Seminar paper from the year 2015 in the subject Politics - Topic: Globalization, Political Economics, grade: 2,3, University of Applied Sciences Essen, language: English, abstract: This assignment gives a general overview of the large civil aircraft market leaders: Airbus and Boeing. Further, the historical backgrounds will be analyzed. The assignment examines the duopoly-position considering the economic backgrounds. A number of key issues arise especially from Boeing’s side. Boeing lost his dominant role on the market. Furthermore, Airbus delivered very high innovative technological standards, by keeping the costs low. It did not take long time until Boeing has responded by blaming Airbus to get subsidies from the government. All this led to the biggest dispute in history and has been a particular challenge for the World Trade Organization (WTO). The results of this assignment point out, that there are new entrants on the aircraft market, for example China and Russia. Instead of negotiating for years about subsidies, Airbus and Boeing should concentrate on improving their technological standards. The best way to summing up, is to say, that it is not a competition between aircraft industries, it is a competition between the world’s largest governments: The European Union and the United States.

This case study examines a long-standing dispute regarding fair competition and government subsidies between The Boeing Company and Airbus Industries. Boeing claims that it is being subjected to an unfair competitive disadvantage because the European Union provided Airbus soft loans in the form of launch aid. This case reviews communication strategy, the potential impact on suppliers and communities, and the upcoming WTO dispute and possible outcomes.

The bilateral WTO Agreement on Trade in Large Civil Aircraft (TLCA) of 1992 regulated the permitted levels of support for the European and American aviation industries. In October 2004, the U.S. unilaterally withdraw from the TLCA, right at the time of Boeing's then-impending loss of market leadership. Together with the termination of the TLCA, the U.S. requested the initiation of WTO dispute settlement proceedings against the EU as well as the governments of Germany, France, Britain and Spain regarding an alleged direct and indirect subsidisation of Airbus. In response, the EC requested, on that same day, the initiation of dispute settlement proceedings regarding U.S. Federal State and local subsidies granted to the American aircraft producer Boeing, which the EC regarded as incompatible with WTO rules. What European subsidies exist for Airbus, and how extensive are they?

Boeing and Airbus, for long, had dominated the market for large passenger aircraft. The battle often took acrimonious turns with even the governments pitching in for the companies. One such issue cropped up in late 2004. In late 2004, the US accused the European governments of subsidizing Airbus, giving it an unfair edge over Boeing. They filed a complaint before the World Trade Organization (WTO) in this regard. European Union (EU) too filed a counter-complaint alleging indirect subsidization of Boeing through offer of military and space contracts. The three month time to resolve the issue mutually expired on April 6, 2005. Now, analysts were wondering what turn the issue would take.