Global resurgence in protective industrial policies, EBRD says
By Libby George
LONDON, Nov 26 (Reuters) -A global resurgence in industrial policies that aim to boost or protect domestic interests threatens international cooperation and could hurt poorer countries in particular, the European Bank for Reconstruction and Development said in an annual report.
The annual transitions report, which this year examined data impacting trade for 140 countries, found a "remarkable global resurgence" in strategic interventions designed to shape countries' economies.
"Industrial policy is back with a vengeance," Beata Javorcik, EBRD Chief Economist said in an interview. "It is back in rich countries as well as in emerging markets."
Such policies often include state-backed grants or loans or subsidies for local industry; 90% of those in advanced economies and EBRD regions discriminate against foreign interests in favour of domestic ones.
The report found that such policies have increased rapidly since 2019 due to factors including boosting the green transition, following the lead of major economies such as China or the United States, and because citizens increasingly back a greater state role 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 office of the chief economist, was the first compiled by it with the use of Artificial Intelligence, which researchers used to crunch data from the Global Trade Alert database.
Javorcik said the economic upheaval in recent years - due to globalisation, automation, the green transition and now AI - had amplified support for greater state involvement - particularly among those born before 1975.
The increasing use of such policies in lower-income countries that have limited administrative capabilities is particularly concerning, Javorcik said, as they tend to opt for the "most distortive", such as import or export bans or export licensing, which bring risk of corruption.
Reporting by Libby George, editing by Ed Osmond
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
