INDUSTRIAL POLICY, INTERNATIONAL TRADE, AND ECONOMIC THEORY
An industrial policy attempts to provide an economic environment that either (1) supports industrial development generally, or (2) promotes the development of specific industries or sectors of an economy. Such a policy might include (1) tax incentives to support either investment or exports, (2) subsidies·direct or indirect·to industrial firms or industries, (3) protection against foreign competition, (4) worker training programs, (5) funding·full or participating·for research and development, (6) grants and loans to support (a) regional development, (b) the development of specific industries, or (c) small business, (7) export financing, (8) loans and loan underwriting to support (a) exports, (b) specific sectors of a domestic economy, or (c) specific firms, (9) price supports, and (10) anti-trust, and (11) related policies.
National economies around the world are more dependent on one another than at any time in the past. The increasing globalization of the economic sphere of life has ushered in a period wherein economic policies implemented by a major industrial power affect not only the national economy of that specific country, but also affect the level and character of economic activity in all other countries. This research examines the advantages and disadvantages of industrial policies in the contemporary period within the context of economic trade models and theory. The findings of this examination are presented within the context of examples of the interaction of international trade and industrial policy.
Increasing regional exclusiveness in international economic organization (the European Community, the North American Free Trade Agreement, the Association of South East Asian Nations, and others) strips away traditional markets for countries such as Australia, while simultaneously making it more difficult for such countries to gain entry into new ma...