House defense authorizers are directing the Air Force to review whether illegal government subsidies played any role in a contentious refueling tanker contract… However, Rep. Ike Skelton (D-Mo.) offered a caveat in his chairman’s mark: Any inquiry would be done after the World Trade Organization (WTO) delivered its rulings on trade disputes between the United States and the European Union over illegal subsidies to Airbus and tax breaks for Boeing . The two bitter rivals on the world’s commercial aircraft market are also at the center of the tanker controversy… Based on what the WTO finds in either case, the Air Force Secretary would have 90 days from the rulings to conduct a review, allowing time for public comment on the effect of illegal subsidies on the program, for consultation with federal government experts, and to speak with officials at both the Northrop Grumman-EADS team and Boeing. If the Air Force determines the illegal subsidy had a “material impact” that calls into question the “fairness” of the contract award, the service leaders have the right to take “appropriate measures” to remove the impact of the illegal subsidy and make the process “fair to all,” according to the legislative language in the chairman’s mark.
The legislation leaves it to the discretion of the Secretary of the Air Force how to make the outcome ‘fair to all.’ Further, it’s not clear when the World Trade Organization will rule on the subsidy question, but the decision may not come for several months. In the interim, the Air Force is not prohibited from going forward with the contract. That said, if the World Trade Organization does rule against the European Union, and determines that launch subsidies gave EADS an unfair advantage, expect a new round of lobbying to undo the deal, assuming that it’s not already too far down the road.
