The Conundrum of Industrial Policy: Incompatibility with the Rules of International Trade Law

Authors

Yong-Shik Lee, West Virgina University College of LawFollow

Abstract

Since the end of World War II, successful developing countries such as South Korea, Taiwan, Singapore, and, more recently China, have leveraged industrial policies—notably trade measures and subsidies—to achieve economic development. However, these industrial policy tools often conflict with the rules of international trade established under the World Trade Organization (WTO law), which aims to minimize government interference and reduce trade distortions. Paradoxically, such regulatory constraints hinder the development aspirations of many countries. Meanwhile, major global economies, including the United States, China, and the European Union, have revived industrial policies to support their key industries, such as semiconductors and electric vehicles, in contravention of WTO law. Some countries, such as the United States, have also attempted to justify WTO-inconsistent measures by invoking the national security defense under GATT Article XXI. This article explores the inherent conflict between industrial policy and international trade law, analyzes the resurgence of industrial policy in the advanced economies, examines the feasibility of national security defense, and argues for regulatory reforms to reconcile these tensions.

Recommended Citation

Yong-Shik Lee, The Conundrum of Industrial Policy: Incompatibility with the Rules of International Trade Law, 46 Nw. J. Int'l L. & Bus. 1 (2026).
https://scholarlycommons.law.northwestern.edu/njilb/vol46/iss1/1