By Sekkat Khalid Buigues Pierre
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Extra info for Industrial Policy in Europe, Japan and the USA: Amounts, Mechanisms and Effectiveness
If one sees competition policy as the fight against any kind of monopolization, collusion and other restrictive practices (labelled ‘strong’) and trade policy as the steady progress towards free trade (labelled ‘low’), there may be little room for public support to business, and so conflicts are likely. The best policy mix is not very realistic in practice. First, the services or the people in charge of one of these policies may not be aware of what is done by the services in charge of the other policies.
1 Identifying instruments Broadly speaking, one can distinguish two categories of instruments, namely structural and monetary. g. tariff and non-tariff barriers to trade, merger policy, protection of intellectual property and regulation). g. grants, tax breaks, or public procurement). 20 Argument Against Public Support 21 Depending on the nature of market failure or externality to alleviate, different types of industrial policy resort to various policy tools better adapted to attaining the policy targets.
Innovative) activities and long-term projects, there is uncertainty about future profitability. If the investment returns ate hazy, market forces may be unlikely to ensure the implementation of such projects. Externalities are a separate case of market failure and they generate sub-optimal market solutions. Knowledge externalities are one of the most common examples of externalities. The most efficient means of correcting for externalities is to ‘internalize’ the costs and benefits. However, internalization is not always possible and public intervention for supporting innovation activity can contribute to total welfare by enabling productivity growth and restructuring.