Homework Assignment 4
Reading Material: Title: International Business
Author: Hill
Publisher: McGraw-Hill
Edition: 12th
ISBN: 9781259929441
Task 1:
OPENING CASE (Chapter 7): Boeing and Airbus Are in a Dogfight over Illegal Subsidies
Summary
The opening case explores the ongoing battle between aircraft makers Airbus and Boeing. Both companies have accused the other of receiving unfair government subsidies designed to give them a competitive advantage, and both the United States and the European Union have taken their complaints to the World Trade Organization (WTO). In response to a 2006 complaint from the United States regarding perceived assistance to Airbus, the WTO issued a ruling indicating that the Europe-based Airbus had indeed received unfair subsidies. After Airbus failed to comply with WTO orders to remove the subsidies, the WTO issued another warning to Airbus. Ironically, the United States is unlikely to pursue Europe’s noncompliance with the WTO rulings as Boeing recently found itself under fire for accepting tax breaks from the state of Washington.
QUESTION 1: According to WTO rulings, both Airbus and Boeing have been recipients of government assistance at one point or another. Discuss the nature of aircraft manufacturing and why subsidies are seemingly part of the industry practice.
QUESTION 2: In its early years, Airbus received subsidies for 100 percent of its development costs. Discuss this situation. Is there a time when subsidies should be considered acceptable? Why or why not?
QUESTION 3: Boeing is expected to benefit from some $5.7 billion in tax breaks from the state of Washington. Why is the state of Washington willing to provide these tax breaks to Boeing?
Summarize your answers in 2 pages.
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Task 2: Regional Economic Integration (Chapter 9)
What effect is the creation of a single market and a single currency within the EU likely to have on the competition within the EU? Why?
Write a 1-page paper to summarize your thoughts.
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Task 3: NAFTA, USMCA and the U.S. Textile Industry (Chapter 9)
Prior to the signing of the NAFTA agreement, many concerns were raised regarding the potential for a significant loss of jobs in the American textile industry. Indeed, between 1994 and 2004, employment in the U.S. textile industry fell from about 858,000 to 296,000. However, at the same time, U.S. consumers have enjoyed lower clothing prices and U.S. fabric and yarn makers have seen a boost in their exports to Mexico.
QUESTION 1: Who gained from the process of readjustment in the textile industry after NAFTA? Who lost?
QUESTION 2: With hindsight, do you think it is better to protect vulnerable industries such as textiles, or let them adjust to the painful winds of change that follow entering into free trade agreements? What would the benefits of protection be? What would the costs be?
QUESTION 3: On 1/16/2020, Senate passed USMCA, a revamped trade deal with Mexico and Canada to replace NAFTA. Who would be the winners and losers of USMCA?
Write a 1-page paper to summarize your thoughts.
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