Governement intervention in Airbus and Boeing
Summary
Airbus and Boeing are competitors in the aircraft industry as both of the companies are aircraft manufacturers. Boeing was actually founded in 1916 in Seattle earlier than Airbus and got huge support from US government. It was a dominant player in the global manufacturing industry in the 1960’s together with McDonnell Douglas. Meanwhile Airbus was founded in 1970s by four countries which are France, Germany, Spain and United Kingdom. These countries have supported Airbus from its establishment until now by providing fund through soft loan and subsidies. These soft loans and subsidies help Airbus in the research and development activities as well as the production of commercial aircrafts which will be sold to the airline companies around the world. It is found that these supports are very helpful to Airbus in competing with Boeing as it succeed in becoming the world’s number two commercial aircraft manufacturer. Besides that, by 1992, Airbus had captured roughly one-third of the global commercial aircraft market. This shows that the soft loan and subsidies from EU and the founding countries help Airbus in competing with Boeing for the position of world’s leading commercial aircraft manufacturer.
Even though the support was really helping Airbus in strengthening its position in the market, it is also create an issue of unfair government intervention. Boeing the competitor of Airbus and the U.S. government have long complained about the massive subsidies and soft loans that were responsible for Airbus birth and its success. This issue is worsened when Airbus surpassed Boeing in becoming the world’s leading aircraft manufacturer. In 2005, the U.S. Trade Representative brought its case to the WTO because of approval of $3.7 billion subsidies and soft loan from EU to Airbus. The case alleged the financial aid is qualified as subsidies under WTO’s Agreement on Subsidies and Countervailing Measures (ASCM). Under ASCM, subsidies to specific firms or industries
Airbus and Boeing are competitors in the aircraft industry as both of the companies are aircraft manufacturers. Boeing was actually founded in 1916 in Seattle earlier than Airbus and got huge support from US government. It was a dominant player in the global manufacturing industry in the 1960’s together with McDonnell Douglas. Meanwhile Airbus was founded in 1970s by four countries which are France, Germany, Spain and United Kingdom. These countries have supported Airbus from its establishment until now by providing fund through soft loan and subsidies. These soft loans and subsidies help Airbus in the research and development activities as well as the production of commercial aircrafts which will be sold to the airline companies around the world. It is found that these supports are very helpful to Airbus in competing with Boeing as it succeed in becoming the world’s number two commercial aircraft manufacturer. Besides that, by 1992, Airbus had captured roughly one-third of the global commercial aircraft market. This shows that the soft loan and subsidies from EU and the founding countries help Airbus in competing with Boeing for the position of world’s leading commercial aircraft manufacturer.
Even though the support was really helping Airbus in strengthening its position in the market, it is also create an issue of unfair government intervention. Boeing the competitor of Airbus and the U.S. government have long complained about the massive subsidies and soft loans that were responsible for Airbus birth and its success. This issue is worsened when Airbus surpassed Boeing in becoming the world’s leading aircraft manufacturer. In 2005, the U.S. Trade Representative brought its case to the WTO because of approval of $3.7 billion subsidies and soft loan from EU to Airbus. The case alleged the financial aid is qualified as subsidies under WTO’s Agreement on Subsidies and Countervailing Measures (ASCM). Under ASCM, subsidies to specific firms or industries