European Institute

In Europe, Boeing Win Seen As New Sign of Pentagon "Buy-American" Bias

Northrop Grumman’s withdrawal from the race to sell a new in-flight refueling tanker to the U.S. Air Force is a huge blow to the hopes of its partner in the venture, EADS, the European aircraft consortium. Its design -- based on a modified Airbus – was initially awarded the contract for the $40 billion deal. But Boeing got the Pentagon to re-run the competition with new specifications, which the U.S.-European team saw as tilted unfairly to Boeing.

The collapse of the joint bid will trigger political fall-out in Europe, prompting officials and the media there to castigate “buy-American” protectionism. EADS’ manufacturing raised political debate in the U.S. about jobs: EADS would have given jobs to its U.S. sub-contractors, but Boeing has major manufacturing facilities in the U.S. Since the decision to quit came from the U.S. partner in the joint venture, there will be questions about the Pentagon’s handling of the controversial venture.

But the outcry in Europe, even echoed by some U.S. voices, is unlikely to significantly worsen the already-lame state of transatlantic defense-industrial cooperation. Reactions among European arms manufacturers was characterized this way by an industry insider: “they felt that their plane was better and lost out due to unfair calls by the referee, but they felt no ‘entitlement’ to such a big contract in such hard times,” according to a European industry analyst. “They will be back for the next contract, a reconnaissance helicopter,” he said, asking not to be identified for his candid view on the sensitive subject.

Finally ending a multi-year contest over the 179-plane contract, Northrop announced its decision March 8, and EADS said that it would not pursue the bid on its own. Now the contract seems set to go this team’s rival, Boeing, which emerged as a sole contender.

The outcome – leaving Boeing in an unchallenged position as the dominant supplier to the Air Force -- runs counter to the Obama administration’s professed goal of promoting competition in Pentagon procurement as a way of cutting costs in the defense budget. Many analysts say that Boeing will now be able to charge a higher price because it is left as the only bidder on the contract.

Northrop said it would not lodge a formal protest against the Pentagon’s handling of the process, a move that will stifle most of the potential domestic political protests about the loss of prospective jobs in southern States – jobs that will now be mainly generated around Boeing’s operations around Washington State.

In Europe, however, the result is also liable to create obstacles for Pentagon hopes of seeing its new multi-role fighter-bomber, the F-35, become a standard warplane for U.S. allies.

In the hours after the Northrop announcement, European governments immediately voiced anger at what they see as Pentagon bias blocking the emergence of a “two-way street” in the trans-Atlantic arms market. The EU Commission warned Washington of negative consequences for future European defense buys from the U.S. if evidence emerges that the handling of the deal favored a U.S. company. In an indirect rebuke to Northrop Grumman, the American partner of EADS, the Commission said it was “highly regrettable” that their joint bid had been withdrawn.

The value of the tanker contract could ultimately amount to $100 billion as the in-flight refueling fleet – the first new one in America since the Eisenhower administration – grows in size over coming decades. As the New York Times reported the story (on an inside page), “the U.S. effort to obtain new tankers has been going on for nearly a decade, and it has come to represent much of what lawmakers say has gone wrong in military contracting. The Air Force’s first effort collapsed in 2004 amid corruption charges involving a proposed leasing deal with Boeing. Northrop Grumman and EADS then won a competition in 2008, only to have the award overturned after Boeing protested that the evaluations had been unfair.

“The Air Force began its third effort last September, and Pentagon officials promised that the rules would be clear enough to steer the contest ‘straight down the middle.’ But analysts said the service’s numerical scoring system seemed to favor Boeing’s plans to offer a smaller plane, which could save billions in fuel costs over the next 40 years. What had been the strength of the previous Northrop and EADS bid — a plane that could carry more fuel and cargo than the Air Force had sought — became a liability as the competition turned into a shootout over which bidder could offer the lower price.

“Northrop’s chief executive, Wesley G. Bush, said in a statement on Monday that the request for bids ‘clearly favors’ Boeing’s smaller plane, even though Northrop felt that its larger plane represented ‘the most capable tanker for the warfighter.’ ”

Mr. Bush, who became the company’s chief in January, has placed more emphasis on improving Northrop’s profit margins than on increasing revenue. His decision on the tanker bid will not endear his company to potential European partners on future projects liable to provide controversial at the Pentagon.

Global Poll Offers New Proof of Web’s Widening, Deepening Societal Role

Nearly 80 percent of people around the world think that access to the internet should be a “fundamental right,” according to a global poll conducted by the BBC World Service.  Covering 26 countries, it surveyed 27,000 adults, including both internet users and people not using the web. The survey showed that str(79 percent) answered “yes” to a question on people’s entitlement to internet access  – a view implying both a demand for the expansion of high-speed broadband telecommunications infrastructure and also opposition to unreasonable charges or censorship on users.

Coming on the eve of an important broadband report by the Federal Communications Commission in the U.S., the poll data confirm the growing impact of internet service on all social and professional categories in countries around the world. And the new findings underscore trends explained by telecom regulators from the U.S. and Britain to European Institute seminar in December, reported  by “European Affairs.”

Countries where very, very high proportions of the population said that they  regarded internet access as a fundamental right included South Korea (96 per cent),  Mexico (94 per cent) and China (87 percent ) – all countries where the internet often serves as a major alternative to other media. The percentages were less high in Europe and the U.S., but they were still substantial. In the U.S., the poll found, 51 percent of respondents view internet access as a fundamental right. In Germany, the corresponding number was 51 per cent,  France 40 per cent, and Britain 56%.

Finland is the only country to date that has mandated broadband access to its citizens as a matter of right.  In June of this year, every Finn will have the guaranteed right to a one megabit-per-second connection to the internet – and the speed will rise to 100 mbps by 2015.

By Bill Marmon

Once again the US Congress is mystifying the world and seriously muddying US-Turkey relations by trying to pass a resolution declaring that it was “genocide” when over a million Armenians were massacred in 1915 by Ottoman Turks. The proposed U.S. measure was passed out of the House Foreign Affairs Committee in early March.

In Practice, Leaders’ Refusal to Grapple with Immigration Breeds “Dark Tribalism”

Almost in a fit of absent-mindedness, major European countries have become magnets for immigration. Between 1990 and 2009, 26 million migrants arrived in Europe -- compared to 20 million to America – a country that (unlike Europe) naturally thinks of itself as a land of immigrants.

But More Rounds Still Liable To Come From PIIGS

Greece seems set to tough out the financial tempest unleashed on the country by its huge fiscal over-runs and sovereign debt. That prospect could help relieve pressures on other troubled economies in euro zone, at least temporarily.

The break-through for Greece came this week when EU President, Herman Van Rompuy announced that "Euro area member states will take determined and co-ordinated action if needed to safeguard stability in the euro area as a whole.” In other words, the euro zone has not cracked in its worst-ever crisis – at least, not for now.