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Government aid to industry in the industrial countries increased substantially between 1973 and 1983 and measures to influence trade – largely non-tariff barriers against imports – proliferated. Since then the industrial countries' direct subsidisation of some industries may have declined, but they have significantly increased their use of non-tariff barriers to trade,* perhaps using such barriers as a substitute for domestic industrial policy measures.

Industrial policy can be broadly defined as the deliberate attempt by a government to influence the level and composition of a nation's industrial output. Thus defined, it encompasses a wide variety of government actions, including those to improve the industrial infrastructure and to enhance national labour mobility and efficiency. This article takes a somewhat more limited view, being concerned mainly with government actions to foster specific industries, either so as to shift resources to activities that will use them more productively in support of adjustment goals, or to maintain resources in existing activities for security, political, or other reasons. The focus is thus largely on the more defensive aspects of such policies.

Industrial policies are implemented both through domestic measures such as subsidies and tax incentives, and through trade actions, such as tariffs and quantitative restrictions. The article looks both at policies' domestic effects and at how they may affect trade flows, in particular those of developing countries.