ABSTRACT
In October of 2004, the United States lodged a complaint with the World Trade Organization (WTO)’s dispute-settlement mechanism in which it alleged that France, Great Britain, Germany, and Spain were illegally subsidizing the European commercial aircraft manufacturer, Airbus SAS. The American move punctuated a decade during which Airbus successfully challenged the American firm Boeing for dominance in the global market for commercial aircraft. Only 20 years ago Airbus appeared to pose little threat to Boeing; Boeing jets commanded almost two-thirds of global commercial aircraft sales, whereas Airbus airliners captured only slightly more than 15 percent. As each year passed, however, Airbus drew closer, until early in the current decade it finally caught up with Boeing, with each firm capturing roughly half of the global market. Within this changing market context, U.S. Trade Representative Robert Zoellick argued that although there may once have been justification for subsidies to Airbus, that time had long since passed. The European Union (EU) quickly responded to the American complaint. Asserting that the American move was “obviously an attempt to divert attention from Boeing’s self-inflicted decline,” the EU initiated a counter-dispute with the WTO in which it alleged that Boeing receives “massive subsidies” of its own from the U.S. government (Pae 2004).
