A row between the US and Europe over protectionism was brewing last night after the US's Northrop Grumman and EADS, the Franco-German aerospace and defence group, pulled out of a $50bn military tender amid accusations of unfair competition.

Lord Mandelson, UK business secretary, led an angry reaction in Europe yesterday, saying he was “extremely disappointed”.

“Given the open market to US producers we have in Europe, it is very disappointing that a US-led European consortium feels that the revised tanker procurement process is now so biased against them that it is not even worth making a bid,” he said.

Karel De Gucht, European Union trade commissioner, said it was “highly regrettable that a major potential supplier would feel unable to bid for a contract of this type . . . open procurement markets guarantee better competition and better value for money for the taxpayer”.

Christine Lagarde, French finance minister, said it was “a shame that the company [EADS] wasn't in the best competitive situation” for the bid.

Northrop Grumman and EADS pulled out late on Monday night, saying the rules of the US tender were designed to favour the smaller air-to-air refuelling tanker proposed by rival Boeing. Louis Gallois, chief executive of EADS, said the group “clearly had no chance of winning and we are sorry about that because we think we have the best plane.”

His comments came as the group warned of continued pressures on profit from its troubled A380 superjumbo programme.

Charges on the A400M military transport aircraft pushed EADS into a net €763m ($1bn) loss for 2009, against a profit of €1.57bn last time.