President Obama correctly has made corporate accountability a touchstone of his administration, demanding stricter rules for unscrupulous Wall Street firms. But while the administration has taken a tough line on Wall Street, it will need to do the same to counter heavily subsidized corporations overseas that threaten to displace massive amounts of American jobs and tax dollars.
French-based aerospace manufacturer Airbus has a track record of using $15 billion in illegal subsidies to win projects costing tens of thousands of American manufacturing jobs. Primed for more business, the French firm is now attempting to convince the Pentagon to overlook its previous history of illegal subsidies in order to nab a prized American defense contract, a $35 billion job building the next fleet of Air Force refueling tankers.
Fortuitously for Airbus, it is proposing to sell the Pentagon a tanker that was developed using $5 billion of the same illegal subsidies that already have hobbled America's aerospace industry. Should Airbus win the contract, it could mean more difficulties for American aerospace engineering, including up to 50,000 lost jobs, about 4,000 of which are in Kansas.
Obama must be ready to defend American workers and our industrial base.
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In 2006, the Bush administration's trade representative sued the European Union through the World Trade Organization over the Airbus subsidies. The case passed on to Obama's U.S. trade representative, Ron Kirk, who skillfully won a victory for American manufacturers. The WTO declared the Airbus subsidies illegal, and directed the United States to take appropriate measures to undo the harm they caused.
Moving forward, the first step toward dealing with Airbus' WTO violations is to address its cheating in the tanker competition. Pentagon officials should discount $5 billion in illegal subsidies Airbus is using to win the tanker contract. To lawyers, this is known as a kind of "equitable relief." It stands for a simple proposition — that the U.S. government does not permit a foreign contractor to undercut an American competitor with illegal subsidies. Rather, U.S. agencies will work to ensure a level playing field and fair competition.
But the Pentagon has yet to adjust the draft tanker requirements to discount the value of the illegal subsidies. That's troubling. The quality of the Air Force's new fleet of refueling aircraft will determine U.S. air mobility for the next 50 years. Special care should be paid to see that fair requirements end up choosing the best tanker at the best price.
Airbus is hoping that it can use its illegal subsidies to open a foothold in the U.S. defense market, just as it employed similar subsidies to win contracts that would have supported roughly 65,000 jobs from U.S. firms in the commercial airline market. Airbus could now uproot more American jobs in Washington state, Kansas, California, Connecticut and Texas. It's a proven tactic that will work again if the Obama administration doesn't use the recent WTO decision to take effective action.
If Airbus succeeds in using illegal subsidies to win a prized U.S. defense contract and outsource tens of thousands of American jobs, it will make a mockery of our procurement system and undermine the level playing field that we seek in international competition. Administration officials should send a clear message to subsidized offshore companies: You cannot cheat U.S. and international rules and steal American jobs in the process.