"Protectionist policies threaten global trade" - EBRD report: Industrial policy has turned into revenge
A global resurgence of industrial policies aimed at promoting or protecting domestic interests threatens international cooperation and could particularly harm the poorest countries, the European Bank for Reconstruction and Development said in an annual report.
The annual transition report, which this year examined data affecting trade for 140 countries, found a "remarkable global resurgence" in strategic interventions designed to shape countries' economies.
"Industrial policy has turned into a revenge," Beata Javorcik, EBRD Chief Economist, said in an interview. Such policies often include state-supported grants, loans, or subsidies to domestic industry. 90% of those in advanced economies and regions covered by the EBRD discriminate against foreign interests in favor of domestic ones.
The report found that such policies have grown rapidly since 2019 due to several factors including the push for a green transition, following the lead of major economies such as China or the United States, and because citizens increasingly support a greater role of the state in the economy.
The report found that while such policies can be effective, when they are not carefully managed, they risk undermining the level playing field. "This means that industrial policy can become a force that will push the world towards fragmentation," Javorcik said.
The report, from the EBRD's chief economist's office, was the first compiled by it using Artificial Intelligence, which researchers used to gather data from the Global Trade Alert database.
Javorcik said the economic turmoil in recent years, due to globalization, automation, the green transition and now artificial intelligence, had strengthened support for greater state involvement.
The increasing use of such policies in lower-income countries that have limited administrative capacity is of particular concern.
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