Collision Course: U.S. Trade Policy vs. the Tanker Decision

May 16, 2008

Washington, D.C.— U.S. Representative Rick Larsen (WA-02) and a number of his colleagues in the House sent a letter to President Bush expressing serious concerns about the Air Force’s recent selection of the Airbus/ EADS consortium to build the next generation of refueling tankers for our military, a contract worth at least $35 billion for this subsidized European company.  In the letter, Larsen and his colleagues ask the President to explain how he plans to resolve the troubling rift in our nation’s trade policy exposed by the Air Force’s selection of a European company that benefitted from subsidies the U.S. government has determined are illegal and asked the World Trade Organization (WTO) to stop.

“We believe the recent United States Air Force decision to procure aerial refueling tankers from the European consortium Airbus/ EADS at the same time that the United States Trade Representative is litigating a World Trade Organization (WTO) case against that same subsidized company presents a troubling conflict that will ultimately hurt American interests,” wrote Larsen in the letter.

“We believe it is absolutely necessary that we have a unified and equitable trade and procurement policy that ensures the American taxpayer does not foot the bill for foreign imports that are in clear violation of WTO rules,” the letter continued.

In 2004, the United States Trade Representative (USTR) filed a WTO case against the European Union to put an end to subsidies for Airbus.  President Bush and his Administration have consistently supported this effort.  At the time the WTO case was filed, President Bush instructed then-U.S. Trade Representative Robert Zoellick to “pursue all options to end these subsidies.”
 
“The fact that one arm of the U.S. government took advantage of an illegally-subsidized plane while another arm is challenging those very subsidies in the WTO raises serious concerns,” said Larsen. “The Administration is on a collision course with itself on this issue, and needs to explain to Congress how they plan to avoid a crash.”

The full text of Larsen’s letter follows:

Dear Mr. President:

We write to raise serious concerns about the lack of coordination between our nation’s defense procurement policy and our nation’s trade policy.  We believe the recent United States Air Force decision to procure aerial refueling tankers from the European consortium Airbus/ EADS at the same time that the United States Trade Representative is litigating a World Trade Organization (WTO) case against that same subsidized company presents a troubling conflict that will ultimately hurt American interests.

The U.S. government has determined that subsidies to Airbus are a clear violation of World Trade Organization rules.  In 2004, the USTR filed a WTO case against the European Union to put an end to these illegal subsidies.  Your support for this has been instrumental, and in past statements you have clearly stated that European nations should end their subsidies to Airbus.  At the time the WTO case was filed you instructed then U.S. Trade Representative Robert Zoellick to “pursue all options to end these subsidies.”

Yet while this WTO case is nearing a final decision, another branch of your Administration sends a conflicting and damaging message by deciding to reward European governments for the billions of dollars and market-distorting subsidies that they have used to create and sustain Airbus.  By choosing the A330 platform, the United States Air Force is, in effect, taking advantage of $5 billion dollars in WTO-disputed launch aid for the development of the A330/A340 models.  In our view, this conflicting message does not help your Administration’s efforts to win the WTO case; a case that if lost, will represent a multi-billion dollar return on investment for European taxpayers.

We are at a loss as to why the United States would have a policy pitting one part of our government directly against another. We believe it is absolutely necessary that we have a unified and equitable trade and procurement policy that ensures the American taxpayer does not foot the bill for foreign imports that are in clear violation of WTO rules. 

We appreciate your attention to this matter and look forward to hearing your plans to resolve this contradiction and move forward with a coherent trade policy that will protect American interests in the global marketplace. 

Sincerely,

Rick Larsen
 

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