By Marina Malenic
A World Trade Organization (WTO) ruling on an aircraft subsidies dispute expected this week should not be allowed to influence how a hotly contested multibillion dollar Air Force contract is awarded, Northrop Grumman [NOC] officials said yesterday.
The WTO case, which has dragged on for nearly five years, was launched by Washington against European Union countries for allegedly providing illegal subsidies to Airbus. Boeing supporters contend that the alleged subsidies–estimated to be worth some $25 billion–gave Airbus, its parent company EADS, and its partner Northrop Grumman an unfair advantage in bidding for a contract to build a replacement fleet of U.S. Air Force aerial refueling tankers.
The EU, in turn, filed its own WTO complaint shortly thereafter, accusing the United States of violating international trade rules by providing Boeing with civil aviation subsidies back-channeled through military research awards. Brussels claims that some $23 billion in civil aviation assistance was passed off as defense research funding.
Northrop Grumman spokesman Randy Belote warned during a teleconference with reporters yesterday that injecting the issue into the tanker competition could spark a trade war.
“This political issue should not be permitted to negatively impact or interfere with the Defense Department’s ability to buy the best tanker available for our warfighters,” Belote said.
“While the EU and U.S. are working to resolve the WTO complaints,” he added, “care must be taken so as to reduce the possibility of a global trade war.”
Defense Secretary Robert Gates canceled the Air Force’s previous $35 million contract award to Northrop Grumman and EADS a year ago. Boeing’s protest of the award was upheld by government auditors, eventually prompting Gates to seek a cooling off period for the highly politicized contest.
Belote said a fresh draft request for proposals (RFP) from the Pentagon will likely come by the end of the month. He said he does not expect the document to include any reference to the subsidy dispute.
Gates and military leaders have held that the WTO showdown is irrelevant to the Pentagon acquisition process. However, some lawmakers have argued that the government must factor subsidies into its assessment of what is a “best value” for the taxpayer.
Boeing, for its part, said it backs Washington’s case against Airbus but is agnostic about whether the issue should be included in the forthcoming tanker RFP.
“We’ll never say we want something in or something out” of the competition guidelines, Boeing spokesman Bill Barksdale told Defense Daily.
“We’ve been consistent about the fact that subsidies distort the market, and we support the U.S. government in trying to end those subsidies,” he added. “But beyond that, all we want is clarity about the rules and a level playing field.”
The WTO decision on the U.S. complaint, expected by Friday, will not be released publicly. The governments involved will receive the ruling. Members of Congress can then request briefings from the U.S. Trade Representative.