Boeing versus Airbus: Two Decades of Trade Dispute - Case Study Example

This issue had been in the limelight of the trade circles for decades now, being sent back and forth with no conclusive end, but the last time it was presented in front of the World trade organization by Boeing in 2005. In this paper the circumstances that led to the dispute, its after effects and its probable decisions will be discussed. As argued by the US based aircraft manufacturers, it is a viable assumption that the main reason behind Airbus was the healthy financial support it received from its European countries.

Financing a huge operation like manufacturing aircrafts requires very heavy research and development for a company to compete with the leading organizations. The product needs years to build and for that duration of production if the company could not even breakeven, the whole operation collapses unless the company is financially strong. Because of the financial support Airbus received, it was able to maintain a competitive edge with its pricing and financing offers while marketing its products.

It led to establishing a foothold in the highly competitive market and once Airbus had achieved that milestone, enhancing the operational activities to gain competitive edge was not a difficult task. As one can easily say that no company gets anywhere if it does not have any strong financial back. The main reason behind the European governments to finance Airbus’s operations was the increasing hold of U.S based companies in the market of the aircraft industry. The main goal was to strengthen their aircraft industry to the extent that they could work with the American companies as partners in the global market at an equal footing.

It was the fear of U.S dominating the market, and the increasing dependency of the European nations on the American manufacturers that led them to heavily fund their own operations (Hayward, 1988). The friction between Airbus and U.S based manufacturing companies was mainly over the fact that Airbus was able to achieve competitive advantage because of the heavy funding it was receiving. Though Airbus argued that there success was because of the state of the art technology that they were assembling into their high end products, still it is safe to say that such high end products could not have been easy to manufacture if there were no resources to produce them.

Once again finances play a vital part, though the company had competent employees that led to the incorporation of state of the art technologies; relating to safety, aerodynamics and flight controls, into their products, but still they could not have been able to acquire them if the company had no way to appreciate their talents. Thus it can be said that though Airbus made strong arguments still the objections of the U.S companies were not baseless. This disagreement brings to light the issue if the 1992 agreement was reasonable or not.

The 1992 agreement enforced limitations on the subsidies that the companies can receive. The agreement limited direct government subsidies to 33%, which were payable in 17 years, as well as limiting the subsidies obtained indirectly by the companies form entities running government-supported military research. As the agreement gave the major players of the industry to compete on even grounds by enforcing the same