Boeing-Airbus Subsidy Dispute: A Sequel

Abstract

After intensifying in the 1980s and 1990s, the longstanding dispute between Europe and the United States over government subsidies for the commercial jetliner industry again heated up in 2004. This time, however, the stakes were higher because both nations sued each other at the World Trade Organization over government subsidies paid to their respective commercial jetliner companies. The dispute over subsidies has heightened trade tensions between the United States and Europe, as both companies spar for dominance in the highly competitive industry of commercial aircraft. This paper provides a sequel to “Boeing-Airbus Subsidy Dispute: An Economic and Trade Perspective,” a paper written by these authors and published in the October-December 2001 issue of Global Economy Quarterly. The initial paper analyzed the trade frictions between Boeing and Airbus regarding governmental subsidies and its implications for the conduct and performance of the two companies in the commercial aircraft industry. This paper extends the analysis by discussing recent developments in the commercial aircraft industry, the subsidy dispute of Boeing and Airbus at the World Trade Organization, and the future health of the commercial jetliner industry.

Boeing and Airbus: Duopoly in Jeopardy?

“…Both the European Union and the United States have a long history of subsidizing the manufacturing of civilian jetliners. In this paper, as a follow-up to two papers that we have written for this journal Olienyk, 2002 and2004) on competition between Boeing and Airbus, we briefly review the history of subsidies in the commercial jetliner market and analyze the implications of the recent WTO rulings for the nature and composition of the market going forward.…”

Trade disputes in the commercial aircraft industry: A background note

“…The WTO needs proof of damage, a measurable injury to competitors, before government assistance can be called a subsidy. Boeing claimed that its loss of more than 20% market share since 1992 was clear evidence of damage; Airbus again cited the extensive impact of US indirect subsidies (22) . (23)…”