What are the arguments against strategic trade policy? What would happen then if we let government intervene to support domestic firms in order to help them gain first-mover advantages?
- Retaliation and trade war
Establishing domestic firms in a dominant position in a global industry with the help from the government will boost national income at the expense of other countries leading to retaliation(=revenge) and finally a trade war.
- Domestic policies
Some governments might not act upon the common good of the country, but rather support specific groups with great political influence.