1. I believe that Airbus would have become a viable competitor without subsidies, although it would have taken significantly longer. By merely introducing an alternative would have gained new customers as competition not only forces the competitors to produce better products, but it drives prices down. Customers like to have options. Because of the enormous cost required to develop an airliner, the government subsidies helped Airbus to bring to market its alternative to Boeing's offerings sooner. But I think the market was ripe for competition and therefore Airbus would have been able to eventually bring its product to market. As a side note, because Airbus was able to enter the market sooner thanks to subsidies, with two major manufacturers now established it has made it extremely difficult for new entrants. 2. I think the four countries that collaborated in the creation of Airbus were the most economically able to do so. They represented four of the largest countries in Europe, both in terms of economy and in terms of population. They stood to gain the most from the creation of a European aerospace manufacturer, yet none of the countries were interested in assuming the risk by themselves. By spreading the risk among the four countries they probably felt sufficiently hedged against failure to move forward with the investment.
3. Is Airbus’s position with regard to the long-running dispute over subsidies reasonable? (ITAI) Many in U.S. claimed that Airbus had been heavily subsidized by the governments of Great Britain, France, Germany, and Spain. According to a study by the Department of Commerce, Airbus received more than $13.5 billion in the government subsidies between 1970 and 1990, $25.9 billion if commercial interest rates are applied). Airbus’s justification was that their success was not due to subsidies, but due to a good product and good strategy. And some European tried to justify its subsidies to support an infant industry. It seems it is fair for...
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