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Modern Industrial Policy and the World Trade Organization

Author

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  • Chad P. Bown

    (Peterson Institute for International Economics, Washington, DC, USA)

Abstract

This article surveys the economics of industrial policy as it relates to the World Trade Organization (WTO). Motivated by concern that the modern use of industrial policy is emerging in ways that threaten cooperation in the international trading system, the article begins with the basic historical economic framework for tying industrial policy to underlying market failures. It then introduces the dominant economic understanding of the role played by the WTO, examining the WTO's rules on subsidies (and thus industrial policy), the unease with the evolution of the trading system's subsidy rules, gaps in knowledge, and important data and measurement shortcomings. The main part of the article examines four areas in which modern industrial policy operates differently and has become especially important for the trading system: China, supply chain resilience, supply chain responsiveness, and climate change. The article identifies the evidence to date, open questions, and potential paths forward for economic research to help inform policymakers’ efforts to restore international economic cooperation in trade and industrial policy.

Suggested Citation

  • Chad P. Bown, 2024. "Modern Industrial Policy and the World Trade Organization," Annual Review of Economics, Annual Reviews, vol. 16(1), pages 243-270, August.
    • Handle: RePEc:anr:reveco:v:16:y:2024:p:243-270
    DOI: 10.1146/annurev-economics-100223-041958
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    More about this item

    Keywords

    climate change; WTO; China; industrial policy; resilience; supply chains; subsidies;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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