Thursday, May 1, 2008

Timber! Falling Faith In US Trade Policy

A central theme of this blog has always been that the tanker issue is not really about Boeing vs. Northrop Grumman or Boeing vs. the USAF, but in fact Boeing and US aerospace workers vs. Airbus and the illegal subsidies it receives.

At Tanker War Blog we contend that the US government has a duty to balance the promotion of free trade with enforcement of free trade. Blindly clinging to the idea that competition and market forces will result in fair trade is folly. Competition doesn't work when the playing field is tilted toward one side or one of the competitors is given an unfair advantage.

Some of us at TWB had hoped that the Executive Branch would realize its mistake in buying an illegally subsidized product like the EADS/Airbus A330 and stop the tanker contract. But others here, who have long since lost faith in US trade policy, have pointed out that even when the administration seemingly stands up for fair trade it may in fact be just lining insider's pockets.

A case in point is the 2006 timber trade settlement with Canada. The Seattle Post-Intelligencer in a recent article by Robert McClure asks the question:

Is it an illegal $1 billion slush fund for Bush administration friends in the timber industry, extorted from Canada and designed to evade congressional oversight?

Or is it a fairly negotiated end to an expensive trade war that's "the best thing that has happened to private forest land conservation in the United States in 100 years?"

Given that at least one of the groups to receive money from the settlement, the U.S. Endowment for Forestry & Communities ($200 million), was hastily set up during the settlement and established just before the deal was finalized, it is probably right to ask these questions. The article also notes that the deal was monitored by Harriet Myers, then still the President's chief lawyer, so suspicions should be heightened all the more.

At Tanker War Blog we believe our government should stand for fair trade and look after the interests of US workers and consumers in trade disputes and not just industry and party insiders. We firmly believe this is also what the American people want.

We further believe that if there was proper enforcement of free trade EADS would never have been allowed participate in the tanker contract.

It is also becoming clearer to us that only Congress has the will and the ability to properly solve disputes such as the tanker controversy.


Skip Anderson said...

Thank you for finally saying "A central theme of this blog has always been that the tanker issue is not really about Boeing vs. Northrop Grumman or Boeing vs. the USAF, but in fact Boeing and US aerospace workers vs. Airbus and the illegal subsidies it receives."

Now how about posting an article saying you think the Air Force did a good job in conducting the competition and evaluating the proposals?

Now to slap you a bit. Where have you been for more than two years since Congress directed this competition? Nothing has changed related to foreign jobs, subsidies, etc. You sat on your, you know what, for all that time and are now ready to further delay the acquisition of the tankers we desperately need.

Skip Anderson

Tanker War Blog said...

Sorry Skip but in our view the RFP and grading criteria got so tilted and changed that the resulting evaluation might even be moot.

Funny you should metion the Air Force running a good competion. In our view because of outside pressure holding a competion, and doing whatever was needed to keep the A330 in it, became the over riding goal of the Air Force, not getting the best tanker for the mission.

We think the Air Force was but in a bad position and had to have a competion no matter what. That was not fair to them, but it happened.

We'll take the slap about waiting on the sidelines too long, but you can count us in the game now. Better late than never.

Scott Hamilton said...

You presume it a "fact" that Airbus has received "illegal" subsidies. In "fact," these are only allegations by Boeing, the USTR and various politicians. The WTO has yet to rule on these allegations, or the allegations by the EU that Boeing has received "illegal" subsidies. Until the WTO rules, none of these allegations are "facts."

It is important to remember that European loans to Airbus for any airplanes covered by GATT fall within the legality as defined by GATT, as do indirect "subsidies" to Boeing via NASA and DOD. The question remains whether these permissibles have been over-stepped.

For the record, I have long believed that both sides are guilty of over-stepping the 1992 GATT agreement between Europe and the US (to which Boeing and Airbus agreed) allowing government subsidies as defined.

Until WTO renders a decision, all this blather by Airbus (vs. Boeing), Boeing (vs. Airbus), the politicians and TankerBlog about subsidies is off the mark--just as all the political blather about blocking the USAF award is off the mark until the GAO rules.

ewaggin said...

There is another reason why the Congress should consider nullifying the contract award to Airbus. It involves the complaint currently before the WTO, regarding Airbus benefitting from illegal subsidies (launch aid, etc).

In US civil law, there is a principle that if you have benefitted from the action of another, you cannot argue that you were harmed by that action. I'm not a lawyer, and I don't know how similar the WTO court is to a US court.

However, if the US benefits from the subsidies given to Airbus, by buying the Airbus tanker (at an artificially low price enabled by subsidies), would the WTO then be able to reject the US claim of Boeing being harmed by the subsidies given to Airbus?

Tanker War Blog said...
This comment has been removed by the author.
Tanker War Blog said...

We were beginning to think you were seeing the light and were going to join the team, but now this? Say it ain't so.

You want to wait until the WTO renders their decision before we call launch aid illegal?

We, and we think the vast majority of Americans, believe that our government is correct in its assertion that these subsidies are illegal. Many of us here have reviewed the USTR documents and can state they are compelling. So we have our minds made up on this.

We do not fully believe the sole determiners of right or wrong are supranational organization. Our government often misses the mark, but they are sharpshooters compared to the WTO or the UN.

At TWB we will put our faith in the US Tade Rep over the WTO any day. And, the "fact" that primarily concerns us is the fact the US government has said they are "illegal".

You prefer to wait and see before calling them illegal, that's a very prudent stance. But, it doesn't change our view

Scott Hamilton said...

Tanker Blog, by your rationale, then it should be an accepted "fact" that Boeing received "illegal" subsidies just because the EU says so--and therefore Boeing should be excluded from any future sales to Europe. I believe this approach is much more dangerous to Boeing than waiting for the WTO (and GAO) to decide. The potential for a huge trade war between the US and Europe over (1) the subsidies issue and (2) Congress acting precipitously can do far more harm to Boeing in the future than the loss of this one contract will (assuming the award stands).

I've said it before and I'll say it again: Boeing should turn its attention to the game-changing KC-BWB and its commercial counterpart. This would leave anything Airbus has in the dust. Screw the conventional airplane. Be bold and go for the gold.

Tanker War Blog said...

Actually by our rational because the US government says Boeing military and NASA contracts are not illegal we believe they are not.

We do understand the risk and agree that no one wants a trade war over this. We only want the best tanker for the mission.

We will leave it to others to start

Steven Maron said...

Trade is a two-way street.
Did anyone of you have a look, how much military technology European Government are buying from American manufacturers. Tens of thousands of American jobs rely on these contracts.
If the American Government now nullifies the Tanker Deal (because of political lobbying from Boeings' side), I can guarantee you that the European Government might consider not to buy as many American technology as before. Thus tens of thousands American manufacturer jobs could be losed.

Many of the proponents of this "Pro-Boeing" block do not understand that America and the European Union have almost equal economic power and muscle. If America annoys the Europeans, then the Europeans will have the power to react.
If this Anti-European sentiment continues from the American side, I can guarantee that both Europe and America will loose in the end.

Anonymous said...

I've heard a lot of discussion claiming that Boeing is the recipient of subsidies via DoD and other military/Govt contracts. By this definition, EADS is also guilty of receiving these types of subsidies (hello, idiots).

Therefore, the only sensible way to level the playing fields is to allow Boeing to receive low interest rate loans for commercial aircraft development.