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.

Boeing and Airbus Are in a Dogfight over Illegal Subsidies

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.