Strategic trade policy
Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT
Meaning
Strategic trade policy means a government uses subsidies or protection to help its own firms win profits in oligopolistic global industries. An oligopolistic industry is one with only a few big sellers. In such markets, big profits go to whoever wins, so state support can move those profits from foreign firms to domestic ones. The risk is that rival governments hit back, and long trade disputes follow.
Example
Airbus and Boeing are the standard case. European governments backed Airbus and the US backed Boeing. Each side accused the other of illegal subsidies, which led to long-running WTO disputes.
Don't confuse with
- Infant-industry argument: this gives temporary protection to a new industry until it grows big enough to compete. Strategic trade policy supports firms that may already be established so they can capture profits in a market with only a few big sellers.
Related concepts
- Free trade
- Protectionism
- Trade barrier
- Infant industry argument
- Beggar-thy-neighbour policy
- Trade liberalisation
- Export promotion
- Trade openness
- Countertrade