the major countries are trying to work this problem out.
Mr. COOKSEY. OK. Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much.
Mr. Oberstar.
Mr. OBERSTAR. Thank you, Mr. Chairman.
So little time and so much to discuss.
Thank you for holding the hearing, for bringing the sharp light and I hope heat of focus on this important issue. I want to thank Ambassador Aaron, Secretary Marchick and former committee counsel, Mr. Traynham, for their concerted, sustained efforts on this issue, and for the united front that the administration has posed. I wish that the administration's effort were as focused and direct and effective on steel as it is on this subject.
Let's be realistic about a couple of things. First, though initiated by the green parties in Europe, this regulation or law, to be enforced by regulation, is an economic issue masquerading as a noise issue. There is a noise component, a noise concern, but we have spent in the United States $4-plus billion over the last 18 years from AIP and PFC funds to help communities counter the effects of airport, aircraft noise. Our noise abatement effort has been $4 billion greater than that of Europe. We enacted tough noise legislation in 1990 in this subcommittee on a bipartisan basis and moved that bill through to get to Stage 3, all Stage 3 fleet 2 years before Europe and ICAO did. And now they are complaining that we got there sooner and we didn't do it the right way, and so now they have found a mechanism to push their technology ahead of ours, to put this in as blunt terms as I can.
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The other side of the equation is, I know that it would be—I think the best of all worlds would be for Europe to roll back, repeal that law. But let's put ourselves in that position. If a foreign governmental, foreign parliament said to Congress, you got to roll back your law on such and such, we would tell them which way to go. So we do have to provide some means for the European Parliament and the European Commission to mitigate the problem that they have created. I think the new commission, the new commissioner, Loyola de Palacio, can take a fresh look at this issue and help us through it, and I am willing to give a little time. As part of face saving, I think we can at least initially talk about tying a Stage 4 rule to latitude on the hushkit reengined aircraft issue, so long as we have a firm regime, legal regime in place that when U.S. carriers sell aircraft to non-EU countries or to EU countries, that those aircraft can, in fact, be operated in the European Community legally and without fear of recourse. We don't have that, we don't have a deal. And what is at stake is $1,600 U.S. Hushkitted or reengined aircraft, $1 billion a year in spare part sales. And what is at stake for Europe is elimination of the Concorde. That is a major national pride issue for France, for the U.K., for the European Community, and we can get a 20 percent noise reduction just like that in New York City by stopping the eight flights a day of the Concorde.
So, do they want to cooperate? Do they want to be realistic, or do they want to be difficult?
I think that you are taking the right approach. I think we are taking the right approach. This committee moved promptly, the House moved promptly, I hope the Senate would act on the Concorde legislation. I think it would be useful for the administration to initiate an Article 84 action so that the Europeans have a very clear idea that the United States means business, that we will pursue this matter further, and then I think we have to define the terms of Stage 4. Is this going to be a performance-based standard or is it going to be a design standard, which again can masquerade as anticompetitive practice and behavior.
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I will wind up, Mr. Chairman, because I know we have a vote.
I think we also have to be clear about what do we mean by Stage 4? Are we going to use the DNL standard that we applied in 1990 when we enacted noise legislation that gets us down to zero Stage 2 aircraft by the end of this year? Are we going to have the EPN DB issue on takeoff, one standard on takeoff and one standard on approach? What is going to be the component, or what are going to be the components of a Stage 4? I think that is a good place to begin with discussion, with the offer to the Europeans: You make it possible for us to continue to engage in trade; we will talk to you about Stage 4.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you. Very impressive. We are going to take a very short recess to cast this vote.
{Recess.]
Mr. DUNCAN. We will call the subcommittee back into session at this time, and I believe Mr. DeFazio is next.
Mr. DEFAZIO. Thank you, Mr. Chairman.
I think I will go first to Mr. Traynham. I have to admit I am a little bit confused. I have read the EU's response or their pleading in this matter, and they are trying to rationalize what they are doing here. Let me kind of go to the heart of this on a common sense basis. If we are concerned about noise and the impact of noise on residents adjacent to flight paths or in proximity to airports, it seems that one should adopt a noise standard. What possible rationale can they use for going to a standard which is based on technology rather than delivering results or performance in terms of noise? Can you address that?
Mr. TRAYNHAM. How I think they got to where they are is they had local pressures to do something about noise; they had the threat that noise was going to be addressed on an airport-by-airport basis; they have no law as we have that preempts local airports from taking certain actions on noise as part of the 1990 noise law. In response to that, they developed this proposal at that time, and then vetted it with European industry to find out what did not affect them, and that is how I think they arrived at it.
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Mr. DEFAZIO. So ultimately, when people realize that they really didn't address the noise issue, don't you think they are still going to have an enduring problem with noise, or does their regulation preempt activities by the individual airports?
Mr. TRAYNHAM. It does not preempt activity by individual airports. Our concern is this technology-based regulation will take effect and then we will also get local restrictions on noise in Europe.
Mr. DEFAZIO. OK. Mr. Ambassador, if I could, I guess I am a bit puzzled by the U.S. proceedings in this matter. I don't understand, given the fact there is going to be a new commission, I understand we want to give them an opportunity to review, but I don't know why we wouldn't have them review under the threat of a sanction with a formal complaint filed, sort of the available international processes by the United States about this nonscience-based standard. Now, to tell the truth, I actually happen to be very sympathetic to the Europeans on the growth hormone issue and questions about genetically modified food, but I am on the losing end of that debate here. But in this case, I just don't see any scientific standard that they can defend in this case given, as I understand the international rules of the WTO, since they have a regulation which is supposed to target noise which doesn't take into account noise, and decibel measurements. So why wouldn't we initiate a formal complaint now, since those processes take so long anyway, in the hope of putting additional pressure on this new commission to act?
Ambassador AARON. Well, I think it is a judgment call, but in my judgment, it would be better at this stage to let the new commissioners take a look at the very fact that you pointed out, that there really is no scientific justification for noise suppression under this regulation for that fact to be made clear to them, and then see what impact that has on the nature of the European position.
The Commission is supposed to report to the Council, I believe it is on October 6, is that right?
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Mr. MARCHICK. Late September.
Ambassador AARON. I guess it is late September. I guess the first Council meeting is October 6, but by the end of this month the Commission is supposed to report to the Council on what is happening in this area. That report, it seems to me, ought to be pointing in the direction of a solution to this problem or not, and frankly, if it does not point in the direction of a solution, then I think we really do have to look—you know, look to our knitting and decide if further steps are merited at that time.
Mr. DEFAZIO. OK. So we can expect that by mid-October, beginning of November at the latest, we will have a pretty good indication of direction, either on the part of the Europeans, or a stronger response on the part of the administration?
Ambassador AARON. I would think that is correct.
Mr. TRAYNHAM. Mr. DeFazio, could I supplement there?
Mr. DEFAZIO. Sure.
Mr. TRAYNHAM. As Ambassador Aaron indicated, what tactic we use at this point is a judgment call and I think you will see that some of the U.S. industry testimony is suggesting the judgment should be to take some concrete steps right now or even a while back. What we are trying to do in negotiating discussions with officials of the European Commission is in effect, trying to convince them to convince other Europeans, namely the Parliament, that they need to withdraw this regulation, and part of this joint declaration we are working on, from our standpoint, should contain the word ''withdraw,'' but also signals of cooperation in the ICAO process, the European Commission staff needs to convince the European Parliament that they should put their faith in the ICAO process.
If we were to file at this moment or while these delicate negotiations are going on as to what this document would look like, if we were to file at this moment a sanction process, something that could lead to sanctions in the ICAO process, I think they lose a lot of their argument to put their faith in the ICAO process. But as Ambassador Aaron indicates, there certainly comes a point when that stream plays out.
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Mr. DEFAZIO. One other question, if I could, Mr. Chairman. There was suggested the potential for retaliation against the Concorde. I am intrigued by that. Perhaps we could set a similar deadline important to the Concorde's operation. How is it that the Concorde is going to continue to operate, or will it not continue to operate in the United States after our Stage 3 requirements are fully implemented?
Mr. TRAYNHAM. Well, the Concorde is, from a stage or a category standpoint, is not rated. It was permitted to start operating in the United States before we even got to the concept of developing different noise level standards. So after long hearings held by then Secretary Coleman, they were granted a special exemption. The Stage 2, 3, 4 standards would all apply to subsonic aircraft. The Concorde is supersonic, so it operates here under a special exemption granted 30 years ago.
Mr. DEFAZIO. Granted by Congress, or by regulatory relief?
Mr. TRAYNHAM. It was done through administrative processes.
Mr. DEFAZIO. OK. So certainly Congress would have the authority to preempt that very quickly, if we so wished?
Mr. TRAYNHAM. Yes.
Mr. DEFAZIO. OK. All right. Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much.
Ms. Norton.
Ms. NORTON. No questions.
Mr. DUNCAN. All right. Thank you very much. Mr. Lipinski.
Mr. LIPINSKI. Thank you, Mr. Chairman.
We were just talking about the Concorde, and Representative DeFazio was talking about Congress could preempt that, but actually, based upon what you just said, the administration could simply rescind that ruling.
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Mr. TRAYNHAM. We could; it would have to be done through a normal regulatory process that, you know, would have public comment on that normal, sometimes lengthy regulatory process. But yes, we could take administrative action to reverse that 30-year-old decision.
Mr. LIPINSKI. If you were to accelerate that process, how short of a time period would it be?
Mr. TRAYNHAM. Well, it would certainly take at least months. We would also have to, because of our bilateral agreement with the U.K., it is pretty standard in most bilaterals, there would have to be a notice that we would give the U.K. that we were intending to take such action, and I believe that is around a year notice in advance.
Mr. LIPINSKI. That doesn't sound like a good idea, then.
How has the rest of the world responded to this? I mean we understand the United States is very much opposed to it, but has the rest of the world had any opinion on this, you know, other carriers around the world?
Mr. TRAYNHAM. I think the evidence of the world view on this came to light in the ICAO General Assembly that was held a year ago. The Europeans put forth a concept that you could take regional exceptions to the ICAO noise standards. That was vigorously argued against by everyone but the Europeans, to such an extent that the Europeans simply withdrew the proposal rather than have it actually formally voted on. So we have strong allies, particularly in Canada and Mexico and Russia, Japan, you know, the developing countries.
Mr. LIPINSKI. The Europeans continually insist that they are doing this because of the fact that the United States and ICAO has been dragging their feet, slowing down the process of developing the Stage 4 aircraft. They put forth the standards for Stage 4 aircraft, they continually put forth this argument. Is there any real specifics that they could point to where we have been impeding the development of Stage 4 standards?
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Mr. TRAYNHAM. Well, there was a time a few years ago where we in ICAO said the time was not right to go forward on Stage 4 because we needed to get Stage 3 under our belts, so to speak. So they can point to some history that the U.S. had not wanted at that moment in time to proceed on Stage 4, but I think the important thing for them to do right now is look at what we want to do today, and that is move forward on Stage 4. Secretary Slater has made what we call a flagship initiative of his, the balance of the Administration here. As I indicated, we have people this very week in London trying to move this process forward. All of our public statements recently in the past year have indicated a very strong willingness to move forward on Stage 4 reasons—on Stage 4 goals, and we want to do so for also U.S. domestic noise considerations, not just solving the international issues.
Mr. LIPINSKI. And it doesn't have to just be David Traynham answering my questions. If either one of the other two Davids have anything to say in regards to this, I would be happy to hear what you have to say.
Mr. MARCHICK. I think he is doing a good job.
Mr. LIPINSKI. David has always done a very good job, whether he was up here or down there.
If we implement either the section 301 investigation or Article 84 case, does this automatically postpone the implementation of this European law, or are we going to have to theoretically at this point put up with it until a period of time has passed and these two processes have run their course? What happens if we were to go either one of these two routes today, tomorrow, or in 6 months?
Ambassador AARON. If I may begin the answer and then I would like David Marchick and David Traynham to comment on it, I think it is quite clear that the best outcome is not to have to do that, and to reach a situation where this, the pernicious effects of this regulation are withdrawn, and we get moving on ICAO Stage 4 standards. All of the other alternatives start imposing pain on the Europeans, but they also impose some pain on us, and they also require delay, and it is not clear even despite that pain whether the ultimate outcome would be as good as trying to reach a sensible decision for that now.
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So any of these other solutions are going to take time. If this regulation remains in effect during that time, it is going to continue to have this sort of dangling guillotine effect on the industry. So what we want to try to focus on now is trying to avoid the train wreck of a battle with them involving sanctions of different kinds.
But let me ask the other Davids to comment on this point.
Mr. MARCHICK. I would agree with everything that David Aaron said and add that unfortunately, these processes do take time, and there is no functional equivalent of a preliminary injunction that would preempt or halt the implementation of the act immediately. So that is one of the things that we need to think about and work with you on, is which approach will best help us obtain our objective, which is withdrawal of the regulation and movement towards Stage 4.
Mr. LIPINSKI. I had heard a report that in order for the process to work out where they would withdraw the situation and were to implement the hushkit, or the reengining law, that they have to start that within the next six weeks in order for it to not become effective in May of 2000.
Is there any truth to that?
Mr. MARCHICK. Yes. As David said earlier, the process really begins with this report that the Commission will write and present to the Council, and then the Council will have a meeting on October 6, at which time they will consider the report, and we hope that at that time they will give guidance to the Commission that the Commission should start the legislative process towards withdrawal. So as Ambassador Aaron said, I mean the October time frame is critical for the launching of the legislative process.
Mr. LIPINSKI. And it is the opinion of the three of you that we should really not do anything about a section 301 investigation or an Article 84 implementation until that time has come and passed, because you feel that it would really have a negative impact on our negotiations?
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Ambassador AARON. That would be my judgment, sir.
Mr. TRAYNHAM. As I indicated, Mr. Lipinski, I believe in response to Congressman DeFazio's question, there are people in the European Commission that are trying to convince people in the European Parliament to put limits on the ICAO process of developing new standards. The Article 84 would be a way of showing that there was not a cooperative process going on in ICAO, and the European parliamentarians that we need to convince its the way to go I believe would see it as a hostile act going on in ICAO. So the European parliamentarians that we are trying to convince lose a very major argument, I think, in trying to convince them to withdraw this regulation. I think at this moment the result would be certainly not having to withdraw it.
Mr. LIPINSKI. All right. My competent staff over here has given me a question of how would you react if the initial legislation was only a postponement?
Mr. TRAYNHAM. Well, this is the debate that is going on with the officials of the European Commission in telephone conferences and in person tomorrow. We are down to whether we are going to use one sentence or a different sentence, and they want to use a sentence that says we will hold it in abeyance or delay it further. We have indicated that that is not very much different than putting it into effect from a market standpoint, and we are urging withdrawal. They are suggesting that they could put it in for further delay at this point and next spring amend their legislation to move toward withdrawal if they are satisfied with the rate of progress in ICAO.
So that is what is under discussion at this moment.
Mr. AARON. They are looking for some kind of insurance policy here to assure themselves and to be able to I think assure their parliament and their public that something really serious will come out of the ICAO process. Unfortunately, the form of insurance that they have chosen has the same effect—has the same guillotine effect. So there may be some other alternatives here that would provide them with such assurance, but not have the impact that mere postponement would have and is having, but we haven't found it yet.
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Mr. LIPINSKI. Would a postponement of say 5 years be sufficient from our perspective to enter into and accomplish real negotiations in regards to Stage 4?
Mr. AARON. Well, we are hoping to have an agreement in ICAO by 2001. Whether 5 years—whether a 5-year breathing space would have the appropriate effects on the market, I guess I would really want to defer to the next panel to get their reaction to that question. I don't know, David, you may have—.
Mr. TRAYNHAM. No, I would agree. A lot of it has to do with how long the market value of the aircraft that are being hushkitted will be. These are aircraft on the older end of the spectrum and they do lose their economic life at some point. Whether it is 5 years or 8 years or 10 years, the next panel could tell you that.
Mr. MARCHICK. I agree.
Mr. LIPINSKI. Thank you, Mr. Chairman. Thank you gentlemen.
Mr. DUNCAN. Thank you. Mr. Oberstar.
Mr. OBERSTAR. Thank you, Mr. Chairman, I appreciate a second round here to make two points. We have the three Davids, let's say, of biblical stature here and we are asking you to pull on that slingshot and fire the missile to the EU and let them know how serious we in the Congress are about these matters and how serious it is. The EU should understand that a couple of years ago there was a vote on the House floor taking issue with the European Commission's actions to undertake a major inquiry into Boeing's acquisition of McDonnell Douglas and there was a resolution of disapproval of that action that passed 400-plus to 2. Europe is about to lose 50 percent of its House support over this issue on hushkits. I was one of those two. And the other one voted only simply because I did.
We have—we will have this year a $36 billion trade deficit with Europe overall. And that is almost 50 percent above the trade deficit of the previous year. And in U.S.-EU aerospace and aviation trade, there are billions of government dollars in Europe for the development of new as well as derivative large civil aircraft and for certification requirements that prevent the introduction into the EU of U.S. aircraft models that compete with various EU types.
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There is a government guaranteed foreign exchange rate in Europe that exceeds market rates that further the development of those aircraft. There are equity infusions to the European aerospace and aircraft manufacturers. There are government inducements by the EU to foreign airlines to promote export of European manufactured aircraft. We know that is happening. We don't do that in the U.S. There are questionable government supported financing for aircraft exports. There are subsidies to European manufacturers of aircraft components. There are regulations on pilot training schools on overwater flight operations that favor European flight schools over U.S. Schools.
Now, do they want to escalate this issue in the EU? Do they want us to lay out these issues and drag them on through a protracted and extended floor debate and move this issue over into the executive branch policy stage? I think not. It is not in Europe's interest. They lose on those scores.
There is far more at stake for them to cooperate with us. I am willing, as I said earlier, that we should give them a bit of time for the EU to find a way to save face on this issue and make peace with the Green parties. But make no mistake about it, this is a matter of major significance for the United States.
Now, the second point is that on Stage 4, if we need Stage 4 noise level as part of a package proposition, you allow U.S. hushkitted reengined aircraft to be sold to countries that can then operate those aircraft in the EU and as part of that package we begin discussions of a Stage 4 standard and, secondly, a schedule for its implementation. And that would be something on the idea of what we did in the 1990 noise legislation. And that we should then set the terms of what Stage 4 noise limits will be that at least include levels on takeoff, regardless of number of engines or weight of aircraft; approach, regardless of number of engines and type of aircraft; and sideline noise. And it should include both the DNL standard, which is readily understood and has been effectively and fairly applied across the United States at all airports, except those that have been grandfathered in, and should also include the effective perceived noise level in decibels for takeoff and approach.
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Those are the points that I would lay out as official elements of a Stage 4 that will not include a design standard which can be tilted toward a competitive advantage for aircraft of one country or another, but should principally be based on those principles as a basis for a performance standard.
If I could have a response from them, Mr. Chairman, then I conclude.
Mr. TRAYNHAM. Part of what we are trying to achieve in the joint statement of principles with the EU is that the future noise standards will be performance-based and that the EU won't take exception to them. One thing when we talk about moving towards Stage 4, that we definitely believe, as we did in the 1990 law, that means to achieve it should not really matter. We fully accept there will be a hushkit industry for Stage 4, or a reengining industry. Mr. Atwood is testifying on your next panel and I think he can speak to that. They think they can get to levels like that but nobody has asked them or paid them to do it yet, but I think they are willing to work on that.
Going back to the earlier part of your question there, we believe we need to move to new noise standards, not just as a quid pro quo for withdrawal of the EU hushkit regulation. We need to do that anyway. We are trying to use that process to convince the Europeans to withdraw it, but it is not because of it.
Mr. OBERSTAR. Well, what I do not want to see is two charts like these two for operations at DCA during the curfew hours where you have a list of engine types and decibel ratings with certain flap settings and you get through three pages before you can get to an aircraft that can land at DCA. If Stage 4 is going to look like this, I am not for it.
Mr. TRAYNHAM. No, we don't expect it to look like that. The 1990 Noise Act that this committee worked on was in part to those sorts of local restrictions.
Mr. OBERSTAR. In which you were a master craftsman.
Mr. TRAYNHAM. No, it was always your work.
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But we want to get to a situation where we are away from local regulation. We tried to do it on a national basis in 1990, and we did that quite well. We want that same concept because the industry has become so internationalized to be, in effect, globally.
Mr. OBERSTAR. Well, thank you very much, Mr. Chairman. I am proud that we had this capable team in charge.
Mr. DUNCAN. Well, thank you very much. And we do need to move on to the second panel. And, gentlemen, I want to thank you very much for your testimony and for your answer to the many questions which the subcommittee has submitted to you. Thank you very much.
We will call up the second panel at this time. And panel number 2 consists of Mr. John W. Douglass, who is President and CEO of Aerospace Industries Association of America, Incorporated; Mr. John Meenan, who is the Senior Vice President for Industry Policy of the Air Transport Association; and Mr. John Dugan, who is Chairman of Duganair Technologies, Inc.
And, gentlemen, we are pleased to have each of you with us, and we do proceed in the order listed on the call of the hearing, and so we will proceed first with Mr. Douglass. You may begin your statement.
TESTIMONY OF JOHN W. DOUGLASS, PRESIDENT AND CEO, AEROSPACE INDUSTRIES ASSOCIATION OF AMERICA, INC.; JOHN MEENAN, SENIOR VICE PRESIDENT FOR INDUSTRY POLICY, AIR TRANSPORT ASSOCIATION; AND JOHN DUGAN, CHAIRMAN, DUGANAIR TECHNOLOGIES, INC., ON BEHALF OF THE NOISE REDUCTION TECHNOLOGY COALITION
Mr. DOUGLASS. Thank you, Mr. Chairman. I would like to begin by thanking the members of the committee for holding these hearings. I was here through the first panel and I am impressed, sir, by the quality of the questions and also impressed by the way the first panel handled their part of the hearing.
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I would say, sir, in the interest of time, what I would like to do is submit my written statement for the record and just very quickly summarize it. I am mindful of the time.
Mr. DUNCAN. You may do that.
Mr. DOUGLASS. Thank you, sir. As I said, I would like to commend the first panel. I thought, generally speaking, everything they said the industry could support with one possible exception, and that is we do feel that it would be helpful for the House, to join with the Senate in a sense of the Congress resolution that the administration should file an Article 84 protest. I sense the first panel kind of stopped a little short of that.
That is a concrete step that we think the Congress could take and it would be a sense of the Congress, not a binding thing, but we think it would show, sir, the feeling that I sensed in this room this morning that we take this seriously, the American people and their representatives take this seriously.
Sir, I would just like to make a couple of points here, and some of them have been made, but I think they need to be made again. The first point that I would like to make is the aerospace industry in the United States today has gone through a dramatic transformation in the last 10 years. The charts you see show our business base in 1988 and our business base in 1998, and as you can see over on the left, that was near the end of the Cold War, about 70 percent of our sales went into some kind of government program. And you can see the Department of Defense represented 53 percent of our sales.
Today, it is almost exactly the opposite. The Department of Defense is down to below 30 percent of our sales now, and the export market is a full 41 percent of our business base, and that tells you that this industry has transformed itself from an industry that was primarily dependent on the government as a customer, and mostly dependent on the Department of Defense, to an industry that is now dependent on the global economy for its future, and that point was made in a general sense earlier today but I think this chart makes it specifically.
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The next chart strikes to another point that was made by the first panel, and that is that the aerospace sector of our national economy is the single biggest earner of export credits in the entire American economy. And we all know what a difficult economic situation is developing because of all those reds at the bottom of the chart, indicating a trade deficit, but not everybody is aware of the fact that aerospace is the principal export earner in the United States.
Those are the figures for 1997 because the Commerce Department has not published the rest of them for 1998. But the little green at the top shows you that the aerospance industry increased our surplus from almost 35 billion in 1997 to over 41 billion in 1998, and it just gives you a measure of the impact on this industry if we do not have access to the global economy.
Next chart, please.
There are a lot of points made this morning about ICAO and it is clear to me that the members that are present here at this stage of the hearing understand what ICAO is. This was an intent to educate those that might not be as familiar with ICAO. But the point that I would make on this chart that has not been brought out so far in the hearing is that ICAO does other things other than just deal with aircraft noise. They deal with navigation, operations, security, aviation safety, something that we all are very concerned about. We all fly. Our families fly. And other kinds of aircraft emissions.
My point is that if members of the international community are allowed to just walk away from this process on noise, why not walk away on some other thing?
This industry, the aerospace industry is a global industry. It cannot operate safely and efficiently unless there is a rule of law on a global basis. And so maintaining the principle of ICAO as the body that adjudicates these kinds of issues is enormously important to all of the ICAO members and it is important in dimensions other than just the aircraft noise.
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The next chart, please.
This little chart was meant to make some of the points that Mr. Oberstar was just making, sir. And I will just sum it up to this: I am an engineer. I used to be an Air Force general. I have been around jet engines all of my life. I know a little bit about aircraft noise and there are many, many parameters in which you can measure aircraft noise. They range from the size of the engine, the attitude of the airplane, your control settings, and the altitude you are at. But they also get into things like whether there is a lot of humidity in the air, there is no humidity in the air, the temperature at the time. There are many, many variables. And engineers can legitimately disagree where to put the decibel meter and who is it going to affect as the airplane comes in and makes its turns and so on. It is a very complicated issue. And I would urge that in your discussions with the EU this afternoon do not let them get you bogged down in this. The technical issue is very, very complicated but the political issue is very, very simple. All of these technical issues have been adjudicated and debated. Engineers from all over the world have reached a consensus on Stage 3 and in none of the deliberations that I have heard about—and I have been in Europe three or four times negotiating for industry on this issue—have I ever heard the assertion by anybody from the EU that our hushkitted airplanes are not compliant with Stage 3. They never assert that. They simply bring up all kinds of other technical details that deal with marginal benefits of their approach over Stage 3.
But the fundamental issue, the political issue, is a very simple one and that is are we going to allow nations or groups of nations to back away from an internationally established standard? That is a fairly simple thing. They are the only group. Someone asked if anybody else in the world supports the EU on this and the answer to that is no. They are the only group that has taken this approach.
I just have one other chart here and this was shown by one of the former witnesses. This is just meant to show you the impact on the United States. It is huge. The figure of a billion dollars to date is pretty accurate. I have asked our member companies what they think about that and they all agree that it is at least a billion dollars now, and if this is postponed another year, that impact will grow larger as time passes.
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And I will just wrap up, sir, and pass on to the other witnesses here by saying no one in industry wants a trade war with the EU on this. I noticed a number of questions by various members about which countries were in favor of what and so on. In general, we have a good balance of trade in aerospace as a nation with the EU countries with the exception of France. We have a deficit with France because of their Airbus production in France. But in general, our trade balance in the aerospace industry with the European Union is a good one and we don't want to see a trade war.
But we feel that this issue of compliance with the international standards is a fundamental issue. We would like to see the members of the government panel who were here earlier take a tough stance and we are also, sir, mindful of the time. I have been over to Europe two or three times now negotiating with my counterparts trying to get their equivalent of the AIA to take a firm stand and they have taken a relatively firm stand that they don't want a trade war and they would like to see the EU Council somehow withdraw this regulation. But so far we haven't been able to make any progress, either privately on the industrial side or through government channels.
And to use a phrase we often hear here in Washington: If we don't do something pretty soon, there is a train wreck coming here. So we feel the best thing that you all could do right now is what you have done. You have held hearings. They are good hearings. And secondly, we think it would be extremely helpful for you to join with the Senate in that sense of the Congress that the administration ought to file an Article 84 protest.
Thank you, sir.
Mr. DUNCAN. Thank you very much, Mr. Douglass. Mr. Meenan.
Mr. MEENAN. Mr. Chairman, thank you. Mr. Lipinski, Mr. Oberstar, I would really like to thank you for holding this hearing today and for your important leadership in trying to get to the right decision on this issue.
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The Europeans' decision to prohibit the operation of compliant Stage 3 aircraft registered inside of the EU in 2002 constitutes not only a direct threat to international commerce, but it really gets at the very heart of our ability to deal with environmental issues in the future in a responsible way, because it undermines the certification process that is at the core of that enterprise.
Now, as this committee is well aware, regulation of aircraft noise has been an important challenge both nationally and internationally, and in fact it was largely due to your work—and I remember working closely with Mr. Oberstar—that we came up with the Airport Noise and Capacity Act of 1990 that for the United States balanced the equation so that we had quieter fleet coming, and we had protection of that fleet in the process. It was a difficult challenge but it was one that under the leadership of this committee and others in the Congress we were successful on.
The EU today faces a situation not unlike that we confronted a decade ago. Environmental coalitions in some countries place pressures on local airports to enforce their own individual noise restrictions. But rather than confronting that situation, what the EU has done is to try to engage in an exercise of appeasement. They have decided they will whack off a little bit of the Stage 3 fleet and offer that up and see if that satisfies them.
In the process of appeasement, of course, what they are doing is undermining the core principle for improving environmental technology in the aviation world and that is the certification process.
It takes no great insight to recognize that by undermining the reliability of that certification process it is going to mean that manufacturers in the future will be far more reluctant to put money into complying with new standards, and operators, obviously, are not going to be able to put the money into buying new equipment. Furthermore, the European actions, as you heard not coincidentally, are highly discriminatory against America and American products.
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I will not go any further into all of this. We have heard this several times this morning.
And finally as I say, the real core of this is the EU's challenge to the certification and to the recertification process because noise standards have always been performance-based, not design-based, and any aircraft can meet that standard through a variety of techniques. The EU has proscribed recertification of hushkits notwithstanding performance, and in the process appears willing to risk a virtual halt in noise standard setting in the future.
Now, the United States has been negotiating with the EU on this issue for some time and following the extension of the effective date of the rule, these negotiations have been basically stalemated. We deeply appreciate what you heard from the ''panel of Davids'' this morning, and we appreciate the work the Administration has done. But, as I think Mr. Metcalf asked earlier, ATA has said that there was a lack of consensus among the government agencies involved. That remains our view.
There have been suggestions made as to how we should approach this issue and unfortunately, from the perspective of industry, the Europeans have successfully just kept the talks going which works to our gross disadvantage. Frankly we are puzzled at why the Europeans can hold a gun to our head and we are told by our government that we have to keep talking. But when a suggestion is made that perhaps we respond forcefully, to that we are told, no, no, that will stop the talks. We think a little bit of mutual reinforcement here may be helpful.
The attitude of the EU has been to continue to reject the proposition that international laws and standards must be respected and followed. The only realistic remaining option as far as we can tell is to file the Article 84 action with ICAO. We believe that that will be met with major support from the remainder of the world that will send a very strong message to the EU that we are serious about getting this issue resolved and it will move these discussions along to conclusions very quickly. The fact is, as you heard earlier, we are out of time. We have been told by various sources that if we are not moving on this—if the EU is not moving to repeal this by October, that is 3 weeks from tomorrow, that we will be told later, well, we are too late to get anything done. The time is now to act on this and we think the Article 84 action is the way to proceed.
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Two quick things I would like to mention just briefly that have come up in the course of the debate. I have noticed in a number of the statements offered at today's hearings the suggestion is made that somehow hushkits were not part of the deal when we decided to phase out the Stage 2 aircraft. If you look at the literature, and I know Mr. Oberstar is well acquainted with this, hushkits were central to the ability of the industry to embrace ANCA back in 1990. This was an essential ingredient and everybody that was involved in the debate was well aware of that at the time.
The second thing that I would like to just mention is the EU's assertion that somehow the United States has dragged its feet on the transition or the establishment of new standards, be they Stage 4 standards or however they are described. I would point out that the session of the Committee on Aviation Environmental Protection of ICAO that they are referencing as David Traynham said earlier, the United States didn't think it was the time for new standards. One of the principal reasons that we didn't think it was the time was that the EU was playing exactly this same kind of game.
Frankly, you can play games with performance-based standards as well as with design-based standards if you pick your numbers just right and what we had back then were some quixotically chosen decibel reductions that just happened to benefit aircraft that were manufactured on the other side of the Atlantic. That was one of the principal reasons that the United States was not cooperative and the basis for what the Europeans have now said.
With that I would be happy to respond to any questions and thank you very much.
Mr. DUNCAN. Thank you, Mr. Meenan. Mr. Dugan.
Mr. DUGAN. Thank you, Mr. Duncan, Mr. Chairman, Ranking Member Lipinski, members of the subcommittee. I appreciate you inviting me here and having this hearing. I represent a small group of hushkit manufacturers, manufacturers for the DC–9, the 707, and my own company, the Duganair technology quiet wing system for the 727.
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The European Union's unilateral hushkit rule breaker is of importance, extreme importance to world aviation industry. It is particularly important to those of us who make the hushkits. Our sales have simply stopped in Europe, the Middle East, Africa, because of this rule that is postponed for implementation. The effect of the rule today is as if it was already in force. We have lost over $150 million in direct sales of expected revenue. And it is a very effective trade barrier to noise compliant, U.S.-manufactured airworthy aircraft.
Our greatest concern lies not in the immediate effect on hushkit sales but in the violation of international law and its impact on the future of aviation. For example, we believe that it will seriously impede the introduction of new noise standards. This is ironic. While the EU alleges that the rule is designed to reduce noise, which it does not as has been demonstrated here this morning, the rule may actually delay progress on noise reduction for future years without ICAO and international support.
Throughout the phaseout of Stage 1 aircraft in 1985 and Stage 2 aircraft at end of this year, hushkits have proved essential to the ability of airlines to meet noise standards without having to scrap valuable airworthy aircraft and totally reequip with new aircraft.
1,500, 1,600 aircraft just in the U.S. will have been hushkitted by the end of this year, as we have heard already this morning. If carriers had been forced to scrap or export these airworthy aircraft, which the EU thinks they should have done, they would not have been able to provide the level of frequency and routes or the low airfares that we have become accustomed to. The air express, air cargo industries would scarcely exist. The same goes for deregulation-inspired low-cost new carriers who depend mainly on lower-cost, compliant, airworthy equipment.
This is also true for the next stage of noise rules, so-called Chapter 4, which may put, in fact, some airlines in Chapter 11. The new noise standards may exclude all but the very newest models of aircraft flying today, putting in jeopardy the billions of dollars invested by the operators without going broke and buying new kits for these new airplanes and thereby raising commercial aircraft costs. We would believe that this industry, our hushkit industry is up to the challenge. It will take a great deal of time and money to develop and produce hushkits, but how will we convince the investors to do this if EU or any other nation can balk and just simply change the rules unilaterally? Why indeed would the commercial aviation industry even support the adoption of costly new noise standards under these conditions?
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Obviously, the ability to achieve the next round of noise reduction depends on stable, universally respected international rules. The EU has shaken the very foundation of the international commercial aircraft community by breaking the law. The very least that it could do now is repeal it promptly before it officially goes into effect next May. What the EU has done with apparent impunity would still be a violation of international law even if the rule actually produced noise reduction; however, it will not. It is nothing more than an empty political gesture.
The United States has repeatedly asked to see any hard evidence of expected benefits. The EU's silence is the only noise reduction I have seen.
Instead of sincere consideration of our concerns, representatives of the Commission have struck back at the U.S. circulating, almost on the eve of this hearing an information pack which tries to undercut the U.S. position and put the blame entirely on the United States for not producing a Chapter 4. This is a remarkable document. It is filled with outright misrepresentations that totally erode the EU's credibility. They claim, for example, that the ICAO standards do not apply to recertified aircraft and that in any event, they are only recommendations. This, of course, is utter nonsense.
I would like to draw your attention to an attachment to my written statement which I have already transmitted and this is really just a summary—that includes a rebuttal to those comments. The U.S. is now working closely with the European Union on developing within ICAO the Chapter 4 rules, as we heard. It is essential, however, that the U.S. continue no farther down that road unless and until the EU commits to a full and prompt repeal of the rule. This condition must be made absolutely clear.
The U.S. Government must be united, clear and uncompromising in its insistence or nothing will be accomplished. If the effort fails, the U.S. must be ready to take prompt action under Article 84, as the other two Johns have mentioned; to adopt a ban on the Concorde; to adopt sanctions against European carriers; and to take trade action.
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We thank the subcommittee for the support it has given and ask it to urge the administration to hold a firm line. Thank you very much for the time to make these comments.
Mr. DUNCAN. Mr. Dugan, thank you very much. Let me just say that I think everyone on this subcommittee, or almost everyone, wants international aviation to be conducted in a cooperative manner and in a free and open way. But also when something is as blatantly unfair as this situation that we have been discussing this morning, and as the chart of Mr. Douglass shows there and the chart that we saw earlier, we are forced into doing something. And so Mr. Oberstar, as he does on most aviation issues, took the lead on this, and we have passed H.R. 661 without any opposition. And, frankly, if we have to, I don't think there is any question that the Congress will take very strong action if we have to. But none of us want a trade war and so we hope we can work this out.
Mr. Oberstar.
Mr. OBERSTAR. Thank you very much, Mr. Chairman, and I again repeat my deep appreciation for your prompt response to the issue and for moving the legislation through full committee and through the floor as promptly as we did. And I appreciate the comments of members of the panel. You are right on target fully in accord with your—but Mr. Dugan, you make the point—I think it is a very interesting, significant and technical point not made previously, is that the difference from your testimony—the difference between older aircraft and new aircraft is that new aircraft have built into them the hushkit technology that is retroactively applied to older aircraft. So why should there be a difference between old and new aircraft if they are both operating on the same technology?
Mr. DUGAN. Well, actually there is none, if that is the question. The new aircraft have to meet the same standards as the older aircraft have to meet after they have the same technology applied. The technology is common sense. Laws of physics are the same. You have got to put the same kind of equipment on the new airplanes that you put on the old airplanes. The only difference being is that the old airplanes have been out before a particular standard has been passed and so the new airplanes get the implementation of the technology during the production.
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Mr. OBERSTAR. I just find it very fascinating that if you take the European design standard expressed in their legislation and apply it to equipment, that all the CFM series engines produced by Snecma meet the standard and the engines produced in the United States don't. That is very curious.
Mr. DUGAN. Very interesting.
Mr. OBERSTAR. It is an economic issue masquerading as a noise issue and we just kind of pull their chain on that issue and make it clear. Thank you very much, Mr. Chairman.
Mr. DUNCAN. Mr. Lipinski.
Mr. LIPINSKI. Thank you, Mr. Chairman. I simply want to say to you gentlemen we are on the same side. We will march to victory together. Thank you, Mr. Chairman.
Mr. DUNCAN. Well, thank you very much. Unfortunately we have sped up because we have a vote going on, and we do thank you very much for being with us, and we will conclude this hearing. Thank you very much.
[Whereupon, at 1:00 p.m., the subcommittee was adjourned.]
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