There was a huge outcry in the United States in 2008, when the Pentagon awarded a $40 billion contract for tanker refueling aircraft for the Air Force to a consortium including a European competitor – EADS, parent of Airbus. EADS won the bid in partnership with Northrop Grumman, the U.S. defense contractor, beating a rival bid by Boeing, Airbus’s longtime antagonist.
Now the tables have been turned and the outrage is in Europe, adding another irritant to transatlantic relations that are already at their worst since the bitter clashes over the Iraq War in 2003/04. The heads of government of Britain, France, and Germany, as well as the president of the European Commission, all denounced the U.S. government for effectively rigging the bid to ensure Boeing won the contract after all. Northrop Grumman dropped out of the competition last week, taking EADS with it and leaving Boeing as the sole surviving competitor.
Throughout Europe, the media reported the widespread European view that U.S. changes in specifications for the new tanker aircraft were a form of “protectionism” that had enabled Boeing to win unfairly. The earlier victory by EADS and Northrop Grumman in 2008 was annulled after Boeing, backed by a wave of chauvinist anger in the U.S. Congress, claimed it was unduly penalized by the initial specifications.
But many European commentators were quick to point to the hypocrisy of the political reaction in Europe, where the manipulation of defense and other contracts is also an art form – particularly in France, where President Nicolas Sarkozy recently stated that all cars sold in France should be made in France. (To be fair, the EADS/Northrop aircraft was to have been built in Mobile, Alabama).
U.S. reporting on the reversal of fortune for the European company was limited, but objective. Under the heading European Nations Allege U.S. Protectionism in Tanker Deal, Edward Cody reported from Paris March 17:
A wave of indignation has swept the major industrial nations of Europe over the Pentagon’s handling of a $40 billion contract to buy new aerial refueling tankers, with political and economic leaders accusing the Obama administration of protectionism…The commercial defeat for European Aeronautic Defense and Space (EADS), the parent company of Airbus, came as tensions were already high between Europe and the United States over disputed proposals for new international financial regulations, with Europeans generally pushing for tighter controls and the Obama administration resisting in the name of free markets and free trade.
Cody could have added other disputes that have recently raised temperatures on either side of the Atlantic: last month’s rejection by the European Parliament of an arrangement for the United States to monitor international financial transfers in pursuit of terrorists; France’s decision to sell four state-of-the-art naval assault ships to Moscow, the biggest ever sale by a NATO country to Russia; and the general resentment among European leaders that they are disdained by President Barack Obama.
In a report by Christopher Drew, The New York Times focuses on the commercial relief that the deal would bring to Boeing, providing the company with “some welcome certainty about its future as a major builder of military aircraft.”
The NYT story notes the European objections and points out that the decision by Northrop and EADS to quit the race “undermines President Obama’s efforts to increase competition for military contracts.” It continues:
Military analysts said that Pentagon officials would try to keep Boeing from pushing up its price for the tankers in the final negotiations.
But Jacques S. Gansler, who was the Pentagon’s top acquisition official in the Clinton administration, said that even if the military could hold down the price now, Boeing could be able to raise it in the future if there was no competitive pressure.
As soon as the Pentagon makes the first changes in the planes or the number it is ordering, he said, that “will give Boeing justification to say, ‘O.K., but it will cost you more.'”
Analysts say Boeing’s victory also suggests it has rebuilt its political influence since the Air Force’s first attempt to replace its aging tankers collapsed in 2004 amid corruption charges involving a proposed leasing deal with Boeing.
Most European media highlighted the condemnations of the U.S. government’s conduct by Sarkozy and British Prime Minister Gordon Brown, to which German Chancellor Angela Merkel and EU Commission President José Manuel Barroso added their concerns this week. A headline in the Financial Times March 17 reads U.S. Faces United Front on Aircraft Tender. But while many leaders said they intended to pursue the affair with the United States, few in the media believe it would do much good.
In Germany the international version Spiegel Online reports the bitter complaints by European politicians, but adds that German commentators sensed more than a whiff of hypocrisy from European governments.
Garrelt Duin of the center-left Social Democratic Party told the tabloid Bild: “This is a sleight of hand on the part of the Yanks… The Americans only talk about free competition when it is to their advantage. You can’t simply change the rules of the game just because you don’t like the winner.”
But, Spiegel adds:
Editorialists at most German newspapers on Wednesday, regardless where they fall on the political spectrum, called the politicians’ bluff. When it comes to defense contracts, they write, Europe is every bit as bad as the U.S. in terms of serving its own interests.
According to the center-right Frankfurter Allgemeine, for example:
The defense industry is far from being a normal business… But for Europeans to insinuate that everything about the Americans’ defense bidding processes is particularly terrible, is hypocritical and nothing more than a political ritual.
The Financial Times Deutschland agrees that Europe is equally guilty of protecting its defense industries: “Europeans shouldn’t be pointing their fingers at Washington. Instead they should be asking all participants what kind of economic and political damage their protectionist games are causing.”
German business daily Handelsblatt concludes:
One thing is certain: The common transatlantic defense market is little more than an illusion. In fact, Europe doesn’t even really have an open defense market. The planned European defense procurement agency EDA is little more than a paper tiger. The Germans, Brits, and French guard their domestic defense industries very closely, hindering public bidding processes and mergers. But it’s an expensive luxury in these times of tight budgets.
That’s all true. It’s just unfortunate that each time government leaders swear to abjure protectionism (as they did, for example, at the G-20 summit in Pittsburgh in September) and then indulge in it, they risk making it worse. The argument that everybody does it is as unacceptable in defending protectionism as it is to justify any human weakness.
