Police Detain Ex-EADS Chief

Noel Forgeard, the former co-chief executive of EADS has been detained since Wednesday by French police under suspicion of insider trading. Although Forgeard has strenuously denied the accusations, investigators are unimpressed and have detained him.

The Times reports that Mr. Forgeard, was due to be interviewed by the magistrate in charge of the inquiry last night. The magistrate will decide whether to place Mr. Forgeard – once the most powerful figure in Europe’s aerospace industry – under formal investigation on suspicion of insider dealing. The article goes on to state:

A report by the French Financial Markets Authority (AMF) pointed to “massive” insider dealing by 17 current and former executives of EADS and Airbus, who sold a total of 1,708,600 shares for almost €20 million.

...According to the AMF, they were in possession of privileged information about A380 production problems and should have abstained from exercising stock options.
All may be questioned by the Paris police’s financial brigade.

While the Times article does not mention it, the New York Times had already reported that one of the 17 EADS executives implicated in the scandal is none other than Ralph Crosby, head of EADS North America. Yes, that is the same EADS that is Northrop Grumman's main partner on the KC-30 tanker which was selected by the Air Force in the KC-X tanker competition.

It was probably a good idea that Mr. Crosby skipped Cannes this year. It might have been a one way trip.

[Update: Reuters now reports that last night Mr. Forgeard was officially placed under formal investigation, the US equivalent to being charged, on suspicion of insider trading.]

Vote for TAnchorman

TAnchorman and News Team 4 have been selected as one of the finalist for the Fake Blog contest at Jane Wells' Funny Money site at CNBC. We congratulate them on this high honor as it is a testament to their stellar in-depth reporting on the tanker issue.

Please take the time to vote for TAnchorman and the team at CNBC Funny Money. Vote early and often as the polls close Friday at noon.

More EU Subsidies for Airbus and EADS

Bloomberg reported yesterday that the Airbus SAS request for European governments to contribute $18.2 billion in development costs for the A350, which will directly compete against Boeing's 777 and 787, has been tentatively approved.

The article states that:

Airbus approached European nations for aid and ministers have agreed "in principle" to the idea, Peter Hintze, Germany's deputy economy minister, told reporters today at the Berlin Air Show. His comments were echoed by Dominique Bussereau, junior minister for transport in France.

Loan commitments for the new A350 widebody jet may exacerbate a trade dispute between the European Union and U.S. over aid for planemakers. The U.S. filed a complaint with the World Trade Organization in 2005 about European assistance to aerospace companies. The EU filed a countersuit against the U.S. and the dispute is still being weighed at the WTO in Geneva.

"It's not going to do trade diplomacy any favors, but it's not like they have a choice," said Richard Aboulafia, vice president at Teal Group, a consultant in Fairfax, Virginia. "Delaying the most important product for the company in the name of diplomacy doesn't sound like a smart move."

I know what Mr Aboulafia means, but I disagree that Airbus does not have a choice. They can choose to compete fairly without asking for a government handout every time they want to develop a new product. Airbus chooses not to forgo subsidies because its state-ownership and shared-production business model is not competitive without them.

This new round of subsidies comes in addition to other announced government "investments" in A350 components such as the Welsh government's contribution to $14.8 million to develop the next generation composite wing technology for Airbus.

The Bloomberg article quotes EADS Chief Executive Officer Louis Gallois saying that Airbus needs more state aid to compete fairly with Boeing.

"We are asking only for a level playing field with the competitor," Gallois said in an interview. "We feel the competitor is getting support from its government for research and development, and from the states of Kansas and Washington."

Gallois said yesterday at the company's annual meeting in Amsterdam that EADS doesn't need to seek a capital increase from investors for A350 funding because the company has 8.3 billion euros in cash.

It is hard to fathom how a company that has over $11 billion is cash, with which it could finance any development, still needs an $18 billion government handout.

Also, I must have missed the billions of dollars in US government support for commercial products Boeing is supposedly getting when the appropriations bills were signed into law last year. Maybe Mr. Gallois knows more about this than those who help write the bills. It is also funny to see he no longer mentions defense contracts as a Boeing subsidy like the original EU WTO countersuit.

One of the most absurd parts of this dispute though is how those in the executive branch, who talk of using all elements of national power, would seemly surrender our nation's economic power and all its leverage over EADS to give up its illegal subsidies.

Why should EADS give up its subsidies when DoD would rather myopically take advantage of the lower the System Development and Demonstration (SDD) cost and reduced unit prices these subsidies provide? No need to look out for the economic interest of the country as a whole if you can cut yourself a good deal.

In fact, DoD seems intent on rewarding EADS as quickly as possible and support the EU's economic war against America's largest manufacturing exporter. You're doing a heck of a job, Brownie...oops I mean Robbie.

Better watch out, next thing you know Kanye West will be saying Bush doesn't care about American workers either.

[Note: The commentary to this post is not the consensus view of Tanker War Blog. While we are all in full agreement on the Airbus subsidy issue, many members are not convinced the SecDef has had much of a role in the tanker dispute. But, we do respect the member's right to make their view known and we believe their perspective is a valid contribution to the tanker debate.]

Spread the Word

Tanker War Blog asks all its supporters to please spread the word to others about www.TankerWarBlog.com. The time is now to get the word out!

Do your part and e-mail, write, or call all your friends, acquaintances or even long lost classmates and tell them to visit today. Also, be sure to mention TWB when you post comments on tanker news articles and in on-line forums. Everyone needs to be in the know on just how wrong the decision is to buy an EADS/Airbus based tanker.

With your help we can make a huge positive difference in what the general public knows about the tanker controversy.

Future US Aerospace Job Losses

Today at Tanker War Blog we are fighting the procurement of an EADS tanker but the implications go far beyond just the shutting an American company out of the aerial refueling business for the next 20 years and the job loss associated with such an event.

In fact this contract has a number of large procurement implications for strategic and tactical airlift in the future.

An areas of great speculation about this contract has always been why the Air Force only very late in the RFP process decide that it might want a larger aircraft.

Aviation industry analyst Scott Hamilton nicely sums up one of these possible reasons for this bigger-is-better preference switch at the end of page 3 in his recent commentary paper:

It’s also worth remembering that one of the reasons the Air Force selected the KC-30 was for its greater troop and cargo carrying capability than offered by the KC-767.

USAF Lockheed C-5 fleet is getting old—the average age is approaching 28 years. The Air Force also doesn’t want any more Boeing C-17s when the current order book is filled.

The KC-30 has the ability to supplement the aging, and increasingly unreliable, C-5s and the over-taxed C-17s, which now support two wars.

Many on the Hill believe the reason the Air Force started to look at a larger aircraft is that, in DoD's mind, in order to buy more F-22s and keep the F-22 assembly line open, it must first cut funding for the C-17 and close the C-17 assembly line. The Air Force, it is reasoned, can not continue to afford to keep both assembly lines open.

So by purchasing the KC-30 the Air Force can afford more F-22's and not suffer adversely from the C-17 line closing, as it plans to make up for the airlift requirements using the KC-30 as a cargo hauler.

The only trouble with this line of thinking is that the KC-30 is not a true cargo aircraft. So eventually in the future more strategic airlift will need to be purchased. And, what will be the only true strategic cargo aircraft available after the C-17 line closes? Why the heavily subsidies and EU protected EADS/Airbus A400M.

It is feared that to get more F-22's, the Air Force is not only willing to buy an Airbus derived tanker, but shut the C-17 assembly line, cut back on C-5 modernization, and possibly purchase the Airbus A400M in the future. It should also be noted that if they do buy A400Ms the Air Force would inevitably buy less American made C-130Js.

So if you are an American working on the C-17, the C-130J, or the C-5 Galaxy Reliability Enhancement and Re-engining Program be warned, your job is probably next to be given to EADS.

We would also warn those airlines and aircraft owners that are now part of the Civil Reserve Air Fleet (CRAF) that the rules and need for this program may change if the KC-30 is purchased; so you might want to pay a bit more attention to this contract than you have in the past.

Rest assured though, the issue of how the selection of a tanker was tilted to overwhelming favor airlift capabilities without sufficient evaluation, study, or consultation will most certainly be an issue Congress will take up before this controversy is over.

For the record, most of us here at TWB hold the position that the Air Force needs more F-22s, more C-17s ,and new tankers. DoD should not give the Air Force roles and missions and then not fund the needed items. Cutting corners and forcing the purchase of a tanker/freighter hybrid is the wrong move. In the long run it will only provide less capability in both areas and cost more overall.

The Air Force Has Some Explaining To Do

Although Tanker War Blog has had issues with some of his briefs in the past, we are glad to see that today highly regarded defense analyst Loren Thompson takes the Air Force to task for their lack of transparency on the tanker selection process.

In his latest brief Tanker Controversy: Questions the Air Force Must Answer Dr. Thompson specifically he calls into question:

1) Why the Air Force says both planes will cost the same to operate when the Airbus plane "burns over a ton more fuel per flight hour"?

2) How can the Air Force say that building the EADS/Airbus tanker presents the same risk when the EADS plant in Alabama and its workers don't yet exist?

3) How can the unrealistic assumptions used in the Air Force selection such as longer and stronger runways be relevant?

4) How can it be said that EADS/Airbus have record of superior past performance when they don't have a history of making tankers?

Dr. Thompson ends his brief with this assessment on the tanker selection process:

Whatever else this process may have been, it definitely was not transparent. Even now, neither of the competing teams really understands why the competition turned out the way it did. It would be nice to hear from the Air Force about how key tradeoffs were made, because at present it looks like a double standard prevailed in the evaluation of the planes offered by the two teams.

It is good to see that others are no longer simply accepting the DoD party line and are beginning to ask serious question about the tanker contract.

For too long EADS supporters have tried to paint questions about the selection as whining, or insults to the integrity of the U.S. Air Force, or even as slaps in the face of service members. EADS and its supporters are pained to admit it, but they must realize that demanding answers to these questions is good for the Air Force and is the only way we will get the right procurement decision.

More EADS $$$ = Less US Jobs

Given that in 2007 EADS was supposedly hard at work engineering "America's New Tanker" and was ramping up production of Army's light utility helicopter (a contract they won in June 2006 worth up to $3 billion for 352 helicopters), one would expect the numbers for US workers at EADS to be skyrocketing.

You would be right to expect this, but you would also be very wrong. It turns out that the exact opposite has happened. In EADS's newly released 2007 Annual Report (Book Three) on page 73, EADS list its US employees for the past three years as follows:

Dec 31, 2005.......1877 US employees

Dec 31, 2006.......1932 US employees

Dec 31, 2007.......1777 US employees

While we at Tanker War Blog expect these numbers to go up in 2008 (how can they possibly go down?), we find it more than a bit curious that after their previous billion dollar DoD contract EADS ended up cutting its US workforce.

So until their Dec 31, 2008 statistics are released, we would warn the American public to be very sceptical of EADS's proclaimed commitment to "in-source" U.S. jobs.

Airbus Reported to be Worthless

Today in an exclusive article Bloomberg reports that Lehman Brothers Holdings Inc. is valuing Airbus SAS, the world's largest commercial aircraft maker, at "less than zero''.

The article quotes highly respected analyst Joe Campbell:

"The market is viewing Airbus as a liability, rather than an asset,'' said Campbell, 62, who is based in New York and has ranked among the top five aerospace analysts for six consecutive years in an Institutional Investor magazine poll.

Seems as though Wall Street finally realizes that the governments that own Airbus can not indefinitely underwrite it though subsidies and launch aid. Eventually Airbus will have to price itself based on market forces, and in doing so may price themselves out of business.

The article also would call into question the high ranks for performance EADS got during the Air Force contract decision:

Airbus, based in Toulouse, France, is also six months to a year late on the A400M military transport. It has a 20 billion- euro ($31.4 billion) contract with six European governments and Turkey for 180 of the planes. Additional cost overruns and penalty payments may drain cash needed for the $16 billion expense of developing the Airbus A350, a long-range jet competing with Boeing Co.'s 787 and 777.

The article closes with a very interesting quote from EADS CEO Louis Gallois where he agrees with the Lehman's Joe Campbell:

"He's right,'' Gallois said. ``Either you're getting Airbus free or the other activities are free. In any case, the shares don't represent the company's value."

Gallois is also right in a sense; Airbus may not be giving away its products for free, but it has been able to absorb costs and underbid competitors because many of the risks truly private companies have to deal with are unwritten by the governments that own Airbus. This fact is the root of the WTO case against Airbus subsidies and it is at the very heart of the tanker controversy.

Congressional Eyes Now on the GAO and Appropriators

The 2009 House Defense Authorization Bill (H.R.5658)and the fight to get tanker related language inserted into it is pretty much a done deal. The bill is now being discussed on the house floor and should be voted on tonight. The fight will be taken up again when the bill goes to conference with the Senate. The Senate Bill (S. 3001) does not have the following provisions:

Review of Illegal Subsidies
If the World Trade Organization (WTO) rules that an illegal subsidy was given to any large commercial aircraft manufacturer, the Committee requires the Air Force to review the potential impact of that subsidy on the recent source selection process for the KC-45 aerial refueling tanker program. If the Air Force determines that the subsidy did impact the competition, then it must find a way to remove the impact from the competition to ensure the fairness of the process.

Prohibition on Illegal Subsidies in Defense Contract Awards
The bill prohibits any future DOD contract from being awarded to a company that benefits from illegal subsidies.

Industrial Base Consideration
DOD is requires to consider the potential impact on the domestic industrial base during all future competitions for major program contracts.

Consideration of Employee Benefits
DOD must ensure that no foreign company receives a competitive advantage if its employee benefits costs are borne by the government.

Also, the House bill reduced the authorization for the KC-45 Tanker to $831.8 million, a cut of about $62 million. This was done because, according to Air Force officials, advanced procurement funding is not required during FY09 program. The Senate authorized the full $893,419 requested; all under RTD&E.

Congressional Quarterly reports that the White House has already lodged veto threats against provisions in the bills ranging from a timetable for withdrawal of U.S. troops from Iraq to an attempt to nullify President Bush’s executive order directing agencies to ignore “earmarks,” or lawmakers’ projects, unless they are spelled out in bill texts. So even after Senate-House conference, the 2009 Defense Authorization Act may have a long way to go before being signed into law.

On Wednesday night the House Rules Committee voted not to allow Rep. Duncan Hunter's amendment that would have barred the military from going to full production of the tanker until the U.S. Air Force certified that no more than 15 percent of the aircraft was foreign-made and that final assembly would take place in the United States. This was the only language that could have had an effect on the tanker contract regardless of GAO or WTO rulings.

A number of other tanker related amendments were either ruled agaist or pulled due to overwhelming resistance from the wait-for-the-GAO report faction. Our members have stated that this wait-and-see group is larger than the pro-Boeing faction and the pro-EADS faction put together. We believed this would end up being the case when we posted much the same back in March.

Given the history of tanker controversy in Congress only the true believers like ourselves are willing to fully weigh in now. Most in Congress will need some sort of positive ruling from either the GAO or the WTO before committing.

The real action should come later in the House Appropriations Subcommittee on Defense (HAC-D) which will do its mark-up after the GAO ruling. Also, the Subcommittee membership is heavily pro-Boeing.

Who's Leaking Air Force Procurement Information?

After the stock market closed last Thursday, the Air Force announced that Boeing had lost another contact; this time it was for the Global Positioning System III satellites.

The loss itself was not surprising, but the timing certainly was. Why wait for the stock market to close if, as it is our understanding, an Air Force official may have already leaked the results of the competition two and a half weeks prior.

If you remember back to the brief Boeing and the Air Force at War: The Damage Spreads and the post we did on it. The following paragraph contains the issue at hand:

“The deterioration of Boeing's relationship with its biggest government customer hit a new low last week...But the tone of Boeing's tanker campaign has led at least some service officials to believe the worst about the company, a feeling that is spreading far beyond tankers. For instance, the service has probably delayed announcing award of the GPS III satellite contract in part because it fears another Boeing protest.”

We may tackle the other ridiculous rumors in the full, unabridged paragraph in another post, but today we'll address the last part of the passage about the GPS III satellite contract.

Remember the information for this brief is coming directly from top Air Force leakers or “service officials” as they are referred to in the penultimate sentence. These officials supposedly “believe the worst about” Boeing and the example given of these suspicions is that the GPS III satellite contract announcement was being delayed because Boeing would protest the loss.

The author tries to muddy the source by using the word “probably” as a qualifier, but one can reasonably ascertain that this information is a direct "instance" of suspicion provided by the “service officials” referred to previously.

This was not the first time we have seen an official leak information to spin the information on the tanker contract. As our inaugural post pointed out, contrary to Assistant Secretary of the Air Force for Acquisition Sue Payton’s public statements during the tanker award announcement that “We owe it to Boeing to give them the first debrief,” Air Force personnel briefed at least one outside defense expert and sought to brief members of congress while trying to delay debriefing Boeing for two weeks.

These actions were taken to seed the story that Boeing had lost decisively and to make public and congressional opinion go against a possible Boeing protest. This shameful tactic did work in the media and continues to generate numerous stories that Boeing lost decisively as see here, here, and here.

Who are these “service officials” that have willfully chosen to spin and spread rumors? Well since the other side is paying the “probably” game we will right play along.

A number of people on the Hill tell us that they very strongly believe a main source for these leaks, and the person who undermined Ms. Payton’s credibility, is “probably” Kenneth E. Miller.

That’s right; the Special Assistant for Acquisition Governance and Transparency to the Secretary of the Air Force is who our sources say is “probably” leaking information to spin the tanker controversy against Boeing in a very un-transparent way.

Is it illegal to leak, spin, or provide misleading information; maybe, maybe not depending on the leaked information. (Just ask poor Scooter Libby) But, if someone did selectively leak the result of a billion dollar contract award early, the risk of malfeasance, such as insider trading, certainly does exist.

DoD is very aware of the effect a big contract can have on the markets, which is why they announced the GPS III contract after the markets closed. Too bad in this case, Mr. Miller may have already let the cat out of the bag.

If our numerous sources are all wrong or Mr. Miller feels he has been unfairly accused on leaking information on the tanker contract, we would ask that he e-mail us a written rebuttal using his Pentagon account, and that he request an appearance at a special congressional hearing where he can deny these suspicions under oath. We would like specific denials of being a source, if not the sole source, of these leaks mentioned in these: Tanker Competition: Northrop Won By A Wide Margin, Boeing, Northrop CEOs Met With Air Force, and Boeing and the Air Force: The Damage Spreads. (We are most interested in these three instances, but if there are some we missed please feel free to make note of them in your statement so that they can be covered in cross-examination.)

Note: Tanker War Blog is releasing this information while the market is open, as it is our hope by doing so we can raise tanker integrity and transparency futures.

News Team 4 Exclusive: Tanker Fight Exposed

We would like to direct our readers to TAnchorman's blog (pronounced tankerman) where News Team 4 has a new exclusive.

It seems as they were able to get their hands on a HASC transcript that contains a portion of a Team KC-30 post-fight conversation which was recorded last month.

Gen. McNabb was right, everyone should just calm down before this gets out of hand again.

Airbus North America CEO Joins Tanker Fur Ball

Unlike his counterpart, Ralph Crosby, the CEO of EADS North America; Allan McArtor, the CEO of Airbus North America, doesn't seem to know when to keep his mouth shut.

In today's Wichita Eagle, McArtor attacks Congressman Tiahrt for supporting Boeing's right to protest the tanker contract and for other perceived slights:

"I would like to see, quite frankly, a little more respect from Congressman Tiahrt on the continued commitment of Airbus to Wichita," Airbus America chairman Allan McArtor said. "I'm troubled by some examples of what I call a callous dismissal."

...[McArtor also stated] that Tiahrt has "gone beyond a chance of misinterpretation or misunderstanding of the Air Force selection process" and is engaging in an "intentional misinformation campaign."

"I find that detestable," he said..."They simply cannot accept the fact that they lost the competition."

In defense of Congressman Tiahrt, he has rightfully pointed out there is no guarantee the promised tanker work will be done in this country.

Tiahrt has also correctly pointed out that:

1) The first five tankers will be built in Toulouse, France
2)EADS also won a light-utility helicopter contract for the U.S. Army. The fuselage and firewall were to be built in Kansas, but the work stayed in France.

We have always stated that the tanker controversy was really about Airbus and Boeing and we are glad to see the CEO of Airbus North America join the tanker fur ball so foolishly late.

Mr. McArtor should remember the more he attacks elected members of Congress for fulfilling their constitutional responsibilities

To regulate Commerce with foreign Nations...[and ] To raise and support Armies [or in this case support an Air Force] -U.S. Constitution Article I, Section 8

[and to ensure]No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law -U.S. Constitution Article I, Section 9

the more he looks like a puppet of a foreign government who has no understand of how our government, for, by, and of the people functions.

Considering that Airbus has been accused of being a puppet of the French government and Airbus North America is a puppet of its parent Airbus, we understand how he can make this mistake.

To avoid embarrassing himself further though, we would suggest Mr. McArtor read our post for all newbies entering this already mature engagement.

But regardless, we at TWB are glad to have him join the fray. His presence proves our point that the heart of the tanker controversy is Boeing and U.S. aerospace workers vs. Airbus and its unfair trade practices.

TAnchorman Exclusive Video

Please visit TAnchorman's blog where he has an exclusive video of a 1/16 model test of new Maximum-On-Ground (MOG) enhancement procedures to accommodate the larger KC-30 tanker.

Name the Tanker Contest

Today Air Force senior leaders are asking all Airmen for suggestions on a name for the service's newest tanker aircraft, the KC-45A.

"I've asked that we seek our Airmen's help to find a name for the KC-45," said Secretary of the Air Force Michael Wynne. "I prefer the name emphasize our heritage or our future horizon, but I'm most interested to see what our Airmen suggest."

As the future operators of the KC-45A, Air Mobility Command officials gathered many good suggestions from personnel in their units. Those submissions will be on the list of names considered during final selection. However, the opportunity to submit proposed names is now open to all Air Force personnel. Until May 30, active duty, Guard and Reserve Airmen, as well as Air Force government civilians, can submit their suggestions to namethetanker@pentagon.af.mil.

We at Tanker War Blog think that naming a plane when the contract is still in protest is a bit premature to say the least. But, we will hold our own informal contest for naming the EADS KC-30. All Airmen and the general public can send their entries to tankerblog@gmail.com.

Suggested names must be brief, no more than two short words. Along with the suggestion, entrants must include a brief explanation for their idea.

All entries are due by 30 May, and TAnchorman will post the best submissions on 1 June. He will also periodically provide contest updates on his site here.

The comments section for this post has been closed so please visit TAnchorman's site if you have input.

HASC Bill Includes WTO Language

In what will be the first of many attempts to include tanker dispute language in this year's bills, the House Armed Services Committee (HASC) is directing the Air Force to review whether illegal government subsidies played any role in a contentious refueling tanker contract pending any adverse WTO rulings.

The Hill reports that this legislation though will most likely up in a clash with Senate that would rather not include the tanker dispute in their version of the 2009 Defense Authorization Bill. Also, the Hill reports that HASC Chairman Ike Skelton (D-Mo.) caveatted the inquiry in his 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.

Since the U.S. WTO case against Airbus will be ruled on first, the Air Force Secretary would have 90 days from that ruling to conduct its first review. The article goes on to state that:

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.

But the provision leaves that to the discretion of the Secretary of the Air Force. It is unclear when the WTO would rule on either of the cases, but it could be several more months until that happens. The discussion could spill into the next presidency and a new Secretary of the Air Force with a different approach than the current secretary, Michael Wynne.

As our previous post indicated, the WTO ruling against the European Union could come as early as next month.

If the WTO ruling comes out against Airbus, we at Tanker War Blog expect Congress would not idly wait by while the Air Force review is conducted. Instead, we would hope funding for the tanker would be cut and not restored until the contract excludes the use of illegally subsidies Airbus planes.

TAnchorman Consumer Alert

News Team 4 is looking out for you.

TAnchorman has just posted a consumer alert that is must reading for all government procurement officials.

If you thought sub-prime loans were bad, wait to you read about sub-prime contractors.

It's Agreed: Congress Should Examine Tanker Deal

Yesterday former Speaker of the House Dennis Hastert in an op-ed entitled "Off the Buss on Security" called on Congress and the Bush administration to thoroughly investigate not just legal and process issues being looked at by the GAO, but also the very real national and economic security questions raised by the Air Force tanker decision.

In his article Rep. Hastert states a recent example of trouble that we may face more of in the future:

After U.S. troops began fighting in Iraq in 2003, owners of a Swiss company, Swatch Group AG, refused to deliver vital components it manufactured for U.S. weapons due to their opposition to our war effort. This unilateral action disrupted our supply chain for a critical military asset during a military campaign and put American troops directly at risk.

If one European CEO can impair our war effort, imagine what could be done by sovereign governments' intent on hindering U.S. efforts and with control over even more critical supplies like refueling aircraft. With the Air Force's decision, this could become reality.

The current Speaker Nancy Pelosi has already called for a congressional examination similar to the one the former Speaker proposes. We bring this point up again because a reader forwarded us an e-mail the KC-30 team had sent around to its supporters last week that stated:

The Associated Press is reporting that House Speaker Nancy Pelosi, who previously had questioned Northrop Grumman's tanker win, is now saying she wants to learn more about the contract before rendering a judgment.

We at Tanker War Blog love our local PR firms as much as the next blog, but the KC-30's crew seems to be over reaching way too far to portray Speaker Pelosi as changing her mind on the tanker contract.

Issue 1) So how is continuing to question/learn more about the contract a change?
Issue 2) Regardless of what the people in a particular state want to hear, Speaker Pelosi has not changed her position on the tanker contract; and that position is that the contract needs to be examined by Congress.

Here is the very telling AP passage the KC-30 team supposedly summarizes:

The first woman to be House speaker spoke later Friday to Alabama Democrats at the party's annual Jefferson-Jackson Dinner.

Republican Gov. Bob Riley and Democratic Alabama House Speaker Seth Hammett on Thursday had urged Pelosi to accept the Air Force decision and not hold Congressional hearings on the project.

"Of all the people for the Democrats to bring to our state to hold up as a representative of what their party stands for, they chose Nancy Pelosi, even while she is vigorously fighting to take jobs out of Alabama," Rep. Mike Hubbard, R-Auburn, Chairman of the Alabama Republican Party said in a statement Thursday.

Pelosi said she has not made a decision and simply wants to make sure it's the best contract possible for building refueling tankers for the Air Force.

"We have the responsibility to the American people to protect them,"she said.

Pelosi mentioned the tanker contract only briefly in her speech to Democrats, instead urging them to unite behind the winner of the party's nomination for president, either New York Sen. Hillary Rodham Clinton or Illinois Sen. Barack Obama.

So let's get this straight: Speaker Pelosi plays nice, tries to avoid a touchy hometown subject, tactfully rebuffs local politicians pressing her to just "accept the Air Force decision", and then she gets slammed regardless in a very partisan way. So much for Southern hospitality...and so much for truthful KC-30 e-mails.

WTO Rejects Request to Stall Airbus Subsidies Case

World Trade Online (Note: This not a free service; you must pay to see the full article) in a 9 Mar headline story "EU Rebuffed In Attempt To Harmonize Boeing-Airbus Cases", reported that its sources say that the World Trade Organization denied an EU request to harmonize the content and timing of the U.S. case against alleged EU subsidies to Airbus and EU case against alleged U.S. subsidies to Boeing.

The EU sought this request to possibly delay the WTO ruling and to possibly force the US into negotiating a settlement. But as the article states:

Within days of making the request, the panel reviewing the U.S. case (DS316) denied it, sources said, giving some credence to the notion it may deliver its interim ruling in the case by June. The EU case (DS353) is on a slower track than the other case, with both sides submitting comments on answers to panel questions earlier this week. The DS316 panel saw the last filings by the parties in March.

The EU argument to the WTO included claims that the parties would be unable to keep the interim rulings confidential in the time between the two rulings. "Parts of the case are very similar," one source argued.The U.S. responded to the brief, arguing that WTO law permits harmonization of cases brought by multiple members against the same alleged WTO violation, but does not prescribe the type of harmonization sought by the EU.

While one source close to the EU sees a DS316 ruling in September, another source said the swift response on the EU request was a sign the DS316 panel is approaching a decision by June.

Many eyes are on the GAO ruling on the tanker competition due by June 19th, but the WTO case ruling may have an even greater impact. Even a partial victory for the U.S. in the first case could spell the end of the $35 billion refueling tanker contract awarded by the U.S. Air Force to EADS and Northrop Grumman over Boeing.

It is an election year and very few in Congress will want to be seen as aiding a foreign company that undermines free trade to the detriment of US companies and their workers, especially when the economy is faltering.

The EADS team has been successful to date in its efforts to spin the tanker controversy as simple protectionism vs. free markets. If the WTO determines that Airbus has broken the rules of free trade, EADS's strongest point now becomes their weakest. Expect the public backlash to be justifiably merciless.

TAnchorman Uncovers Start of Tanker War

For today's post we will simply refer you to TAnchorman's Blog where he has an exclusive on the e-mail that started the tanker controversy.

We would like to thank TAnchorman and all of News Team 4 for their tireless efforts to bring us the often humorous behind-the-scenes tanker contract reporting.

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.