Trade Disputes in the Commercial Aircraft Industry

The recent launch of Airbus's new super jumbo, the A-380, has provoked yet another trade conflict between the United States and European Union (EU) in the aircraft industry. The industry has strained trade relationship between the US and the EU ever since the Airbus's entry into the market in 1974. These tensions tapered with the signing of the 1992 US-EU agreement on trade in civil aircraft (the 1992 agreement). In fact, Boeing and Airbus shortly considered cooperating on the superjumbo project during the early 1990s, but the collaboration faltered because the two sides disagreed on the commercial viability of the aircraft. While Airbus forecasted that over the next 20 years, airlines would demand approximately 1,500 superjumbos, yielding around $345 billion in revenues, Boeing's projections were much more reserved. It forecasted only 700 planes. Hence, Boeing doubted the project could break even (The Economist, 2001). As a result, Airbus proceeded with the development of the new aircraft on its own.