Industrial Policy

Extracted Attributes

• Tools

  Subsidies (on specific types of exports, investment, R&D), import protection, exemptions from specific regulations, public provision of key inputs (land, training), easy credit, preferential taxes, tariff and nontariff barriers.

• Definition

  Proactive government-led encouragement and development of specific strategic industries for the growth of all or part of the economy, especially in absence of sufficient private sector investments and participation.

• Debate Points

  Efficacy in fostering industrialization and economic development; potential threat to free trade and international cooperation.

• Goals (Broader)

  Stimulate innovation, productivity, economic growth; promote climate transition, good jobs, lagging regions, exports, or import substitution.

• Modern Approach

  Generally accepts globalization, focuses on growth of emergent industries, involves government working collaboratively with industry.

• Government Measures

  Aimed at improving the competitiveness and capabilities of domestic firms and promoting structural transformation.

• Traditional Examples

  Subsidizing export industries, import-substitution-industrialization (ISI) via temporary trade barriers.

• Contemporary Examples

  Support for linkages between firms, support for upstream technologies.

• Role of Infrastructure

  A country's infrastructure (transportation, telecommunications, energy industry) is a major enabler.

• Economic System Context

  Interventionist measures typical of mixed economy countries.

• Primary Focus (Historical)

  Manufacturing sector, militarily important sectors, new technologies.

• Relationship to Trade Policy

  Contains common elements with other types of interventionist practices such as trade policy.

• Relationship to Macroeconomic Policy

  Usually seen as separate from broader macroeconomic policies (e.g., tightening credit, taxing capital gains).

Timeline

• Industrial policy fell out of favor in many countries. (Source: web_search_results)

  1980-XX-XX

• After the financial crisis, countries including the US, UK, Australia, Japan, and most countries of the European Union adopted industry policies. (Source: web_search_results)

  2008-XX-XX

• The Joe Biden administration supported advanced manufacturing as part of industrial policy. (Source: web_search_results)

  2021-XX-XX

Industrial policy

Industrial policy is proactive government-led encouragement and development of specific strategic industries for the growth of all or part of the economy, especially in absence of sufficient private sector investments and participation. Historically, it has often focused on the manufacturing sector, militarily important sectors, or on fostering an advantage in new technologies. In industrial policy, the government takes measures "aimed at improving the competitiveness and capabilities of domestic firms and promoting structural transformation". A country's infrastructure (including transportation, telecommunications and energy industry) is a major enabler of industrial policy. Industrial policies are interventionist measures typical of mixed economy countries. Many types of industrial policies contain common elements with other types of interventionist practices such as trade policy. Industrial policy is usually seen as separate from broader macroeconomic policies, such as tightening credit and taxing capital gains. Traditional examples of industrial policy include subsidizing export industries and import-substitution-industrialization (ISI), where trade barriers are temporarily imposed on some key sectors, such as manufacturing. By selectively protecting certain industries, these industries are given time to learn (learning by doing) and upgrade. Once competitive enough, these restrictions are lifted to expose the selected industries to the international market. More contemporary industrial policies include measures such as support for linkages between firms and support for upstream technologies. Economists have debated the role of industrial policy in fostering industrialization and economic development. They have also debated concerns that industrial policy threatens free trade and international cooperation.

Web Search Results

• Industrial policy - Wikipedia

  Industrial policy is proactive government-led encouragement and development of specific strategic industries for the growth of all or part of the economy, especially in absence of sufficient private sector investments and participation. Historically, it has often focused on the manufacturing sector, militarily important sectors, or on fostering an advantage in new technologies. In industrial policy, the government takes measures "aimed at improving the competitiveness and capabilities of [...] Industrial policies are interventionist measures typical of mixed economy countries. Many types of industrial policies contain common elements with other types of interventionist practices such as trade policy. Industrial policy is usually seen as separate from broader macroeconomic policies, such as tightening credit and taxing capital gains. Traditional examples of industrial policy include subsidizing export industries and import-substitution-industrialization (ISI), where trade barriers are [...] After the 2008 financial crisis, countries including the US, UK, Australia, Japan and most countries of the European Union adopted industry policies. However contemporary industry policy generally accepts globalization as a given, and focuses less on the decline of older industries, and more on the growth of emergent industries. It often involves the government working collaboratively with industry to respond to challenges and opportunities. China is a prominent case where the central and

• Is Industrial Policy Making a Comeback?

  Industrial policy refers to government efforts to support particular industries that are considered strategically important, such as semiconductors. It has been employed in many countries, including the United States, though it fell out of favor in the 1980s. Some experts warn that, done poorly, it can backfire. The Joe Biden administration has supported advanced manufacturing to contend with worsening climate change, tumult in global supply chains, and China’s economic rise. [...] Industrial policy generally refers to efforts to promote specific industries that the government has identified as critical for national security or economic competitiveness. In a Council Special Report, CFR experts Jennifer Hillman and Inu Manak define industrial policyas “government action that encourages or directly subsidizes the expansion of certain economic sectors over others.” [...] To its supporters, a new U.S. industrial policy is essential to respond to China’s state-led development, secure a supply of critical materials and products, and develop technologies that could preserve the planet. They point to the use of industrial policy not only in China, but also in countries such as Germany, Japan, and South Korea, as well as its historical use in the United States. To critics, such a policy inevitably distorts the free market and rewards companies not for the quality of

• [PDF] The New Economics of Industrial Policy - Dani Rodrik

  DefiniƟons Industrial policy is much discussed, but rarely explicitly defined. We define industrial policies as those government policies that explicitly target the transformaƟon of the structure of economic acƟvity in pursuit of some public goal. The goal is typically to sƟmulate innovaƟon, producƟvity, and economic growth. But it could also be to promote climate transiƟon, good jobs, lagging regions, exports, or import subsƟtuƟon. Since industrial policy targets structural change, a key [...] developmental challenges going beyond industrializaƟon. Industrial policies can take various forms but always create incenƟves for private-sector actors – firms, innovators, investors – to act in ways that are consistent with the intended direcƟon of structural change. Subsidies (on specific types of exports, investment, R&D, etc.) are the most obvious types of industrial policy. But the gamut runs from import protecƟon to exempƟons from specific regulaƟons to public provision of key inputs such [...] as land or training. Since government atenƟon is a scarce good, public-private collaboraƟon focused on alleviaƟng constraints faced by specific sectors or groups of firms, such as deliberaƟon councils or business-government roundtables, also counts as industrial policy. Since industrial policy, by design, favors certain types of economic behavior, it typically comes with some kind of condiƟonality. CondiƟonality can be of a limited kind, restricted to ex-ante eligibility criteria. For example,

• [PDF] Industrial Policy for the 21st Century: Lessons from the Past

  to show just how vast the toolkit can be when aiming to achieve industrial policy objectives. Box 1. WHAT IS INDUSTRIAL POLICY? Industrial policy is a terminology that is often interpreted differently depending on the audience. The fact that it cuts through a variety of economic policy tools, ranging from trade to FDI and innovation, makes the matter even more complex. As such, it lends itself to easy misinterpretation. At its core, the concept builds however on two fundamental elements: (i) [...] industrial policy are several national agencies, which provide funding for breakthrough innovation at an early-stage and play a crucial role in building networks of companies, scientists, engineers, venture capitalists and universities, which in turn enable the commercialisation of research. The most prominent example is the Defence Advanced Research Projects Agency (DARPA, see Annex I), born in response to the U.S. shock in the face of the Soviet launch of the first artificial satellite [...] one prong of a broader economic policy effort to guarantee Europe’s prosperity in the 21st century. A successful industrial policy should therefore aim at complementing, rather than substituting, ongoing efforts to complete the Single Market and strictly enforce competition policy, while avoiding excessive territorial divergences, all of which have been, and should remain, the bedrock of Europe’s economic success. Given these multiple objectives, future research looking at the optimal level at

• [PDF] Scoring 50 Years of US Industrial Policy, 1970–2020

  First, we offer a definition and then a short summary of the US ideological cycle for employing industrial policy. Marcus Noland and Howard Pack (2003, 10) define “industrial policy as an effort by a government to change the sectoral structure of production toward sectors it believes offer greater prospects for accelerated growth than would be generated by a typical process of industrial evolution according to static comparative advantage.” Somewhat more simply, but more inclusively, we define [...] industrial policy as government intervention against market forces to promote a favored firm or industry. Accelerated growth is one objective, but certainly not the only one. Tools of industrial policy include easy credit, direct and indirect subsidies, preferential taxes, and tariff and nontariff barriers. Over the past half-century, the goals of industrial policy (as we define the term) have varied. In some episodes, the goal was to assist declining industries (e.g., steel, textiles and