There are potential risks of subsidising national industries if you have a clear competitive advantage in foreign countries.
Industrial policy in the shape of government subsidies can lead other countries to retaliate by doing exactly the same, which could influence the global economy, stability and diplomatic relations. This might be exceedingly dangerous due to the fact general economic effects of subsidies on productivity remain uncertain. Despite the fact that subsidies may stimulate financial activities and create jobs in the short run, however in the long run, they are going to be less favourable. If subsidies aren't along with a range other actions that target efficiency and competition, they will probably hamper important structural adjustments. Thus, companies will become less adaptive, which lowers development, as company CEOs like Nadhmi Al Nasr likely have noticed in their careers. Hence, certainly better if policymakers were to focus on finding a method that encourages market driven development instead of obsolete policy.
History indicates that industrial policies have only had limited success. Many countries implemented various types of industrial policies to encourage certain companies or sectors. Nonetheless, the results have frequently fallen short of expectations. Take, for instance, the experiences of several Asian countries in the twentieth century, where considerable government input and subsidies by no means materialised in sustained economic growth or the desired transformation they envisaged. Two economists examined the effect of government-introduced policies, including low priced credit to enhance manufacturing and exports, and compared industries which received help to those who did not. They figured that through the initial stages of industrialisation, governments can play a positive role in developing companies. Although traditional, macro policy, including limited deficits and stable exchange rates, additionally needs to be given credit. Nonetheless, data shows that helping one firm with subsidies has a tendency to damage others. Additionally, subsidies allow the endurance of ineffective firms, making industries less competitive. Furthermore, when firms give attention to securing subsidies instead of prioritising development and efficiency, they remove funds from productive use. Because of this, the entire economic aftereffect of subsidies on productivity is uncertain and possibly not good.
Critics of globalisation suggest that it has resulted in the relocation of industries to emerging markets, causing job losses and greater reliance on other nations. In response, they suggest that governments should relocate industries by implementing industrial policy. Nonetheless, this perspective does not recognise the dynamic nature of worldwide markets and neglects the basis for globalisation and free trade. The transfer of industry had been mainly driven by sound financial calculations, specifically, businesses look for cost-effective operations. There clearly was and still is a competitive advantage in emerging markets; they provide abundant resources, reduced production expenses, large customer markets and favourable demographic patterns. Today, major businesses operate across borders, making use of global supply chains and reaping the many benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser would likely aver.