News Releases

Murray Highlights Illegal, Market Distorting Airbus Launch Aid in Letter to Gates on Tanker Competition

Sep 15 2009

Senator Murray expresses serious concerns about illegal launch aid; Calls on Secretary Gates to not penalize our domestic industry

(Washington, D.C.) – Today, U.S Senator Patty Murray (D-WA) sent a letter to U.S Secretary of Defense Robert Gates regarding the World Trade Organization’s (WTO) interim ruling that found that the EU has provided illegal subsidies to the European aerospace company Airbus. In the letter, Senator Murray asks Gates a number of questions about how he plans on handling the aerial refueling tanker competition in light of the WTO’s findings. The Department of Defense plans to move forward with a draft Request for Proposal for the next generation tankers in the coming weeks.

Excerpts from Senator Murray’s letter to Secretary Gates:

“Reports of the WTO interim ruling on this case indicate the WTO agrees that the way the EU has provided launch aid to current Airbus platforms is a violation of international trade rules.   These illegal, market distorting subsidies have caused harm to a domestic aircraft manufacturer, the Boeing Company.”

“I have serious concerns, however, that previous actions taken by the EU have tipped the scales in favor of one competitor before the competition has begun by giving Airbus illegal launch aid to subsidize its research and development of its platforms, which includes the expected offering for the KC-X.”

“I want to ensure the actions of the Department of Defense do not unintentionally penalize our domestic industry which has already lost market share, or for that matter, further injure our American workforce who has suffered job loss in this critical economic sector. It is my expectation that the USTR has briefed you in detail on this case and you are taking the interim ruling and the expected final ruling into consideration.”

“How will the WTO ruling that the practice of launch aid to one expected competitor has harmed another expected competitor be taken into account?”

“Will the playing field be leveled so that the Air Force purchases the aircraft that not only best meets its requirements and is also a wise use of U.S. tax payer dollars now and into the future of the KC-X procurement?”

Yesterday, Senator Murray sent a letter to President Barack Obama urging him to take the strongest possible actions to prevent European governments from providing Airbus with additional illegal, trade-distorting subsidies.  Murray also called on President Obama to take the strongest possible actions allowed under the WTO against the European Union to ensure a level playing field for the American aerospace industry and its workers.

On September 4, Senator Murray issued a statement urging the EU and Airbus to heed the WTO’s ruling and to immediately put a stop to plans to provide any further illegal launch aid.

In 2005, Senator Murray led efforts to pressure the Bush Administration to initiate a WTO case against the EU and Airbus. Murray also helped pass a unanimous Senate Resolution that denounced the harmful and market distorting subsidies.

The full text of the letter follows:

September 15, 2009

The Honorable Robert Gates
Secretary of Defense
U.S. Department of Defense
1000 Defense Pentagon
Washington, DC 20301-1000

Dear Secretary Gates:

As you are aware, in 2004 the United States Trade Representative (USTR) filed a trade case with the World Trade Organization (WTO) challenging the European Union (EU) for its practice of providing subsidies to its commercial aircraft manufacturer Airbus, a subsidiary of the European Aeronautic Defense and Space Company (EADS).  Of particular concern are the subsidies known as launch aid which the USTR stated is significant “because it shifts the commercial risk of airplane development from Airbus to the European treasuries.”  Clearly, the United States government strongly believes our domestic aerospace industry is at a competitive disadvantage if this practice continues. 

Reports of the WTO interim ruling on this case indicate the WTO agrees that the way the EU has provided launch aid to current Airbus platforms is a violation of international trade rules.  These illegal, market distorting subsidies have caused harm to a domestic aircraft manufacturer, the Boeing Company.  This case should be important to the Department of Defense (DoD) in relation to the upcoming competition for the KC-X aerial refueling tanker.  As you know, these two companies produce the only commercial airplanes upon which our next tanker will be built.

Mr. Secretary, you have been consistent in your determination to select the KC-X from a fair and transparent competition and I support that approach.  You and I also agree that the competition should produce a sole source contract with a winner take all result.  I have serious concerns, however, that previous actions taken by the EU have tipped the scales in favor of one competitor before the competition has begun by giving Airbus illegal launch aid to subsidize its research and development of its platforms, which includes the expected offering for the KC-X.

As we have discussed previously I am concerned about the health of our domestic aerospace industry.  Much is at stake in this competition and I want to ensure the actions of the DoD do not unintentionally penalize our domestic industry which has already lost market share, or for that matter, further injure our American workforce who has suffered job loss in this critical economic sector.  It is my expectation that the USTR has briefed you in detail on this case and you are taking the interim ruling and the expected final ruling into consideration. 

In the coming weeks, the draft Request for Proposal (RFP) is expected to be made available to the U.S. Congress for comment.  Moreover, I anticipate that you will take a position regarding this case and the implications on the KC-X competition.  In order to thoughtfully evaluate the draft RFP, more information from your office is required.  Specifically, how will the WTO ruling that the practice of launch aid to one expected competitor has harmed another expected competitor be taken into account?  Will the playing field be leveled so that the Air Force purchases the aircraft that not only best meets its requirements and is also a wise use of U.S. taxpayer dollars now and into the future of the KC-X procurement? This is a complicated issue and your thoughtful explanation of your perspective and reasoning on your decision is critical at this stage of the process.

The recapitalization of the United States Air Force midair aerial refueling tanker fleet is the highest priority acquisition for the United States Air Force.  It is imperative that the selection of the KC-X move forward swiftly with a fair and transparent process.  I look forward to your response and to further discussion of the acquisition process.

Sincerely,

Patty Murray
United States Senator