The disputes between the United States and European countries concern the competition between Airbus and Boeing, the world's largest commercial aircraft manufacturers, in the market for body-wide aircraft. The increasing competition from Boeing and Airbus complained that Airbus benefited from unfair subsidies and had an ability to mobilize political influence and pressures. This was not the first time when European association was accused of unfair competition through price-cutting or political interference. Three major companies dominate the aerospace industry: Boeing, Airbus, and McDonnell Douglas. Boeing has long been the dominant market share leader. However, due to the recent downfall of McDonnell Douglas, Airbus has gained significant market share and is threatening Boeing's position as the market leader.
Subsides were used to aid Boeing gain a first mover advantage into the emerging airline industry. They were given tax grants for Research and Development spending or money to develop military technology that could be transferred to civilian projects.
Boeing, Type 307, Stratoliner
Airbus A380 flyby
Airbus-Boeing-competitionAirbus, on the other hand, was able to enter the market through a $13.5 billion subsidy from governments in France, Great Britain, Germany, and Spain. According to a 1992 agreement between EU-US and the WTO, "up to 33 per cent of the program cost was to be met through government loans which were to be fully repaid within 17 years with interest and royalties, but only if the aircraft was a commercial success. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support." Thus, without this subsidy Airbus would have never been able to break into the world market and compete with Boeing at such a strong level. It is only recently that Boeing was able to recapture the title of "world's largest civil aircraft...