For Immediate Release

September 24, 2008

Defense Authorization Bill Language
Will Assure Review of Subsidies

WASHINGTON, D.C. – Specific language contained in the final version of the Defense Authorization bill approved today by the House of Representatives will assure that the next competition for the Air Force’s refueling tankers will take into account launch subsidies provided to Airbus aircraft by the consortium’s European partners, U.S. Rep. Norm Dicks said Wednesday.

The bill contains a provision that requires the Defense Secretary to conduct a formal review of the impact of subsidies on the tanker replacement program following any determination rendered by the World Trade Organization (WTO) on pending complaints. Most relevant is the impending WTO response to the U.S. government’s charge that the European governments have acted contrary to WTO agreements in providing unfair launch subsidies that have diminished American aerospace jobs, the congressman said. 

The congressman said that the subsidies gave an unfair advantage to the proposal submitted by the Airbus/Northrop Grumman alliance in the competition to replace the Pentagon’s fleet of KC-135 aerial refueling tankers.  The competition was halted by the Defense Secretary earlier this month after a Government Accountability Office review uncovered numerous unfair aspects of the original contract selection process.  A renewed competition is expected to be launched by the new administration next year, Rep. Dicks noted, most likely after a WTO ruling on the subsidy complaint.

[See a PDF summary of the U.S. complaint from the office of the United States Trade Representative: http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settlement/WTO/Dispute_Settlement_Listings/asset_upload_file9_13177.pdf ]

Following is the language contained in the FY 2009 Defense Authorization Bill – Final Version – approved today by the House of Representatives:

SEC. 886. REVIEW OF IMPACT OF COVERED SUBSIDIES ON ACQUISITION OF KC-45 AIRCRAFT.

(a) REVIEW OF COVERED SUBSIDIES REQUIRED.—
The Secretary of Defense, not later than 10 days after a ruling by the World Trade Organization that the United States, the European Union, or any political entity within the United States or the European Union, has provided a covered subsidy to a manufacturer of large commercial aircraft, shall begin a review, as described in subsection (b), of the impact of such covered subsidy on the source selection for the KC-45 Aerial Refueling Aircraft Program.

(b) PERFORMANCE OF THE REVIEW.—In performing the review required by subsection (a), the Secretary of Defense shall consult with experts within the Department of Defense, the Office of Management and Budget, the Office of the United States Trade Representative, and other agencies and offices of the Federal Government, and with such other experts outside the Government as the Secretary considers appropriate, on the potential impact of a covered subsidy on the source selection process for the KC-45 Aerial Refueling Aircraft Program.

(c) COMPLETION OF REVIEW.—The Secretary of Defense shall complete the review required by subsection (a) not later than 90 days after the World Trade Organization has completed ruling on all cases involving the allegation of a covered subsidy provided to a manufacturer of large commercial aircraft pending at the World Trade Organization as of the date of the enactment of this Act.
(d) REPORT ON REVIEW.—Not later than 30 days after the completion of the review required by subsection (a), the Secretary of Defense shall provide a report to the congressional defense committees on the findings of the review, together with any recommendations the Secretary considers appropriate.

(e) DEFINITIONS.—In this section:
(1) The term ‘‘covered subsidy’’ means a subsidy found to constitute a violation of the Agreement on Subsidies and Countervailing Measures.
(2) The term ‘‘Agreement on Subsidies and Countervailing Measures’’ means the agreement described in section 101(d)(12) of the Uruguay Round Agreements Act (19 U.S.C. 3511(d)(12)).
(3) The term ‘‘source selection’’, with respect to a program of the Department of Defense, means the selection, through the use of competitive procedures or such other procurement procedures as may be applicable, of a contractor to perform a contract to carry out the program.

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