Smart Bombs: Politics refueled

The Air Force’s decision to select Northrop Grumman-EADS over Boeing to supply the next generation of aerial refueling tankers has touched off a fierce battle in Congress, as lawmakers representing Alabama and Mississippi, which stands to gain jobs, face off against those from the Boeing-friendly states of Washington, Kansas and Illinois.

If you believe that national defense is the chief reason to award such contracts, then the only question that matters is whether the Air Force made the right decision when it picked this aircraft for the mission.

The rest is noise, and, boy, is it noisy.

Because Airbus, based in France, will get much of the work, Boeing, its machinists union and supportive politicians have loudly complained about jobs being sent overseas. Under the Northrop deal, 60 percent of the aircraft will be built in the United States. Under Boeing, it would’ve been 85 percent.

U.S. Rep. Rahm Emanuel, a Democrat from Illinois, where Boeing is headquartered, brought presidential politics into play: “We are sending the jobs overseas, all because John McCain demanded it.”

Actually what McCain demanded was an open bidding process after discovering that a no-bid deal to lease 100 tankers from Boeing had been slipped into a bill. Investigations into that sleight-of-hand led to a procurement scandal and jail time for Boeing’s chief financial officer and an Air Force officer.

It’s fascinating to listen to vocal opponents of the no-bid contracts awarded to contractors in Iraq, such as Halliburton, complain that a corrupt deal involving Boeing was scuttled.

As for Boeing’s campaign of “buy American,” that’s awfully hypocritical because it is a big supplier to foreign governments. As BusinessWeek recently reported:

“Boeing sells aerial refueling tankers to Japan and Italy. It sells C-17 military transport planes to the United Kingdom, Canada and Australia. And it sells F-15 fighter jets to Korea and Singapore and has sold F-15s to Japan in the past. Roughly $27.1 billion of Boeing’s total 2007 revenue of $66.4 billion came from foreign commercial and military sales. Europe alone accounted for $6.3 billion in revenue last year, with 16 percent of that coming from defense sales.”

If Congress were to limit defense contracts to U.S. companies, then we could expect retaliation from foreign countries. And the biggest losers would be Boeing, its workers and trade-dependent Washington state.

Finally, let’s not underestimate the anti-French sentiment behind the outcries. As aviation consultant Scott Hamilton told BusinessWeek, BAE Systems – which is based in the United Kingdom – is a major supplier to the Pentagon: “No one complains about that.”