Obama urged to factor WTO issue into tanker contest

By Andrea Shalal-Esa

WASHINGTON (Reuters) - Forty U.S. lawmakers backing Boeing Co urged President Barack Obama on Monday to ensure a new Air Force competition for aerial refueling planes takes account of alleged illegal subsidies received by Airbus.

Boeing is competing against a team made up of Northrop Grumman Corp and Airbus parent EADS to build 179 refueling tankers for the Air Force, the first of three batches that are valued at around $100 billion.

The lawmakers, who represent states where Boeing has large manufacturing facilities, said it would be unfair not to factor in a preliminary finding by the World Trade Organization that Airbus benefited from illegal subsidies for various airplanes, including the A330 on which the Northrop-EADS tanker is based.

They urged Obama to use his authority under U.S. law and trade agreements to support U.S. workers and ensure the tanker competition took the trade issue into account.

The Air Force's decision not to consider any WTO rulings in the tanker competition "totally ignores the clear evidence that illegal European subsidization is injurious to both our economy and our national security industrial base," said the letter.

To ensure a "level playing field," the price formula "must reflect in some way the amount of illegal subsidies that aided the development of the Airbus airframe and may thereby allow EADS, Airbus' parent company, to submit a reduced price bid that would not otherwise be economically viable," it said.

"Airbus should have been disqualified from competing for the tanker contract from the start," said Rep. Todd Tiahrt, a Kansas Republican. "If the Air Force insists on allowing them to compete, then they should ensure a fair and level playing field by taking into account illegal Airbus subsidies."

Rep. Jay Inslee, a Democrat from Washington, said it was illogical for the U.S. government to be pursuing a trade case against the European Union for the subsidies while the Air Force "ignores the same to the detriment of American workers."

Northrop spokesman Randy Belote in response said his company was focused on getting U.S. troops a new tanker and creating 48,000 new jobs, while Boeing supporters "continue to raise this irrelevant issue and won't be satisfied until Boeing is awarded a sole-source tanker contract."

He said the WTO issue was an ongoing dispute between commercial aircraft builders, and the Defense Department had been clear that it was not relevant to the tanker program.

Northrop and its backers are unhappy with other aspects of the Air Force's draft rules for the competition and company officials have left open the possibility of boycotting the competition.

Northrop officials are considering possible legal action against the Air Force's disclosure of confidential pricing data given to Boeing after the last competition.

Northrop and EADS won a projected $35 billion contract in February 2008, but the Pentagon canceled the deal in September 2008 after government auditors upheld a Boeing protest.

(Reporting by Andrea Shalal-Esa; Editing by Andre Grenon, Phil Berlowitz)