Tag Archives: trade subsidies

World Bank Sorry for Mistakes of 30 Years

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World Bank on March 17, 2026 confessed to an error of more than three decades duration, moving to embrace industrial policy as tariffs, subsidies and a variety of other interventions become increasingly popular with governments in search of growth. Back in 1993, the bank published an assessment of the rapid economic growth achieved by some economies in east Asia, and which appeared to owe something to government interventions in support of selected industries. The bank controversially concluded that their economic success had nothing to do with those interventions, which it instead described as a “costly failure.” As World Bank Chief Economist Indermit Gill wrote in a new report, that conclusion helped “stigmatize” industrial policy just as a leap forward in transport and communications technologies spurred a period of intense globalization. Instead, governments were encouraged to let markets operate without direction or barriers to trade, while keeping inflation low and budget deficits narrow and backing investment in education and vital infrastructure. “That advice has not aged well—it has the practical value of a floppy disk today,” wrote Gill.

Taking a fresh look at the evidence, the new report concludes that the South Korean government’s “big push” during the 1970s in support of heavy industry and chemicals has resulted in the economy being 3% larger each year. In other words, it was very much not a failure, nor was it particularly costly.

Despite the stigma, many economies never entirely lost faith in industrial policy. Indeed, China resorted to a wide variety of interventions during its period of record growth. In emulation, many rich economies—including the U.S.—have begun to implement industrial policies. “Industrial policy—the range of policy tools that governments use to shape what an economy produces rather than leave it to the discretion of markets alone—is back with a vengeance,” the bank said.

Excerpt from Paul Hannon, World Bank Embraces Industrial Policy, Abandoning Three Decades of Stigma, WSJ, May 17, 2026

The New Opium War: How the World Got Addicted to China

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 A fundamental axiom of economics is that when two individuals or countries trade, both are better off. In the decades after World War II, the U.S. was the world’s largest exporter and economy and as it grew, it imported more, helping its partners. As they grew, they bought more of what the U.S. made. Expanding trade helped everyone specialize, leading to more competition, innovation and choice, and lower costs.

China is now the world’s second-largest economy and its largest exporter, but its philosophy is quite different. It has never believed in balanced trade nor comparative advantage. Even as it imported critical technology from the West, its long-term goal was always self-sufficiency. In 2020, Chinese leader Xi Jinping codified this approach as “dual circulation.” This would, he said, “tighten the international industrial chain’s dependence” on China while ensuring China’s production was “independent” and “self-sustaining.”

And as China expands into high-end manufacturing such as aircraft and semiconductors, Xi has decreed it must not relinquish low-end production such as toys and clothes. Beijing has discouraged Chinese companies that invest abroad from transferring key know-how, such as in the production of iPhones and batteries. Xi has rejected fiscal reforms that would tilt its economy away from investment, exports and saving and toward household consumption and imports.

Excerpt from Greg Ip, World Pays a Price for China’s Growth, WSJ, Dec. 6, 2025

Subsidize Exports: US Export-Import Bank

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[T]he Export-Import Bank of the U.S., which was so successful at expanding exports that scores of other nations have copied the model. Now — for the second time in a year — small-government advocates are trying to abolish the bank, saying it distorts the free market by using tax dollars to pick business winners and losers. …

Unless Congress acts, the Export-Import Bank’s lending authority will expire June 30, 2015. Tea Party Republicans, who want to limit government intervention in the free market, say the bank provides a form of corporate welfare. Some airlines, including Delta, say the bank’s loan guarantees for Boeing jets unfairly subsidize its international competitors. Congress is now considering four bills that would reauthorize the lender with some reforms. But Republican Representative Jeb Hensarling, head of the House committee that oversees the bank, is still calling for its abolition.

The Export-Import Bank was started by President Franklin D. Roosevelt in 1934 as a New Deal program to boost exports….It provides loan guarantees, loans and insurance to help foreign companies — sometimes those with less-than-perfect credit — buy U.S. goods when private banks can’t or won’t make loans in industries including aerospace, energy and manufacturing. Though Democrats widely support Ex-Im, Barack Obama criticized it while campaigning for president in 2008, calling it “little more than a fund for corporate welfare” at a time when opposition to government spending, triggered by the bailouts that year, was growing. Ex-Im authorizationssoared, reaching a peak of $114 billion in total outstanding financial commitments at the end of fiscal 2013, from $58 billion in 2008. President Obama now supports Ex-Im reauthorization.

In May 2015, the U.S. Chamber of Commerce began a national ad campaign in favor of the bank, arguing that without it, jobs might be lost to competitors in China or Russia. …[Another issue] is “corruption” at Ex-Im, after a former bank employee pleaded guilty to accepting over $78,000 in bribes between 2006 and 2013. While about 90 percent of Ex-Im’s deals help U.S. small businesses, an analysis by Veronique de Rugy, a bank critic at George Mason University, found that Boeing benefited from about 30 percent of the bank’s authorizations in 2013.

Excerpt from : Brian Wingfield, U.S. Export-Import Bank: From Apple Pie to Endangered Species, Bloomberg, June 25, 2015