Fairness, Not Protectionism

Posted by on Jun 21st, 2010 and filed under Congress, Defense, Defense, Economy, Foreign Policy, Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry from your site

By U.S. Rep. Todd Tiahrt

DoD Must Weigh Unlawful and Unfair Advantage in Tanker Bid

The United States achieved a major milestone in the long-overdue competition to build America’s next generation of aerial refueling tankers when the House passed the Fiscal Year 2011 National Defense Authorization Act. The House adopted the Inslee-Tiahrt amendment by an overwhelming vote of 410-8.

This provision, patterned after the Fair Defense Competition Act authored by Sen. Sam Brownback, R-Kan., and myself, forces the Department of Defense to consider any potentially unfair competitive advantage a competitor has in the KC-X acquisition process and apply it equally to both bidders. But despite this prudent defense acquisition change, many false charges have been leveled against this effort that was overwhelming supported.

After sitting idle for more than 25 years as U.S. companies were forced out of the commercial aircraft business and at least 65,000 American aerospace workers lost their jobs, the U.S. government at last took action.

In 2004, the United States filed a case with the World Trade Organization (WTO) against the European Union for providing billions of dollars in subsidies to aircraft manufacturer Airbus. The WTO ruled this past March that these subsidies were illegal and harmful to the United States.

Yet, the Pentagon has chosen to ignore the substantial unfair competitive advantage provided to EADS in the form of $5.7 billion in illegal “launch aid” subsidies. The Defense Department also has allowed EADS to submit a bid for the Air Force’s new tanker contract based on subsidized planes from Airbus.

Competing Against Countries

Under these circumstances, Boeing, the only American company in the tanker competition, is not competing against just Airbus; it is competing against at least four European governments and treasuries.

Even with the faltering European economy, there is no way any company can compete against the full weight and force of multiple nations.

Appropriate Accounting

Some claim that accounting for these illegal subsidies is a violation of WTO guidelines. This is simply not true. This approach is consistent with all U.S. government obligations as a member of the WTO and does not violate the WTO Agreement on Government Procurement’s (GPA) terms or spirit.

Certain military procurements, including fixed-wing aircraft, are exempt from the GPA. Even if the KC-X competition were covered under the GPA, accounting for unfair competitive advantages, including subsidies, would not constitute a violation. Rather, the GPA exists to prohibit discrimination between suppliers based on country of origin. This effort would account for any unfair competitive advantage regardless of whether the company is based in Europe, the United States or elsewhere.

Others contend that Article 23 of the WTO Subsidies and Countervailing Measures Agreement prevents DoD from accounting for unfair competitive advantages and subsidies. Article 23 does prevent countries that have initiated WTO proceedings from declaring a violation of WTO rules and engaging in self-help remedies before the WTO issues a ruling.

The approach taken in the Inslee-Tiahrt amendment, co-authored by Rep. Jay Inslee, D-Wash., however, does not address or redress the WTO process. It only ensures that DoD is conducting procurement competitions on fair and even terms. Our effort through the National Defense Authorization Act simply improves the fairness of the overall acquisition system, which is exempt from international trade laws.

Finally, the Department of Defense has argued that it cannot address the issue of unfair competitive advantages and subsidies until it knows the outcome of a separate WTO case brought by the European Union against the United States. Not only is there no legal reason for DoD to ignore the March WTO ruling, but it is also inappropriate for DoD to link these cases.

The WTO, in Article 3.10 of the Dispute Settlement Understanding, expressly forbids member nations from linking separate disputes. In other words, the Defense Department’s rationale for setting aside a WTO ruling on subsidies is itself prohibited by the WTO.

For all of the above reasons, the procurement changes sought in the Inslee-Tiahrt amendment are vital in ensuring a fair competition for American workers. We want fairness, not protectionism. Our military men and women are in dire need of a modern, survivable tanker, and several attempts to secure a contract for the replacement of our Eisenhower-era tankers have failed.

We cannot afford anymore delays – we must get it right this time. The Inslee-Tiahrt amendment is a much-needed first step to ensure a level playing field for both companies.

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Rep. Todd Tiahrt, R-Kan., is a senior member of the House Appropriations defense subcommittee. This article was originally published at http://www.defensenews.com/story.php?i=4677663&c=FEA&s=COM.

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