Labor & Employment Law

Lexington Institute Finds Tanker Bidder EADS Breaks Trading Rules

By James Parks

If the U.S. Defense Department awards its $35 billion air tanker contract to European-based EADS over U.S-owned Boeing, it would reward a company that breaks international trading rules, says Loren Thompson of the nonpartisan Lexington Institute.

The contract for the tanker was rebid after the Government Accountability Office (GAO) in 2008 upheld Boeing’s protest of the original contract award. First, EADS and its partner Northrop Grumman said they were dropping out of the bidding. But this spring, EADS announced it would bid alone for the contract.

Here’s what’s at stake. Granting the contract to Boeing would create at least 50,000 family-supporting jobs, save taxpayer dollars and protect fair trade laws. But, if EADS wins the contract, most of the jobs would be in Europe. The few thousand jobs created here under an EADS contract would be low-paid assembly jobs with no union representation.

In March, the World Trade Organization (WTO) found EADS has been receiving illegal subsidies from four European governments for years for its A330 airbus, the plane EADS wants to offer in the tanker competition.

Thompson says the illegal subsidies should be a big consideration in deciding which company gets the contract: 

Failing to take Airbus subsidies into account…rewards Airbus for competing unfairly and punishes Boeing for playing by the rules. It helps socialism to triumph over free enterprise in securing a $35 billion contract that will be paid for by U.S. taxpayers?taxpayers who are expected to live by the same rules Boeing does.

The government subsidies to EADS have already hurt the U.S. aviation industry, Thompson says. In a recent report, “European Aircraft Subsidies, a Study of Unfair Trade Practices,” Thompson says European governments have given Airbus the equivalent of $200 billion to help capture the global aviation market. And it has worked. Two decades ago, U.S. aviation manufacturers like Boeing provided 85 percent of the market. Today, European companies control most of the market.

To make sure EADS doesn’t gain an unfair advantage in the bidding, Reps. David Obey (D-Wis.) and Norm Dicks (D-Wash.) introduced legislation that would require the U.S. Secretary of Defense to assess all major defense contracts under competition this year to determine whether the costs are realistic and reasonable. The defense chief also is required to provide to Congress an estimate of how many U.S. jobs are created or lost as part of those contract proposals.

Other lawmakers are pushing legislation to require the Defense Department to take into account the WTO ruling in making the contract decision.  

In 2008, the AFL-CIO Executive Council praised action by the House Appropriations Subcommittee on Defense that requires the impact on our nation’s industrial base be included in evaluation of the tanker proposals. In a statement, the council said:

Understanding how the use of our tax dollars can make America strong, both economically and militarily, is a sensible requirement that will help ensure the viability of our industrial base and, in this instance, the high-skill, high-wage jobs associated with the aerospace industry.

Full post as published by AFL-CIO NOW BLOG on May 27, 2010 (boomark / email).