The European media are in an uproar today following Northrop Grumman’s decision to pull out of the Air Force’s tanker competition. Much of the commentary accepts at face value the charge made by Northrop and European aerospace conglomerate EADS that the solicitation favored Boeing, and then jumps to the erroneous conclusion that Washington is practicing a form of protectionism.
In Europe’s defense, it is hard to explain how the modified Airbus commercial transport that Northrop offered in the first round of tanker competition could win so handily, and then not be a viable contender at all in the second round. However, critics have conveniently overlooked the fact that the Airbus plane won the first round because the government conducted an incompetent, unprofessional source selection. That’s why a second round was required — to fix all the problems arising out of the first round.
Anybody who thinks that Northrop’s decision not to bid was the result of protectionism favoring a more American airplane hasn’t taken a close look at the solicitation. The standards of merit for offerors are spelled out in excruciating detail, and there is not the slightest hint of bias. The Northrop offering could easily have satisfied all 372 mandatory performance requirements, and Air Force officials refused to even read the recent decision by the World Trade Organization challenging European subsidies for Airbus commercial planes such as the A330 Northrop was pitching.
What really went wrong for Northrop and Airbus in the latest solicitation is that the European company didn’t have a plane in its current commercial lineup that was price-competitive with the Boeing 767. Even with subsidies, the Airbus A330 Northrop was offering would have been so much more costly to build and operate that it could not have matched Boeing on price. Northrop’s strategy for winning always depended in part on convincing the Air Force to do the aerial refueling mission a new way, but once the Air Force decided to seek a simple replacement for its existing Eisenhower-era tankers, the bigger Airbus plane was doomed. In essence, it needed to get extra credit for capabilities the service didn’t want to prevail.
Having said all that, it doesn’t take a genius to see where European governments will try to go with their erroneous charges of U.S. protectionism. They will say that if America can protect its producers then they should be able to protect theirs too, and Europe will then try to set aside the WTO ruling on airliner subsidies. That would be an utter travesty if it happened, because Europe has used such subsidies, particularly launch aid, to deprive America of literally hundreds of billions of dollars in export earnings. If Europe tries to go that route, the Obama Administration needs to signal in no uncertain terms that America will no longer accept unfair, predatory trade practices that harm its economy — no matter what pretext the perpetrators dream up.
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