Assignment
Task 1: OPENING CASE (Chapter 7): Boeing and Airbus Are in a Dogfight
over Illegal Subsidies
Summary
The opening case explores the ongoing battle between aircraft makers Airbus and
Boeing. Both companies have accused the other of receiving unfair government
subsidies designed to give them a competitive advantage, and both the United States
and the European Union have taken their complaints to the World Trade Organization
(WTO). In response to a 2006 complaint from the United States regarding perceived
assistance to Airbus, the WTO issued a ruling indicating that the Europe–based Airbus
had indeed received unfair subsidies. After Airbus failed to comply with WTO orders
to remove the subsidies, the WTO issued another warning to Airbus. Ironically, the
United States is unlikely to pursue Europe’s noncompliance with the WTO rulings as
Boeing recently found itself under fire for accepting tax breaks from the state of
Washington.
QUESTION 1: According to WTO rulings, both Airbus and Boeing have been
recipients of government assistance at one point or another. Discuss the nature of
aircraft manufacturing and why subsidies are seemingly part of the industry practice.
QUESTION 2: In its early years, Airbus received subsidies for 100 percent of its
development costs. Discuss this situation. Is there a time when subsidies should be
considered acceptable? Why or why not?
QUESTION 3: Boeing is expected to benefit from some $5.7 billion in tax breaks
from the state of Washington. Why is the state of Washington willing to provide these
tax breaks to Boeing?
Summarize your answers in 2 pages
