EADS/Airbus Government Ownership, Protection, Intervention & Subsidies: The Effect on American Free Enterprise and National Security

U.S. Secretary of Defense Robert Gates has stated that government contracts are not jobs programs.¹⁹ But EADS is in fact a very explicit European jobs program. Political support in return for maintaining this jobs program is crucial for re-election for Sarkozy and his counterparts in Berlin, Brussels, and Lisbon. Even in London, the power of retaining EADS jobs trumped the Tories’ previous criticisms of Airbus launch aid.²⁰

EADS/Airbus Government Protection

Awide gulf of economic philosophy has traditionally separated the continents. Generalizations about American  laissez-faire and European socialism remain true despite the current administration’s bent towards nationalizing U.S. industries. A facile comparison has stated that “American fosters competition [while] Europe protects competitors.”²¹ To be clearer: Europe protects its own competitors.

A striking comment representing European protectionism was made by former European Union Competition Commissioner (EUCC) Neelie Kroes, who went as far as suggesting specific market shares for large American corporations. Speaking about Microsoft in 2007, she said, “you can’t draw a line and say exactly 50 percent is correct, but a significant drop in market share is what we’d like to see…”²² In a less protectionist regime, the goal of any business would be for its product to be the choice of consumers. If an American company or manufacturer is successful and takes market share from European competitors, European Union officials assume a prerogative to impose the market share they prefer.

An abundance of news sources have, for years, reported on European governments’ subsidies to EADS and Airbus, enabling them to be more competitive against American aerospace companies. EADS Chairman Louis Gallois has declared that, in order to compete, Europe needs to become united and cultivate “a domestic market with alliances in order to create common industrial interests.”²³ Commitments to create a common defense policy to rival NATO, the co-called European Security and Defense Policy, include the creation of a common military procurement policy so that member-states can be both supplier and customer. The intended outcome is to edge firms based in the United States out of the continental market. EADS, “benefits from closed European defense markets, despite professing a desire for competition.”²⁴

This aim is no secret. European chauvinism with regard to domestically manufactured goods is well documented. Indeed, in 2004 when the French Ministry of Defense sought a lease deal for two long-range military transport planes, the tender stated, “the aircraft proposed must be of European conception.” Those are words quite clear: “No American planes or companies need apply.” A brief list of other well-known defense purchases where EADS’ owners have purposefully kept out U.S. companies includes:

• The Rafale combat aircraft contract for the French Air Force and Navy was awarded without competition to Dassault and is valued at more than $40 billion.²⁵

• The A400M contract was given to EADS’ subsidiary Airbus without competition; and seemingly without need as American built C-17s and C-130s provide similar capability. The contract is valued at $24 billion.²⁶

• The Tiger advanced attack helicopter for European armies was developed without competition. Eurocopter, an EADS subsidiary, was given the contract valued at $4 billion.²⁷
• The NH90 medium transport and anti-submarine warfare helicopter was developed with no competition by a consortium of EADS subsidiaries Eurocopter France, Eurocopter Deutschland, as well as Agusta and Fokker. The contract is valued at $2.6 billion.²⁸

• The Scorpion, France’s planned future combat vehicle system was initially open to American companies, but when Boeing teamed with one of the French competitors, the French Defense Procurement Agency applied pressure until Boeing was dropped. A suitable French company, Thales, was the hand-picked replacement.²⁹

• The nEUROn UCAV (Un-manned Combat Aerial Vehicle) demonstrator is being developed without competition as a collaboration between France, Sweden, Greece, Italy, Spain and Switzerland. Initial funding was $484 million dollars. If brought to production, the value of the contract will be in the billions. EADS is a partner in the Neuron’s development.³⁰

• France’s infantry combat vehicle replacement program VBCI (Véhicule Blindé de Combat d’Infanterie) was awarded without competition to the French government owned company NEXTER. The value of the contract is estimated at $4 billion.³¹

None of the above programs has been cost-effective, but the EADS/Airbus partners’ national priorities are not about getting the best deal for their money. As one of Britain’s oldest think tanks has noted, even when a “whole new manufacturing base must be created first…Purchasing existing equipment from America is always seen as the least favorable option.”³²