Airbus Boeing WTO dispute International Business Law
THE BOEING/AIRBUS WTO DISPUTE
International Business Law –
Contents
Introduction
The commercial airline industry has the conspicuous feature of extending the competition between companies and stepping into the realm of international trade disputes. One of the most high profile and recurring disputes between the United States and Europe concerns the fierce rivalry between two of the largest aircraft manufacturers in the world: Boeing and Airbus. This dispute is a tumultuous saga on the subject of illegal subsidies that has been around for more than four decades and is considered one of the most difficult and complex conflicts between the US and the EU. Not only that the two companies and governments are implicated in this dispute, but the WTO has also been drawn into it. Both Airbus and Boeing accuses the other of distorting competition on the aircraft market by receiving substantial aid from their government, therefore violating international trade policies. However, this is a case that goes beyond a simple fight between two competing companies.
Description of the facts
Characteristics of the civil aircraft market
A clear understanding of the mechanism of the aviation industry is vital for explaining why the governments’ influence is of such importance to this field. The commercial airline industry is regarded as a highly competitive and extremely difficult. Its special attributes give the industry a rather unusual structure.
Firstly, it is almost impossible for newcomers to compete effectively as the market entry barriers are extremely high. Some of the factors that impose the barriers are the economies of scale and the gigantic capital requirements – huge R&D spending, as well as proficient engineering expertise. Productivity within this sector rises over the life cycle, making the learning curve seem almost vertical. There are also some exigent exit barriers because the investments made are almost
International Business Law –
Contents
Introduction
The commercial airline industry has the conspicuous feature of extending the competition between companies and stepping into the realm of international trade disputes. One of the most high profile and recurring disputes between the United States and Europe concerns the fierce rivalry between two of the largest aircraft manufacturers in the world: Boeing and Airbus. This dispute is a tumultuous saga on the subject of illegal subsidies that has been around for more than four decades and is considered one of the most difficult and complex conflicts between the US and the EU. Not only that the two companies and governments are implicated in this dispute, but the WTO has also been drawn into it. Both Airbus and Boeing accuses the other of distorting competition on the aircraft market by receiving substantial aid from their government, therefore violating international trade policies. However, this is a case that goes beyond a simple fight between two competing companies.
Description of the facts
Characteristics of the civil aircraft market
A clear understanding of the mechanism of the aviation industry is vital for explaining why the governments’ influence is of such importance to this field. The commercial airline industry is regarded as a highly competitive and extremely difficult. Its special attributes give the industry a rather unusual structure.
Firstly, it is almost impossible for newcomers to compete effectively as the market entry barriers are extremely high. Some of the factors that impose the barriers are the economies of scale and the gigantic capital requirements – huge R&D spending, as well as proficient engineering expertise. Productivity within this sector rises over the life cycle, making the learning curve seem almost vertical. There are also some exigent exit barriers because the investments made are almost