*Bill would force Pentagon to weigh illegal subsidies
*Backers say it would apply to all companies
*Obama administration has no immediate comment
By Jim Wolf
WASHINGTON, May 13 (Reuters) - Identical bills that could help Boeing Co (BA.N) best Europe’s EADS EAD.PA for a potential $50 billion U.S. Air Force contract were introduced in the U.S. House of Representatives and Senate Thursday.
The legislation would force the U.S. Defense Department to adjust bids on its major purchases by the amount of any illegal subsidy under a final World Trade Organization ruling.
In a final ruling, a WTO panel found in March that Airbus, a Toulouse, France-based EADS unit, benefited from billions of dollars of European government subsidies to develop its A330 wide-body aircraft, among other commercial planes.
EADS is pitting an Airbus A330 derivative against a modified Boeing 767 in a rematch to sell an initial 179 mid-air refueling aircraft to the Air Force. Bids are due July 9; the Pentagon has told the bidders to be ready to start work by Nov. 12 if chosen for the deal.
The measure would apply to all companies — including to Boeing, if it were found by the WTO to have received illegal subsidies, said Senator Sam Brownback, a Kansas Republican who introduced it in the Senate with four co-sponsors.
The goal of the “Fair Defense Competition Act” is to make sure “that illegal subsidies do not distort the defense procurement process,” he told reporters.
A WTO panel is expected to make an interim ruling by the end of next month on European Union counter-complaints that Boeing has unfairly benefited from U.S. federal, state and local subsidies. That would not constitute a final WTO determination under the measure.
Rep. Todd Tiahrt, who put in the bill in the House with more than 20 co-sponsors, estimated the Defense Department would have to add about $5 million per plane to an EADS bid under the legislation if it became law in time.
Tiahrt is also a Republican from Kansas, where Boeing would do final assembly and militarization of its tanker. He and Brownback said the legislation complies with WTO rules in that it is non-discriminatory.
Brownback and Tiahrt said they would attach their bills to an annual defense authorization act or another measure aimed at speeding them through Congress quickly enough to affect the tanker competition.
It would require the Pentagon to take illegal subsidies to Airbus into account, “thus leveling the playing field and making the tanker competition fairer,” Tiahrt said in a statement.
“We need an American tanker built by an American company with American workers. Even more so, we should never outsource a vital national security component,” he added.
The Defense Department press secretary did not immediately respond to a request for comment on the bill, nor did the U.S. Trade Representative’s office.
Chicago-based Boeing, concerned that it might be underbid, said Wednesday it was deeply concerned “about the ability of a heavily subsidized EADS to accept levels of financial risk that a commercial company such as Boeing cannot.”
EADS’ North American arm said: “The Boeing bill is one more attempt to avoid competing on the merits of the tanker.”
“Unlike EADS North America, Boeing doesn’t have a tanker that meets requirements, it faces tremendous technical risk in producing one and is therefore determined to take away the warfighter’s right to choose,” Guy Hicks, a company spokesman, said in an email.
EADS partnered with Northrop Grumman Corp (NOC.N) in a winning bid for the tanker deal in 2008, only to have it overturned after Boeing successfully protested on procedural grounds to U.S. congressional auditors, leading to the rematch. (Reporting by Jim Wolf, editing by Gerald E. McCormick)