Historically, the country’s defense market has been closed to foreign competitors, largely because of stringent Buy America rules mandating that at least 50 percent of all work on defense contracts be completed domestically. While U.S. aerospace companies sell 40 percent of their completed products overseas, the Pentagon awards a much smaller percentage of contracts to foreign firms.
“The Europeans have complained for years that the U.S. talks about free trade, but in fact it is very protectionist in terms of the domestic military market,” said Christopher Bolkcom, an aviation analyst at the Congressional Research Service. “On the other hand, if I were someone who was very concerned about the U.S. industrial base and had real Buy America sentiments, this might for me be a real rallying cry.”
In recent months, foreign competitors have made some inroads into the U.S. market. Brazilian jet maker Embraer teamed up with U.S. defense giant Lockheed Martin in a successful bid for the Army’s lucrative Aerial Common Sensor program. And Paris-based European Aeronautic Defence and Space Company promises to be a tough competitor for Boeing for the Air Force’s new fleet of aerial refueling tankers.
Now, European helicopter maker AgustaWestland, a prominent member of a contract team led by Lockheed Martin, will design the president’s next chopper, the US101, giving it ultimate bragging rights. Thirty-six percent of the work to build the 23 helicopters will be done overseas.
The total project is valued at $6.1 billion, with an initial contract award of $1.8 billion. What’s more, the win could position Lockheed Martin, AgustaWestland and fellow team member Bell Helicopter as the front-runner in the Air Force’s competition for a search-and-rescue helicopter.
The Lockheed team beat out Connecticut-based Sikorsky, the incumbent on the contract since the Eisenhower administration. Lawmakers in Connecticut and elsewhere are vigorously opposing the Navy’s decision, fearful of the long-term effects the decision will have on the country’s defense industrial base.
“I think there’s a strong equity argument that if the American worker is going to pay for the defense of the free world, they should have the right to build the defense,” said Rep. Duncan Hunter (R-Calif.), chairman of the House Armed Services Committee and the House’s leading advocate for stricter Buy America rules.
Sikorsky, which offered its VH-92 aircraft, has said the decision will not cost the company any jobs, while Lockheed Martin plans to create 750 new positions at a new manufacturing plant in Owego, N.Y.
Hunter said he is concerned about not only U.S. jobs but also the future of the domestic defense industry. By awarding European firms major defense contracts, the United States is essentially outsourcing its research and development dollars to heavily subsidized Europe. “The American taxpayer will now end up subsidizing its own competition,” Hunter said.
In the last Congress, Hunter unsuccessfully campaigned for Buy America regulations to require of defense programs 65 percent U.S.-made parts. He said he does not yet have any specific goals for this year but will focus on urging U.S. prime contractors to partner with domestic companies.
At the same time, Rep. Rosa DeLauro (D-Conn.) has written legislation requiring that all parts of the presidential helicopter be built in the United States. Lockheed Martin plans to build the rotor blades and gearbox, two major components, overseas.
“What we have done through this contract is help develop the European helicopter industry and put our own industry at a disadvantage,” DeLauro said. “Why don’t we just try to make sure this is a helicopter that’s built here and the parts are made here?”
DeLauro and other members of the Connecticut congressional delegation plan to meet with Navy Secretary Gordon England on Wednesday.
“If this doesn’t raise Buy America flags, nothing will,” said Rep. Rob Simmons, (R-Conn.).
Sikorsky also is awaiting a meeting with the Navy in the next few days, company spokesman Ed Steadham said. The company will decide whether to contest the contract — a move pushed by the Connecticut delegation — after the Navy briefing.
For some lawmakers and defense observers, further closing doors to foreign competitors could have negative repercussions on international trade.
“Trade is an important issue,” said John Douglass, president and chief executive officer of the Aerospace Industries Association, which represents more than 300 aerospace companies. “We have to buy something from the allies to expect them to buy something from us.”
Douglass said the organization is keeping its eye on the debate over international competition but doesn’t see the presidential helicopter decision as any major signal that the U.S. market will take continuous hits from overseas competitors.
Lockheed Martin officials stressed that the amount of the foreign content in the airframe falls well within the current Buy America standards. The contract award, they said, was based solely on the merits of the team’s offer.
“This is a global industry and … people need to understand that,” said Lockheed spokesman Tom Jurkowsky. Trade, he added, “is a two-way street.”