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Britain 'Disappointed' With U.S. Tanker Bid

British Prime Minister joined France in accusing U.S. of protectionism over $35 billion contract to build Air Force refueling tanker.

LONDON (AP) -- The French and British leaders accused the United States of protectionism on Friday over a contract to build a new Air Force refueling tanker.

A European-led consortium pulled out of bidding this week for the $35 billion contract, saying the Pentagon was favoring rival American bidder Boeing.

"This is not the right way for the United States to treat its European allies," French President Nicolas Sarkozy said.

"If they want to be spearheading the fight against protectionism, they shouldn't be setting the wrong example of protectionism," he said. "In life there is what you say and then there is what you do."

British Prime Minister Gordon Brown said he was disappointed with the situation.

"We believe in free trade, we believe in open markets, we believe in open competition," he said.

The withdrawal of a bid by EADS, the parent company of Airbus, and Northrop Grumman, leaves Chicago-based Boeing as the only bidder for the 179-tanker order.

The EADS-led consortium was awarded a contract for the tanker fleet in 2008, but Boeing protested and the deal was annulled later that year.

The European Union has warned the United States about possible protectionism, saying it "would be extremely concerned if it were to emerge that the terms of tender were such as to inhibit open competition for the contract."

Sarkozy and Brown gave their news conference after holding talks at the prime minister's 10 Downing St. residence that focused largely on the economy.

The two leaders suggested a compromise was possible next week on the thorny issue of hedge fund and private equity fund regulation. The United States and Britain, which is home to most European hedge funds, are wary of proposed EU reforms to regulate the industry, fearing they could stifle growth and harm business.

Together with the financial industry, they have criticized the proposed reforms as too stringent, while socialist European lawmakers -- eager to crack down on risky trading -- see them as too lenient.

"I believe, as Nicolas does, that we can reach a solution over the next few days on these issues," Brown said.

The European Commission recommended last year that hedge funds and private equity funds should register in Europe and inform regulators about trades and debts to prove that they don't pose a risk to the financial system.

Funds based outside Europe would have to show that they face similar oversight at home and cooperate with European tax authorities. The reforms were intended to pressure the U.S. to step up supervision.

British Treasury chief Alistair Darling has suggested that hedge funds authorized by regulators to operate in any one EU country should then be allowed a "passport" to operate across the bloc.

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