Government Intervention at Boeing and Airbus Case Study

Government Intervention at Boeing and Airbus - topic Study ExampleGlobalization led to the cross-border free flow of capital, labor, information and other resources. Countries began to realize that the alone way to reap the fruits of comparative advantage was to compete internationally. FDIs and generation of government revenues were common results of international fear in technology intensive areas (page 33) (Cavusgil, Knight, & Reisenberger, 2012) and, thus, the collaboration of various European governments in this respect can be attributed to this reasoning. The study(ip) reason behind Boeings complains is that the provision of subsidies by the EU government to its competitor Airbus is preventing some(prenominal) the companies to compete on equal footing. It is seen as an unfair trade practice by the U.S, although, the case reflects that the soil itself is offering protection to its airline Boeing, albeit, in a different way. Thus, although the U.S government is not providi ng discoverright subsidies to Boeing, it is lock in protecting its clientele by bestowing it with military contracts. The key elements highlighted in the case are those of intervention through with(predicate) provision of subsidies, development of infrastructure, tax rebates and strategic national contracts. Part of the explanation underlying government promote for Airbus is grounded in the democratic genialism political system of the EU. As learnt in the text, this form of system called social democracy is characterized by government intervention in private enterprises and in business activities.... To this extent, as pointed out in the case study, the governments of various EU countries including the French, German, Spanish and British governments have embarked on a military mission to enhance the international competitiveness of its national airline, Airbus, through the provision of subsidies primarily. A major implication of globalisation has been that in the midst of cu t-throat competition, companies often find themselves competing on costs. The text also supports the fact that the costs of doing business are relatively higher in the EU which is largely because of high corporate taxes (page 178) (Cavusgil, Knight, & Reisenberger, 2012). This is a major reason behind the government precept to support Airbus financially. To this extent that the cost of capital in EU is higher than that in U.S, the governments intervention in Airbuss operations is justified. The defensive rationale of government intervention manifests itself along these lines of thinking by claiming that protection of the national economy is a major factor behind government intervention (page 204) (Cavusgil, Knight, & Reisenberger, 2012). The offensive rationale is also applicable here, since one of the major reasons for government intervention in the case of Airbus was to protect the infant industry that could not compete efficaciously with the two giants (Mac Douglas and Boeing) and the creation of tax revenues. Also one of the fundamental justifications for the same was the generation of jobs and employment opportunities that were created at a time Airbus had its operations all over Europe (Cavusgil, Knight, & Reisenberger, 2012). Furthermore, this move of European governments to support Airbus and make it