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INTERNATIONAL BUSINESS

Case study Assignment

Airbus versus Boeing: when is intervention Not Intervention?

Task One:

Globalization has given us access to new products, opened our eyes to new cultures, and helped us to share valuable information across borders, but sometimes the competition between companies from different countries can result in international legal disputes. One longstanding argument between the United States and the European Union (EU) is over government subsidies to aircraft manufacturers, specifically the American firm, Boeing, and the EU Company Airbus        

By looking at the case study Both the U.S. and the EU claim that the other government is subsidizing their domestic aircraft manufacturing industry. Subsidies are basically payments or other benefits given to a company by a government. Many subsidies are illegal according to the rules agreed to by the members of the World Trade Organization (WTO) because they create an unfair competitive advantage        

In the case study The EU counters that Boeing has received a great deal of help from the United States. Arguing that U.S. subsidies to Boeing dwarf the launch aid given to Airbus, the EU points to Boeing military contracts, research and development grants, state (e.g., Washington, Missouri) incentive programs such as tax breaks for plant location, tax breaks given to Boeing divisions overseas, and a sizeable list of other tax benefits and financial aid. 

So the case study clearly illustrated the USA and EU involvement by providing aid to Airbus and Boeing Respectively, but the issues arise here  is that why do both of these governments are helping these companies and however if they are then on what basis or what kind of interest both the government have in it.

Also there is the case of protectnism involved in this dispute. Underlying this fact is the assumption that free markets determine prices and that there are no market failures. But market failures can occur. A market failure arises, for example, when polluters do not have to pay for the pollution they produce. But such market failures or “distortions” can arise from governmental action as well. Thus, governments may distort market prices by, for example, subsidizing production, as European governments have done in aerospace, as many other governments have done in electronics and steel and as all wealthy countries. Also there are four countries involved in helping the Airbus which are UK, SPAIN, GERMANY, and FRANCE and by looking at the case study mainly because of some reasons which are as follow.

  • Airbus generates enormous tax revenues.
  • Airbus provides jobs to some 53,000 skilled and semiskilled Europeans and 3066 thousands outside from EU.
  • Air bus research and development programs.
  • And also their foreign trade.
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if the EU government stops its subsides to Airbus then this will cause great negative impact on company research and development program which they are doing right now in order to come with more fuel efficient aircraft . And also this will cause the job losses in the Airbus which is not good in the interest of the EU. Apart from employment and technological advancement, the company generates tax revenue for all the countries it operates in also matters in relation with EU to help Airbus. As EADS, the parent company of Airbus, already said that sales of its new ...

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