Rise in Industrial Policies Risks Global Trade Cooperation, Warns EBRD

The European Bank for Reconstruction and Development (EBRD) has issued a warning in its annual report, noting that the resurgence of industrial policies aimed at promoting domestic interests could hinder international cooperation and particularly impact poorer nations. The report, which focused on trade data from 140 countries, highlighted a significant global increase in strategic economic interventions.

Beata Javorcik, the EBRD’s Chief Economist, emphasized that “industrial policy has made a strong comeback,” noting that it is now prevalent not only in advanced economies but also in emerging markets. These policies frequently involve state-supported grants, loans, or subsidies targeted at bolstering local industries. The report indicated that 90% of such policies in advanced economies and EBRD regions favor domestic companies over foreign competitors.

According to the report, the surge in industrial policy since 2019 has been driven by several factors. These include efforts to advance the green transition, emulating major economies like China and the United States, and growing public support for a more prominent government role in the economy. However, while industrial policies can be effective, the EBRD warned that if not carefully executed, they risk creating an uneven playing field.

Javorcik noted that poorly managed industrial policies could contribute to global fragmentation as countries prioritize domestic interests at the expense of international cooperation. The report was the first to use Artificial Intelligence to analyze data from the Global Trade Alert database, with AI aiding researchers in examining the patterns of trade interventions.

The EBRD’s findings suggest that recent economic disruptions—including those driven by globalization, automation, the green transition, and now Artificial Intelligence—have heightened calls for increased state intervention, particularly among those born before 1975.

Javorcik also expressed concern about the growing use of industrial policies in lower-income nations, which often have limited administrative capacity. These countries are more likely to adopt highly distorting measures, such as import and export bans or export licensing requirements, increasing the risk of corruption and economic inefficiencies.

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