Who Do You Want to Fly? Competition Continues between Boeing and Airbus

Should the United States continue to subsidize its industries in order to promote domestic growth even if the result is a global reduction in efficiency? Subsidies provide necessary relief to developing countries’ industries not capable of combating international competition, but the United States certainly does qualify as developing. And yet its subsidy for jet engine manufacturing has led to healthy growth in the long run—Europe saw the success of the Boeing initiative and sparked the creation of Airbus. Despite a short-term inefficiency, in the long run this competition in subsidies has led to better products not just for American consumers but around the world.

The competition between Boeing and Airbus commenced twenty years ago, but the industry received recent attention in this article detailing the potential merger between Airbus and the global defense and aerospace company BAE Systems. As the article points out, BAE is based in London, a fact that worries US authorities concerned with protecting the domestic economy.

Among these grievances are national security claims, for a large portion of Airbus stock is controlled and maintained by French investors. France, as the article points out, has historically been more willing than its neighbors in dealing with unfriendly countries around the world. In the face of the merger then, the US will face potential security risks should France decide to share its newfound military defense knowledge with high bidders such as Iran.

More importantly, the merger threatens to destroy competition by dominating the defense industry with what the article’s author calls “the world’s largest aerospace company.” The US can’t compete with this mega-company in the face of its decreased military spending.

Are these reasons enough for the US to prevent the passing of the merger? The objections are largely domestic for the United States, calling into question whether the US should relax its protectionist stance in favor of more free trade. The US, as the article mentions, has significant pull in the decision because its defense market dominates international consumers; Airbus’ goal in absorbing the fiscally stagnant BAE is to establish itself within the US market.

The article’s author, Steven Pearlstein, suggests that the US should favor the merger because it will spur new competition that will ultimately aid the American taxpayer. His decision rejects the need for US protectionist trade restrictions. Thomas Friedman, it appears would disagree. His melodramatic panic over the effects of globalization suggests that he doesn’t believe the US can rebound from newfound competition. Yet in order to spur economic growth, the US must lower its trade barriers and compete with Europe rather than hiding behind its own technological subsidies.