WTO Report States Boeing Received Illegal Aid Effect on KC-X Undetermined

In the latest round of the back-and-forth at the World Trade Organization (WTO) between the United States and the European Union (EU) over airline development and sales the report on Boeing (BA) was leaked to the press and found that the Chicago based company received illegal subsidies from the U.S. Government and four states. In September this finding was also leaked as a preliminary to the completion of the final report.

Earlier last year the WTO had ruled in favor of the U.S. in their complaint about launch aid for EADS’ (EADS:P) Airbus products. Since that time there have been those in Congress trying to rewrite acquisition law and regulations so that the illegal aid to EADS would be taken into account in the upcoming KC-X new aerial tanker decision on which Boeing and EADS submitted bids for the initial $39 billion contract.

The findings by the WTO that both sides provided illegal aid that caused unfair competition to the other should lead to negotiations to settle the matter. The normal WTO punishment of having the losing company pay back the economic affect on the other will probably not happen due to the large amounts involved.

The two decisions may aid the Pentagon in deciding the KC-X contract as it possibly removes the issue from the competition and might limit some chances for a protest by the loser. The Pentagon has made clear for months that it cannot take into account the WTO rulings in their source selection and evaluation hence the attempts by Boeing’s supporters in the legislative branch to change the rules.

Now with both bidders confirmed to have benefited from illegal subsidies of some sort it hopefully will remove the issue and allow a competition based on merits and meeting the requirements as defined by the Air Force and Defense Department.

3 Comments »

  1. Sal Said,

    February 1, 2011 @ 8:50 am

    Gee, you guys didn’t forget to publish this but you did forget to publish the story of Australia’s KC-30A damaging not only itself, but a Portuguese F-16, when its Advanced Ariel Refueling Boom, fell off during testing last week. Hummm… Why is that Defense Procurement?

  2. Dagpotter Said,

    February 1, 2011 @ 4:37 pm

    Thank you for reading. I have tried to strike a balance with the WTO. I have read reports about the certification and testing issues with the KC-30 and certainly that may have an affect on the competition.

  3. Sal Said,

    February 3, 2011 @ 12:51 pm

    There’s something wrong with one division of government launching international trade litigation while another branch conscientiously ignores those same facts alleged by the former division. I wonder if the Europeans also engage in the same self destructive practices?

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