Published: Wednesday, March 12, 2008
Tanker deal leaves U.S. looking pretty foolish
In agreeing to buy refueling tankers from a European company instead of Boeing, the Pentagon has put the United States government at odds with itself.
U.S. trade representatives continue to pursue a case before the World Trade Organization, arguing that European government subsidies to Airbus violate WTO fair-trade rules. One particularly harmful subsidy -- which went to the A330, upon which the Air Force now wants its next-generation tankers built -- reimburses Airbus' startup costs should a particular model fail financially, allowing Airbus to launch new lines virtually risk-free. It's hard to imagine a more anti-competitive strategy.
Yet as one arm of the U.S. government rightly pursues remedies for such illegal activity, another -- the Department of Defense -- is agreeing to spend up to $40 billion in taxpayer money on a European company's ill-gotten gains.
"We look a little foolish right now, in my estimation," U.S. Rep. Rick Larsen said Tuesday after raising the conundrum with Air Force officials during a committee hearing.
And according to Boeing, which officially protested the Air Force/Airbus deal on Tuesday, the procurement process was "seriously flawed" in several other ways. The company claims the Air Force changed the rules during the process, resulting in "selection of an aircraft that was radically different from that sought by the Air Force and inferior to the Boeing 767 tanker offering."
The choice of the A330, which is larger than the 767, surprised most observers partly because it was soundly rejected by Air Force officials in 2002. Reasons cited by the Air Force then were that the A330 took up 81 percent more ground space than the existing tankers, without a commensurate increase in refueling capacity; that it would demand a greater infrastructure investment than the 767, and would "dramatically limit the aircraft's ability to operate effectively in worldwide deployment." What changed?
The General Accounting Office, which has 100 days to investigate the procurement process and rule on Boeing's protest, has that and plenty of other questions to answer.
Meanwhile, Larsen's observation is a good one: This case has left the U.S. government looking more than a little foolish. The government's trade-policy objectives shouldn't be undercut by one of its own agencies. Congress and the Bush administration need to get to work on that.
U.S. trade representatives continue to pursue a case before the World Trade Organization, arguing that European government subsidies to Airbus violate WTO fair-trade rules. One particularly harmful subsidy -- which went to the A330, upon which the Air Force now wants its next-generation tankers built -- reimburses Airbus' startup costs should a particular model fail financially, allowing Airbus to launch new lines virtually risk-free. It's hard to imagine a more anti-competitive strategy.
Yet as one arm of the U.S. government rightly pursues remedies for such illegal activity, another -- the Department of Defense -- is agreeing to spend up to $40 billion in taxpayer money on a European company's ill-gotten gains.
"We look a little foolish right now, in my estimation," U.S. Rep. Rick Larsen said Tuesday after raising the conundrum with Air Force officials during a committee hearing.
And according to Boeing, which officially protested the Air Force/Airbus deal on Tuesday, the procurement process was "seriously flawed" in several other ways. The company claims the Air Force changed the rules during the process, resulting in "selection of an aircraft that was radically different from that sought by the Air Force and inferior to the Boeing 767 tanker offering."
The choice of the A330, which is larger than the 767, surprised most observers partly because it was soundly rejected by Air Force officials in 2002. Reasons cited by the Air Force then were that the A330 took up 81 percent more ground space than the existing tankers, without a commensurate increase in refueling capacity; that it would demand a greater infrastructure investment than the 767, and would "dramatically limit the aircraft's ability to operate effectively in worldwide deployment." What changed?
The General Accounting Office, which has 100 days to investigate the procurement process and rule on Boeing's protest, has that and plenty of other questions to answer.
Meanwhile, Larsen's observation is a good one: This case has left the U.S. government looking more than a little foolish. The government's trade-policy objectives shouldn't be undercut by one of its own agencies. Congress and the Bush administration need to get to work on that.
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