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Boeing versus Airbus Subsidy Dispute - Essay Example

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Boeing vs Airbus subsidy dispute: The American jetliner company Boeing started operating before the European jetliner Airbus. Boeing along with McDonnell Douglas and Lockheed dominated the jetliner industry globally which completely sidelined the European divided commercial aviation industry…
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Boeing versus Airbus Subsidy Dispute
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"Boeing versus Airbus Subsidy Dispute"

Download file to see previous pages The new competitors were not able to survive in a market which was virtually the sole provider of the jets. To help develop a strong competitive foundation, the European governments starting providing substantial subsidies to Airbus for the development cost. The subsidies played important role in forcing the Lockheed out of the jetliner industry whereas Douglas merged with Boeing (Pelletier, 2010). Airbus eventually took the major share of the market and is providing more jetliners as compared to Boeing which raised the concern among the US. This led them to form an agreement at the WTO to reduce the subsidies to provide healthy competitive economic environment. The agreement at WTO clearly stated that both Boeing and Airbus can enjoy the direct governmental subsidies at 33% of the jetliner’s developmental costs. It also included the limitation on the subsidies provided by indirect programs or civilian or military institutions as well. In addition to these, many other limitations were imposed on the subsidies. However the market share for Airbus kept on increasing at a steady rate which again raised the concern for Boeing (Gunstone, 2010). ...
The EU threatened to sue Japan for providing this help because without this help, the Boeing aircraft will be more expensive and less competitive. Both these companies in order to have the greater market share used the subsidies but didn’t really share the actual figure which leaves the global competitors and market very dubious over the certainty of their accusations. This case leaves the global market very vulnerable to violation of agreements and can create the dissatisfaction among the other jetliners in the competence and central position of WTA as well (Pelletier, 2010). Ethically, Boeing engaged in the aggressive pricing strategy with the help of unlimited subsidies affected the European jetliner Airbus by cutting their sales short, price and market suppression of Airbus in various markets of its hold. Secondly, Boeing terminated the WTO agreement on its own and filed the case against Airbus which was pretty much against the essence of the business. The agreement comes to an end by the mutual consent of both parties. In addition to this, both the companies have created duopoly which has left the market pervasive to other competitors which is strictly against the global business’s essence and practices. In addition to this, at this time when the successful industrialized countries should work towards trade liberalization, their subsidies wrangling will have the trickledown effect on the suppliers. The emerging economies look towards the industrialized economies for markets access (Newhouse, 2008). Culturally, the general inclination of US towards Japan in the greatest interest of their economies has created the clear biasness towards the ...Download file to see next pagesRead More
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