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HOUSE BILL TO BAR AIRBUS

24 May 05. The U.S. House armed services committee yesterday proposed legislation that could prevent the European Aeronautic Defence and Space Company from participating in future competitions to supply the US air force with refuelling tankers.

EADS is currently negotiating with Northrup Grumman to become its US partner in any Pentagon tanker competition. The Pentagon is awaiting a Rand Corporation study on the urgency of replacing the existing tanker fleet before deciding whether to have a competition. Congress last year cancelled a $23.5bn deal with Boeing to sell and lease tankers to the air force after a former senior Pentagon official admitted boosting the price of the deal to benefit the company. While the measure in the 2006 defence authorisation bill does not mention EADS, it prevents the Pentagon from buying goods from any company that receives state aid, which would target Airbus, EADS’s parent company. The provision, sponsored by Duncan Hunter, the Republican committee chairman who last year unsuccessfully pushed for “Buy America” legislation, is expected to run into opposition in the Senate. Guy Hicks, an EADS spokesman, said there were too many questions surrounding the proposed measure to speculate on its impact. He said one question was whether it would affect BAE, a shareholder in EADS that has substantial dealings with the Pentagon.

The Bush administration has demanded an end to all European government support for Airbus, alleging that the European aircraft maker has received billions of dollars in subsidies in the form of government loans repayable based on aircraft sales. Separately, the bill would also prevent the Pentagon from buying weapons from companies that sell weapons, or technologies specifically designed for weapons, to China.

Michael O’Hanlon, defence analyst at the Brookings Institution, said the genesis of the measure was a move by the European Union, which has now been postponed, to lift its embargo on arms sales to China this year.

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