U.S. to take WTO out of tanker contest

By Andrea Shalal-Esa and Jim Wolf

WASHINGTON (Reuters) - The U.S. Air Force will exempt a trade dispute between the European Union and the United States from a multibillion-dollar aerial tanker competition, a top Air Force acquisition official said on Monday.

"We're going to hold them harmless from any future WTO determination. Whatever the outcome is, it will be neutral," Ken Miller, special assistant to Air Force Secretary Michael Wynne, told the Reuters Aerospace & Defense Summit.

Boeing Co. (BA.N: Quote, Profile, Research, Stock Buzz), the only U.S.-based airliner maker, is vying against a team of Northrop Grumman Corp. (NOC.N: Quote, Profile, Research, Stock Buzz) and Europe's EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), the majority owner of Airbus, which had argued that the World Trade Organization battle over government subsidies had no place in the competition.

Some analysts had suggested that Boeing, based in Chicago, could benefit from any Air Force decision to assign significant weight to WTO issues.

Boeing and Airbus have accused each other of improperly benefiting from government subsidies as they compete for commercial sales.

Miller also said the Air Force would revert to a more traditional treatment of the Berry Amendment, which requires specialty metals like titanium used in weapons programs to be U.S.-produced, as well as of U.S. export licensing regulations.

"We were being very innovative at first," Miller said, noting that under the revised draft request for proposals, the Air Force would basically require the competitors to comply with existing law governing those issues.

He acknowledged that the Air Force was "plowing ground that we are not very familiar with" by including the trade issues in its communications with industry, but said the overall goal was to get more information and run a "fair and open competition."  Continued...