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So Both Sides in KC-X Got Subsidies, Now What?

by John Reed on January 31, 2011

The World Trade Organization has apparently issued a final ruling saying that Boeing did indeed recieve unfair — not illegal — subsidies that benefit the development of its aircraft fleet.

According to the New York Times, the WTO ruled, in a confidential report, that Boeing received about $5 billion in subsidies. The WTO focused on about $24 billion in R & D contracts Boeing receives from the military and NASA along with Washington state tax breaks that European governments say gave the Chicago-based company a technological and financial edge.

Last summer, the WTO found that EADS had received billions in unfair subsidies as well, something that was key in allowing EADS to eat up large amounts of Boeing’s market share around the globe, according to the U.S. trade representative.

This comes as the U.S. Senate is once again taking up the so called, “Level-Field” bill, that will require the Pentagon to factor in the impact of the subsidies in its evaluation of Boeing’s KC-767-based and EADS A330 MRTT-based offerings in the $35 billion KC-X contest.

Many who have watched KC-X closely didn’t think the proposed law would have a chance of getting passed before the Air Force choses its new tanker (something that may happen in the coming weeks).

A similar bill was first introduced in late Spring of last year when it appeared the service would award a contract sometime between September and mid-November.

Oh how things have changed. The Air Force has repeatedly delayed the contract award so that it can be as confident as possible that this round of the contest has been run by the book.

Remember, in 2008, Boeing successfully protested the service’s award of KC-X to EADS, claiming that the requirements laid out in the RfP for that contest weren’t clear enough. That came after the whole Darleen Druyun tanker leasing affair.

Hopefully this bill won’t delay the contest any longer. The KC-135 is great, but as we all know, the oldest are 50 years old and desperately need replacement.  So both sides received subsidies. Fine, lets just move on with the contest.

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