Rethinking Industrial Policy for Global Supply Chain Resilience: A Comparative Analysis of National Strategies and International Spillovers

As global supply chains face increasing disruptions due to pandemics, geopolitical tensions, and climate change, governments are exploring industrial policies aimed at enhancing resilience. This paper examines the theoretical foundations, implementation strategies, and governance challenges of these policies within the context of world trade rules. Using a threecountry model with sequential production and random disruptions, we analyze four key policy interventions—entry subsidies, production subsidies, tariffs on inputs, and export bans—to understand their impact on supply chain stability. Our results reveal that while entry subsidies reduce volatility at a high cost, small production subsidies may improve global welfare without significantly reducing supply fluctuations. Tariffs create a prisoner’s dilemma, and export bans can lead to inefficient outcomes without international cooperation. We highlight the importance of competition, strategic policy design, and focusing on critical sectors for enhancing resilience. Finally, we propose measures to improve international collaboration, such as expanding data collection and monitoring of global value chains, and discuss potential reforms to international trade frameworks to better accommodate resilience objectives.