David Dodwell

Outside In | Shining a light on the dark forces of industrial policies

With industrial policy interventions growing, the transparency provided by a new global tracker will enable organisations like the IMF and WTO to distinguish between the good and bad

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US President Joe Biden talks economic policy at the Flex facility in West Columbia, South Carolina on July 6. Last year, 71 per cent of industrial policy interventions came from advanced economies, with 48 per cent from three alone – China, the EU and the US. Photo: Bloomberg

David Dodwell

Published: 4:30pm, 12 Jan 2024

Outside trade policy wonk circles, the name of Simon Evenett, professor of international trade and economic development at the University of St Gallen in Switzerland, probably means very little.

But since his 2009 launch of Global Trade Alert, he has become an almost-biblical source of data on trade protectionism. Initially an annual celebration of free trade and globalisation, the Global Trade Alert tracked the fall of protectionist barriers and tariffs, and the importance of trade as a driver of economic growth. Since 2016, however, it has become a gloomy record of rising protectionism.

This month, Evenett has launched – with support from and in collaboration with the IMF – a new database built on the foundations of the trade alert to provide a glimpse into the dark and unfathomed world of government industrial policies.

It responds to rising concern about the scale and scope of such policies as they evolve from the protection of infant industries in the poor and developing world.

Policies have evolved to include the comprehensive planning tools used by countries like China to map and guide economic development, and measures like America’s US$280 billion Chips and Science Act and US$60 billion Inflation Reduction Act, intended to address climate threats, the challenge to reach net zero carbon emissions by 2050, the vulnerability of supply chains and – perhaps most importantly – the threat to US technology supremacy from China’s emergence.

Western free-market economies have traditionally been disdainful of industrial policies, and the subsidies and state enterprises embedded in them. Western economists have generally been confident that government officials are unable to drive competitiveness and innovation the way the free market can, and that subsidies amount to a deadweight taxpayer cost that inhibit innovation, preserving inefficient behemoths and crony capitalists at the expense of nimble new enterprises.