Introduction
The Boeing Company is a USA-based aerospace and defense company, founded by William E. Boeing. It has grown over the time organically as well as with its merger with McDonnell Douglas in 1997. Boeing is the largest exporter by value in the United States. (Reed, 2009) Boeing’s biggest competitor is Airbus. Airbus SAS is an aircraft manufacturing arm of EADS, a European corporation. While on one hand as a result of the competition the aviation industry has gained with better aircraft on the other hand the industry has also seen a lot of controversy around the role of government with regards to aid to the firms.
Main Text
The trade disputes have alleviated a lot between the global giants and the matter was taken by the US govt. to the World Trade Organization. This has by far been the biggest trade dispute to be taken to the WTO in dollar terms (CSS, 2009). The main contention of the dispute is the way both firms benefit from the actions and policies of the respective government agencies.
The state of Washington has been providing a lot of infrastructural benefits as well as tax benefits to Boeing and a major part of all debates has been around the issue that has it been equally beneficial to the state and has this in turn violated international norms. Further studies suggest that the resulting increase in jobs was in no way directly accredited to tax holidays but was a natural outcome of increased aircraft demand globally (Watkins, 2009).
A major cause of such benefit package as highlighted by the EU at WTO was the 2003-04 incentive provided to Boeing by state of Washington to persuade Boeing to manufacture its 7E7 jetliner at Everett. The said package would benefit Boeing by $ 3.2 Billion over a period of 20 years (Wallance, 2004). The state however contended that it was a package for the industry on a whole and not merely Boeing (Washington, 2004). Boeing’s acquisition of Vought in 2009 is being seen as a move by the manufacturer to move out of Washington. Boeing quoted labor unrest and high manufacturing costs as reason for this move (Creedy, 2009).
Boeing surely gets benefits from such government actions in an industry that has huge entry barriers due to cost structure and regulation norms. While Boeing has been a major US employer and partner to agencies like the NASA and US Air Force the tax exemptions and grants do provide it undue advantages. Though in the recent times with economic recession set in the idea of govt. bailouts and exemptions have become more acceptable. Almost every country and govt. agency has been pitching in to bail out firms.
Conclusion
The ways in which such policies are crafted at times undermine worker’s interests. The 2003 proposals by the state of Washington allowed the norms to be changed to change compensations and benefits to workers which eliminated 9000 beneficiaries from the system (Galloway, 2003). Thus while the firm does benefit from such norms and tax breaks it should also be noted that the tax breaks help generate local employment and helps the firm sustain competition from Airbus. With the economic slump and post 9/11 impact on industries in general and aviation industry in particular the tax breaks may seem to be justified. Federal agencies must take care to balance the cost-benefits of any such initiatives as it affects the tax dollars of citizens.
Works Cited
Creedy, Kathryn B. “Boeing Taxiing Out of Washington?”2009, Aviation Today. Web.
CSS. “Boeing vs. Airbus – clash of the dwarfs?.” 2009, www.csmonitor.com.
Galloway, Angela. “Tax break for Boeing proposed.” 2003, www.seattlepi.com. Web.
Reed, Dan. ” Boeing says it’s flying high despite recession.” 2009. www.usatoday.com.
Wallance, James. “Boeing: Tax breaks no bargaining chip.” 2004. www.seattlepi.com. Web.
Washington, Action. “Boeing 7E7 Site Agreement.” 2004. Action Washington. Web.
Watkins, Marilyn P. “Everyone Else Gets One: An Analysis of Tax Breaks in Washington State.”2008. Web.