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23 March 2010
A planned state visit to Washington by French President Nicolas Sarkozy at the end of March may be overshadowed by European allegations of protectionism against the U.S. Leaders of France, Britain and Germany accuse the U.S. Defense Department of altering specifications for a $40-billion dollar military contract, leaving Chicago-based Boeing as the sole bidder. U.S. firm Northrop Grumman and the European Aeronautic Defense and Space Company (EADS) withdrew their bids earlier this month. Industry experts say the European move could have repercussions for US manufacturers.
When the U.S. Defense Department issued a tender to replace its aging fleet of aerial refueling tankers, few imagined the international problems it would create.
"I’ve never seen anything like this in 25 years of looking at defense contracts," said aerospace consultant Richard Aboulafia at Virginia based Teal Group Corporation. He said some of the planes, which were designed to refuel military jets in mid-air, are more than 50-years-old. "Even if you started replacing them now, by the time you got to the last of them, those would be 75 years old," he said.
Northrop Grumman, in partnership with EADS, the parent company of Airbus, submitted bids, as did US-based Boeing Corporation.
But when the Pentagon changed the specs for the order, Boeing became the only bidder for a contract some say could be worth upwards of $50 billion.
In a recent visit to Britain, French President Nicolas Sarkozy accused the United States of protectionism. "This is not the right way for the United States to treat its European allies, and it’s not the right way for the United States to behave because it is a major nation, a leading nation," he said.
French officials say Mr. Sarkozy will discuss the issue when he meets President Barack Obama at the end of the month.
France has already received backing from several European leaders, including British Prime Minister Gordon Brown. "I too am disappointed about the American decision, and we have made our views known about this as well. We believe in free trade. We believe in open markets. We believe in open competition," he said.
While some say Mr. Sarkozy’s claims have merit, Aboulafia believes Boeing’s advantage is more about domestic politics than protectionism. "At the end of the day, they looked at the jobs footprint of those planes and one is far more Democratic party, the Boeing plane. And the other one is purely in the Republican south, primarily Alabama. They might have just made the rational calculation that with the Democrats in charge of the House, Senate and executive branch - that would be the plane that was more likely to obtain funding," he said.
Some say Europe’s argument carries little weight because the French government has never purchased a U.S. military product when a European equivalent was available.
But Aboulafia warns the issue could cause problems for some U.S. manufacturers. "I think the real concern here is that Europeans use this protectionist angle as an excuse to shut their own borders and basically insure that more European EU nations purchase European weapons systems rather than American ones.? Theres a real danger of that," he said.
But even if Boeing is awarded the contract, Aboulafia says military contracts represent only a fraction of civil aviation orders.
He says the growing demand worldwide for larger, more fuel-effcient aircraft is likely to keep competing aircraft manufacturers - both European and American - busy.
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