U.S. Bill Ties Tanker Bid to WTO Airbus-Boeing Ruling

iBill requires Pentagon to factor in allegedly illegal Airbus subsidies when it chooses between EADS and Boeing for a major Air Force tanker contract

U.S. lawmakers proposed a bill on May 13 forcing the Pentagon to factor in allegedly illegal Airbus subsidies when it chooses between the European firm and Boeing for a major Air Force tanker contract.

The legislation introduced in the Senate and the House of Representatives "would require the Department of Defense (DoD) to consider World Trade Organization decisions for military acquisitions," Republican backers said.

"The WTO has ruled that European governments have illegally subsidized Airbus, a competitor in the KC-X aerial refueling tanker competition, creating an unfair competitive advantage for U.S. workers," Senator Sam Brownback and Representative Todd Tiahrt said.

Supporters say the bill would require the Pentagon to add five billion dollars to the cost of the Airbus bid for the $35 billion aerial refueling tanker contract.

"The Fair Defense Competition Act would require the Pentagon to add the cost of illegal subsidies onto the price of a competitor's bid proposal pursuant to a ruling by the WTO," they said.

"This would help level the playing field for American workers. It is estimated by the U.S. Trade Representative that Airbus has received over five billion dollars in illegal subsidies from European governments."

Brownback and Tiahrt, who are co-sponsoring the bill in both chambers, represent the state of Kansas, where Boeing has manufacturing facilities. The lawmakers criticized Democratic President Barack Obama's administration for refusing to consider illegal subsidies in the contract decision. "The DoD has chosen to ignore the effects of illegal subsidies, even though it acknowledges that nothing in the law stops DoD from taking into consideration such subsidies," Brownback said.

"Since the Obama administration has chosen to elevate the interests of European workers above those of American workers, Congress needs to take action and correct the situation," Tiahrt said.

The legislation drew fire from EADS (European Aeronautic Defence and Space Co.), the parent of France-base aircraft maker Airbus. "The Boeing Bill is one more attempt to avoid competing on the merits of the tanker," Guy Hicks, spokesman for the EADS unit, said.

"Unlike EADS North America, Boeing doesn't have a tanker that meets requirements, it faces tremendous technical risk in producing one and is therefore determined to take away the warfighter's right to choose."

EADS rejoined the bidding in April for the contract to supply the US Air Force with 179 aerial refueling tankers.

The European company and its former U.S. partner, Northrop Grumman, had dropped out of the bidding, complaining the Pentagon had skewed the contract terms to favor Boeing.

Proposals from each firm are due by mid-July to replace an aging fleet of Boeing KC-135 Stratotankers that date back to the 1950s.

In March, the WTO issued a confidential ruling on U.S. allegations that European governments had illegally subsidized Airbus, part of a long-running subsidy battle between the United States and the European Union.

The U.S. and EU governments have remained tightlipped about the ruling; both Boeing and Airbus have claimed victory.

A WTO ruling on a counter-complaint brought by the EU against US aid for Boeing is expected by late June.

Copyright Agence France-Presse, 2010

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