Industrial policy sometimes involves protectionist measures, such as subsidies and tariffs. Such measures can give domestic industries a competitive advantage, potentially leading to adverse effects, including job losses, in other countries.
When countries pursue industrial policy solely in their own interests, they can generate what economists call “beggar-thy-neighbor” effects. During the Great Depression of the 1930s, protectionist measures further destabilized the international economic order.
If industrial policy generates beggar-thy-neighbor effects, it may trigger a cycle of retaliatory measures, posing a considerable risk to the global economy. Using a dataset they constructed, a research team led by Professor Simon Evenett of IMD, a Swiss business school, analyzed the factors driving the adoption of industrial policy.
Their research shows that countries tend to introduce industrial policies in sectors where other countries have already adopted similar measures. This finding suggests that industrial policies have a reactive or competitive dimension.
In recent years, developed countries have been much more active than developing countries in adopting industrial policy, raising concerns that disparities between the two groups may widen. Developed countries’ greater fiscal and technological capacities make it easier for them to implement industrial policies on a large scale, whereas developing countries tend to have more limited resources and capabilities.
As industrial policy gains wider international acceptance, developing countries could find themselves at a disadvantage in policy competition and risk being left behind.
For this reason, some scholars argue that an inclusive international framework for industrial policy coordination is needed to ensure the participation of developing countries. Professor Dani Rodrik of Harvard University and others have proposed establishing an international forum to discuss industrial policy and promote responsible globalization.
Indeed, research on industrial policy within the European Union (EU) suggests that such policies tend to be more effective when coordinated at the EU level than when implemented independently by member states.
Is international policy coordination possible? Our research has shown that Japan and Southeast Asian countries have collaborated on industrial policies that enhance complementarities between their supply chains. Further efforts are needed to promote international policy coordination across a range of areas.
>> Original text in Japanese
* Translated by RIETI.
August 11, 2026 - Published in Nihon Keizai Shimbun's " Introduction to Economics—New Trend in Industrial Policy "
