By Robert E. Scott Economic Policy Institute
The Obama administration recently won a victory at the World Trade Organization for fair trade in aircraft over French Airbus company and its parent EADS. However thousands of U.S. jobs could be lost if the Defense Department isnt stopped. Plans for a new Department of Defense aircraft purchase could give away critical aerospace jobs & technology to EADS - the very firm found guilty in this case.
Tens of thousands of U.S. aerospace manufacturing jobs have been stolen by Airbus and EADS largely because massive European Union subsidies have enabled them to undercut their principal American competitor Boeing. Over the past decade Airbus has used $15 billion of these subsidies to shift American aerospace jobs overseas while the U.S. industry simultaneously lost 75000 jobs.
Worse yet the European gambit threatens to permanently move a major U.S. - and heretofore world-leading - aerospace manufacturing base abroad.
The U.S. cannot afford to lose another leading high-tech manufacturing exporter to unfair trade practices.
In a rare effort to stand up for working Americans the United States sued the Europeans at the WTO in 2006 arguing that the subsidies were illegal.
Recently the U.S. prevailed with the international tribunal ruling unanimously in our favor.
But in a perplexing paradox of modern-day government bureaucracy Bush and Obama administration trade officials efforts could soon be undone by defense officials.
Recently the Department of Defense invited Airbus and EADS to compete for the U.S. Air Forces most coveted and expensive contract for replacement tanker aircraft - those in-flight refueling aircraft that every fighter pilot will tell you have life-or-death consequences for any mission in the air.
Keenly aware of the potential public relations nightmare Airbus/EADS has tried to put an American face on its tanker proposal by teaming with a U.S. defense contractor Northrop Grumman. But Northrop Grumman has never built the kind of commercial airliner derivative the Pentagon requires and at least half of the 29000 jobs created by the Pentagon tanker contract will go abroad if Airbus wins the deal.
The very aircraft Airbus wants to use for the tanker contract - the A330 - received more than $5 billion of the illegal tainted subsidy pool identified by the WTO.
Officials from Airbus and EADS have been quick to defend their bid arguing that U.S. contracting laws require open competition to ensure taxpayers get the best deal. Competition in contracting is the rule of law as it should be.
But competition and fair-trade laws are not - and need not be - at odds. We should hold contractors to the highest standards of honest competition and fair trade.
More specifically if one defense contractor - such as Airbus/EADS - is found to be violating trade laws then Department of Defense contract officials can take corrective action by simply discounting the value of those subsidies for
the purposes of the contract. That would assure fairer competition by preventing companies from using illegal subsidies to stack the deck in their favor.
Military experts are virtually unanimous in the view that Boeing is the more experienced of the two competitors for the contract having built tankers for many nations for more than 75 years. Boeing also manufactures a much-coveted fifth-generation refueling boom that is unmatched.
This stronger track record and the implications for U.S jobs may not be sufficient to award the contract to Boeing.
The winning contractor will have to be chosen through the normal bidding procedures. But if defense officials ignore the heavy illegal subsidies that Airbus/EADS has built into its price they will make a mockery of these procedures.
Accountability is change that President Barack Obama is delivering on; we should extend it to foreign companies who want to do business with our tax dollars.
Robert E. Scott is a senior international economist with the Economic Policy Institute in Washington D.C.
