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Airbus vs. Boeing: Respective positions and the WTO's decision - Essay Example

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Analysis of the Airbus-Boeing Dispute Presented to the World Trade Organization Your Name Your Code Your University Date Introduction “The Geneva-based World Trade Organization helps establish trade rules in the global environment” (Ireland et al, 2008)…
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Airbus vs. Boeing: Respective positions and the WTOs decision
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"Airbus vs. Boeing: Respective positions and the WTO's decision"

Download file to see previous pages One of the areas that the World Trade Organization controls the affairs of large international firms is in the area of subsidy and countervailing. These rules are included in the GATT (General Agreement on Trade and Tariffs rules) issued in 1994. Two major airline manufacturers, Airbus and Boeing together produce almost all the airlines that are used throughout the world. Boeing is a US based entity whilst Airbus is owned jointly by some member states of the European Union; United Kingdom, France, Germany and Spain. Boeing and Airbus grew over the years through mergers and acquisitions of various airlines and parts manufacturers in these opposite sides of the Atlantic. In October 2004, The United States (representing Boeing) brought up a case to the World Trade Organization against Airbus for getting unauthorised subsidies under the 1994 GATT rules. In this complaint, they stated that Airbus has been benefiting from illegal subsidies from their national governments and are guilty of countervailing. This case went on for several years with claims and counter claims and a WTO panel reported on the matter in 2010. An appellate body ruled on it in 2011. This paper examine the details of the two issues and how it was presented by both parties. The paper will begin by examining, the facts of the case. It will also evaluate the arguments of the two parties and the judgement that was passed on the subject. Finally, the writer will pass an opinion on the matter. Background of the Boeing and Airbus Competition “Airbus and Boeing compete head-to-head for major aircraft orders” (Spreen, 2007). Interestingly, Carbaugh (2010) identifies that in the 1970s Airbus produced only 5% of the world's aircrafts. However, in the world today, Airbus manufactures over half of the airliners that are available to airline companies. This can be credited to the various levels of growth in the 1980s which was done through mergers and acquisitions within the European continent. The expansion and growth of Airbus has been supported by cooperation and integration of the European Union. This is because European Union Laws have supported the growth and acquisition of different airline and parts manufacturing entities on the continent. The growth of the EU has enabled the various airline manufacturers to become more united and there is a significant reduction in the level of competition and disagreements that exist between the companies as they operate. On the other side of the Atlantic, Boeing has also grown through the consolidation of different American and Canadian airline and part manufacturers. This expansion is supported by the North American Free Trade Agreement (NAFTA). Canadian, American and Mexican plants and entities come together to work to provide important parts and airline assembling entities for the building of Boeing Airlines. Together, Boeing and Airbus control a huge chunk of the airline manufacturing industry. “The Boeing-Airbus story seems at first sight to provide exactly the kind of argument for aggressive national trade policies that protectionists have always wanted to cite as a textbook example” (Helpman and Krugman, 1989). This is because the two airline carrier manufacturers represent the two great economies of the world. The two companies are significant to the economies of both the United States and the European Union. Due to this, their respective governments have the duty of ensuring that they operate well in the international markets and earn the optimum profits as this is a ...Download file to see next pagesRead More
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