Tanker Deadline Arrives With Key Concern Unresolved

Issue Brief

Sometime in the next two weeks, the Boeing Company and European aerospace giant EADS must submit their proposals for the next round of competition in the Air Force tanker solicitation. The deadline is July 9th, halfway between America’s July 4th Independence Day and France’s July 14th Bastille Day, so get ready for some heavy-handed advertising from both sides about the true meaning of freedom.

The tanker contest has become so politicized that it is easy to lose sight of what is at stake. When the Air Force began its efforts to replace aging KC-135 tankers a decade ago, the planes — which make up four-fifths of the aerial refueling fleet — already averaged 40 years of age. Now they average 50 years. There is an urgent need to begin replacing them, because no one knows for sure how long they will be safe to fly, and it will take decades to buy all the new planes needed.

But that is no longer the most important concern surrounding the competition, because as the tanker drama has played out over the last ten years, the U.S. economy has undergone a steady decline due in no small part to its waning trade competitiveness. When the decade began, America accounted for roughly a third of global economic output and a third of global military spending. Today, it accounts for a quarter of global economic output and half of global military spending. Obviously, the growing disparity between America’s economic and military power cannot be sustained indefinitely.

Pentagon policymakers apparently do not grasp what America’s economic decline means for the future of its defense posture. They are planning on the assumption that military spending will be stable in the years ahead, even though the nation is growing poorer every day. In fact, the policymakers are contributing to the economic trends that spell doom for their defense plans by sponsoring a tanker competition that may send billions of dollars to one of the key culprits behind America’s trade deficit.

That culprit is Airbus, the commercial-transport arm of EADS that proposes to provide the aircraft for the company’s tanker bid. After years of deliberation, the world’s preeminent trade body ruled last year that Airbus has employed a predatory business model to undermine America’s role in the global airliner market. Two of the three U.S. producers in the market when Airbus first appeared have been forced out, and the sole survivor, Boeing, has seen its market share cut in half. The chief factor causing that loss has been low-cost or no-cost loans that European governments euphemistically refer to as “launch aid.”

According to the World Trade Organization, none of the planes Airbus currently markets, including the A330 being proposed as an Air Force tanker, ever would have been built without these illegal subsidies. But the defense department says it doesn’t want to consider the role such subsidies played in the A330, even though the EADS tanker bid is predicated on competitively pricing a much bigger plane than Boeing is offering that should cost tens of millions more dollars per aircraft to build and operate. The fact EADS has been allowed into the tanker competition and may not have to account for its use of prohibited trade subsidies suggests that the Obama Administration’s export goals are disconnected from its military procurement policies. It also shows that the Pentagon is contributing to the economic decline that will eventually unravel our global security posture.