Backseat Drivers: The Political Economy of Trade Liberalization

When the U. S. Air Force decided to update its fleet of air-to-air refuelling tankers, global rivals Boeing and Airbus both submitted competing bids for the 35billion contract. American-owned Boeing was under pressure after losing international market share and was the odds-on favourite due to a history of securing non-competitive military contracts. The surprising award of the contract to European-owned Airbus led Boeing to immediately reiterate accusations that Airbus was receiving illegal subsidies. This resulted in the U. S. government launching an investigation into the bidding process and re-tendering the contract (U. S. GAO 2008). The activation of government in response to a distressed firm is not unusual and, in fact, the WTO (2010a, b) has found both the United States and the EU have provided billions of dollars of illegal support to Boeing and Airbus. However, this case raises the broader question, addressed by Dur's volume, of the extent to which, historically, bilateral trade policies in the United States and EU should be understood as primarily driven by exporter interests.