There are potential risks of subsidising national industries if you have an obvious competitive advantage in foreign countries.
History indicates that industrial policies have only had minimal success. Various countries implemented various forms of industrial policies to encourage particular industries or sectors. Nevertheless, the results have often fallen short of expectations. Take, for instance, the experiences of a few Asian countries in the 20th century, where extensive government input and subsidies by no means materialised in sustained economic growth or the projected transformation they imagined. Two economists evaluated the effect of government-introduced policies, including inexpensive credit to boost manufacturing and exports, and compared companies which received assistance to those that did not. They figured that throughout the initial stages of industrialisation, governments can play a constructive role in establishing companies. Although conventional, macro policy, such as limited deficits and stable exchange rates, should also be given credit. Nevertheless, data shows that helping one company with subsidies has a tendency to harm others. Furthermore, subsidies allow the endurance of ineffective firms, making companies less competitive. Moreover, when businesses give attention to securing subsidies instead of prioritising creativity and effectiveness, they remove funds from productive use. Because of this, the entire financial effect of subsidies on productivity is uncertain and perhaps not good.
Industrial policy in the form of government subsidies often leads other countries to retaliate by doing the exact same, which can affect the global economy, stability and diplomatic relations. This is certainly excessively risky because the overall financial ramifications of subsidies on productivity remain uncertain. Despite the fact that subsidies may stimulate financial activity and create jobs within the short run, yet the future, they are likely to be less favourable. If subsidies are not accompanied by a wide range of other actions that target efficiency and competitiveness, they will likely hamper essential structural alterations. Thus, companies will become less adaptive, which lowers growth, as business CEOs like Nadhmi Al Nasr have probably noticed in their professions. It is, truly better if policymakers were to focus on finding a method that encourages market driven development instead of obsolete policy.
Critics of globalisation suggest it has resulted in the transfer of industries to emerging markets, causing job losses and greater reliance on other nations. In reaction, they suggest that governments should relocate industries by implementing industrial policy. Nonetheless, this viewpoint does not acknowledge the dynamic nature of global markets and neglects the rationale for globalisation and free trade. The transfer of industry was primarily driven by sound economic calculations, specifically, businesses seek economical operations. There clearly was and still is a competitive advantage in emerging markets; they provide numerous resources, reduced production costs, large consumer areas and favourable demographic patterns. Today, major businesses run across borders, making use of global supply chains and gaining some great benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser may likely aver.