The renewed effort by Boeing and its supporters to focus on the WTO ruling against Airbus on illegal subsidies in the KC-X competition (see preceding post) is playing with fire.
The hyperbole by Washington State’s Members of Congress is particularly shrill.
The Reuters article linked in the preceding post reports some key issues that need to be remembered: there remains a pending ruling on the EU complaint that Boeing received illegal subsidies; both sides can appeal; and if the US unilaterally imposes penalties, which a Congressional law mandating consideration of the ruling would amount to, this violated WTO rules.
The effort by Washington State’s delegation and Sen. Sam Brownback of Kansas, where Boeing’s KC-767s would be modified, to introduce and pass a law requiring consideration of the WTO action probably would not get passed. EADS backers Sens. Richard Shelby and Jeff Sessions (R-EADS/AL) probably would filibuster and we don’t think there would be a coalition large enough to invoke cloture (break the filibuster).
Even if cloture failed, we’re not entirely sure President Obama wouldn’t veto the bill. Obama places a lot of stock in Defense Secretary Robert Gates, and we learned that Defense asked EADS to bid in order to provide competition. Gates may well oppose this Congressional meddling. And he is no apparent friend of Boeing. Gates said he would urge Obama to veto the entire Defense appropriation bill if Congress adds back in funding for the Boeing C-17, a program Gates is trying once again to end with the current orders.
This brings us to another point in addition to the pending WTO ruling on Boeing subsidies. Boeing and its supporters risk angering Gates and the Air Force. It would be very easy for DOD to cut current and future Boeing programs or award contracts to Boeing competitors in payback for this bungled meddling in the tanker procurement. Boeing got hit hard in the FY2010 budget and DOD is working on the FY2011 budget now (the fiscal year begins October 1). And even if Boeing survived the FY2011 budget, there is FY2012 and FY2013. Gates, who originally intended to stay on for one year, shows no sign of retiring.
The Boeing effort on subsidies, backed by its Congressional supporters, could very well backfire on other procurement programs.
And then there is the subsidy issue. Although Boeing CEO Jim McNerney downplays the potential adverse ruling to Boeing (see the previous post), Airbus is convinced that the WTO ruling will be against Boeing and will involve larger amounts than Airbus was tagged off base with.
If Airbus is correct, it will be embarrasing to Boeing and its supporters, who have said Boeing is virtuous on this issue, or that any violation will “pale” to the Airbus launch aid. But this is hardly the point: illegal is illegal, and for those who want to disqualify Airbus or compute the penalties, remember the old saying: Be careful what you ask for.