Remember high school?

The kid on the outside wants to be part of the cool group, and one of the insiders starts to show some interest in the outsider. “Will you . . .” asks the insider, and the outsider waffles. “Once you start hanging out with me, folks will think you’re at least as cool as that other semi-cool kid . . . and maybe cooler” says the insider, and still the outsider waffles. Then word get out about the things the insider has been doing behind the outsider’s back, and the outsider sees how that other semi-cool kid gets treated better. And still the cool kid asks “Will you . . .” At this point in the story, you know what happens next: the outsider looks for a way to get back.

This is as good a description of today’s business and diplomatic environment for the US as one could come up with.

Lost in the news cycle yesterday was a little story from Brazil: Boeing lost out of a bid to sell more than $4B worth of F/A-18 Super Hornet fighters to Brazil, with the contract going to Saab in Sweden instead. Ordinarily, this might have been just another contact won/lost story, but this was no ordinary contract. Boeing had worked hard to get the Obama administration to help push the bid and all looked well . . . until it didn’t. As Reuters tells the tale:

After Biden’s reassurances [during a VP visit to Brazilia] that the United States would not block crucial transfers of technological know-how to Brazil if it bought the jets, she was closer than ever to selecting Chicago-based Boeing to supply its fighter, the F/A-18 Super Hornet.

“She’s ready to sign on the dotted line,” one of her senior aides told Reuters at the time. “This is going to happen soon.”

And then along came Edward Snowden.

Documents leaked by the former National Security Agency contractor, released in the weeks after Biden’s visit, ended up enraging Rousseff and completely changing her plans, several Brazilian officials told Reuters.

On Wednesday, she surprised the defense and diplomatic worlds by tapping Sweden’s Saab to supply the jets, a move aides said was made in part as a deliberate snub to the United States.

You think?

Brazil has been looking not just for fighter jets, but a larger presence in world affairs. Their successful push to host both soccer’s World Cup and the Olympics was a part of this effort. Along with countries like India and Germany, they’ve also been pushing to get a permanent seat on a restructured UN Security Council, to move it beyond the current monopoly held by the East/West powers. From the Brazilian point of view, the back-and-forth over this fighter contract was an opportunity to improve their relations with — and support from — the US on the broader international stage, and things were looking good. A full state visit to DC was in the works, but Reuters notes how the NSA spying changed this dynamic:

Facing renewed pressure from her party’s anti-Washington flank [after the NSA spying on Brazil's president was revealed], Rousseff requested an apology from Obama, still hoping to salvage the trip. Instead, Obama said only that he would order a review of U.S. intelligence-gathering techniques.

[snip]

Upon new revelations in October that German Chancellor Angela Merkel had her BlackBerry spied on by the NSA, Rousseff and members of her team saw Washington’s response as much more contrite, officials close to the Brazilian president said.

Ironically, U.S. officials, when pitching the jets deal to Rousseff, had said Brazil could expect to be a strategic ally on the level of Germany – making the perceived double standard that much more upsetting in the minds of Brazilian officials.

Double standards and double dealing is part and parcel of the world of Boeing. They lied to Wichita and the Kansas political delegation when they got congressional support from Kansas senators and representatives to win a big military contract, and closed a plant they had promised to keep open. Double-dealing appears to be a feature, not a bug.

And for Boeing and the rest of the US defense industry, it gets even worse. As Wired.com pointed out in a headline last July, “Lawmakers Who Upheld NSA Phone Spying Received Double the Defense Industry Cash.” The defense industry loves the folks who have propped up and enabled the NSA, and those members of Congress were happy to take their cash and hope for more jobs back home. But thanks to the NSA spying and its fallout, those jobs are gone and future sales contracts are going to be a lot harder to make. Who wants to buy advanced military hardware from a country that lies to you, when they have other options elsewhere? And they’ve also got to be asking another question: how many backdoors were built into these products at the behest of the US spy agencies?

Today it was Brazil and this one contract, but who’s next? As an industry insider remarked to Businessweek, “When buyers think you are wounded they run away. No one wants to be the last buyer of any particular airplane.”

Thanks to the spying done by the NSA, the game has changed for international business deals, and as Boeing discovered, “made in the US” is no longer a selling point. It’s an obstacle, and as Brazil proved, it can be a real problem.

Welcome back to high school.

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Photo h/t to the US Department of Agriculture and used under Creative Commons Attribution 2.0 Generic license. Boeing and the rest of the government might want to ponder the word highlighted in that high school cafeteria.