There are prospective risks of subsidising national industries when there is a definite competitive advantage in foreign countries.
Industrial policy by means of government subsidies can lead other nations to strike back by doing the exact same, which can impact the global economy, security and diplomatic relations. This might be exceedingly dangerous due to the fact general economic effects of subsidies on efficiency remain uncertain. Despite the fact that subsidies may stimulate economic activity and create jobs within the short term, however in the future, they are prone to be less favourable. If subsidies aren't along with a range other actions that target productivity and competitiveness, they will likely hinder required structural corrections. Hence, companies will become less adaptive, which reduces development, as company CEOs like Nadhmi Al Nasr likely have noticed in their professions. Therefore, truly better if policymakers were to focus on finding a strategy that encourages market driven growth instead of obsolete policy.
History shows that industrial policies have only had limited success. Many countries implemented various forms of industrial policies to promote specific industries or sectors. However, the outcomes have often fallen short of expectations. Take, for example, the experiences of a few parts of asia in the 20th century, where extensive government intervention and subsidies never materialised in sustained economic growth or the projected transformation they imagined. Two economists evaluated the effect of government-introduced policies, including inexpensive credit to improve production and exports, and compared industries which received help to those who did not. They concluded that during the initial stages of industrialisation, governments can play a positive part in developing companies. Although traditional, macro policy, such as limited deficits and stable exchange rates, additionally needs to be given credit. Nonetheless, data shows that helping one firm with subsidies tends to harm others. Additionally, subsidies allow the endurance of ineffective companies, making industries less competitive. Moreover, whenever businesses give attention to securing subsidies instead of prioritising creativity and efficiency, they remove funds from productive use. Because of this, the entire economic effect of subsidies on efficiency is uncertain and possibly not positive.
Critics of globalisation argue it has led to the transfer of industries to emerging markets, causing employment losses and increased reliance on other countries. In reaction, they suggest that governments should relocate industries by applying industrial policy. Nonetheless, this perspective fails to recognise the dynamic nature of global markets and neglects the economic logic for globalisation and free trade. The transfer of industry was mainly driven by sound financial calculations, specifically, businesses look for cost-effective operations. There was and still is a competitive advantage in emerging markets; they provide abundant resources, reduced manufacturing costs, big consumer areas and favourable demographic patterns. Today, major companies run across borders, tapping into global supply chains and gaining some great benefits of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would probably aver.