**Introduction** Governments should play a targeted, rules-consistent, and performance-based role in protecting strategic industries and critical technologies. Intensifying industrial policy, supply-chain concentration, and geopolitical competition have made state intervention a structural feature of the global economy. The appropriate role is not blanket protectionism, but calibrated intervention that corrects market failures, mitigates national security risks, and limits systemic spillovers. The effectiveness of protection depends on governance discipline, transparency, and compatibility with multilateral trade principles. **Core functions of government protection** **1.** **Correcting market failures and enabling technological upgrading** Strategic industries such as semiconductors, advanced manufacturing, and clean energy technologies generate significant spillovers in research, workforce development, and ecosystem formation. Because these sectors are characterized by high fixed costs, uncertain returns, and coordination failures, private investment may fall short of socially optimal levels. Targeted public investment in research and development, early-stage commercialization, and enabling infrastructure can therefore support capability formation and technological upgrading. When embedded within coordinated industrial ecosystems — linking suppliers, manufacturers, and research institutions — such support can shorten innovation cycles and deepen production capacity. At the same time, industrial policy carries fiscal and efficiency risks. Large-scale subsidy programs can distort trade and investment flows, particularly when multiple economies adopt similar measures simultaneously[1]. To mitigate these risks, support mechanisms should be time-bound and performance-based, reducing the likelihood of entrenched inefficiency and excess capacity. **2.** **Mitigating strategic and supply-chain vulnerabilities** Critical technologies and key inputs are often geographically concentrated, increasing exposure to disruption and potential coercive leverage. Processing capacity in sectors such as critical minerals and advanced manufacturing nodes remains highly concentrated in a small number of economies. This concentration heightens systemic vulnerability to supply shocks and geopolitical tensions. Governments therefore have a legitimate role in reducing excessive dependency through diversification strategies, strategic stockpiles, investment screening, and carefully designed export controls on dual-use technologies. The objective should be resilience rather than autarky. At the same time, fragmentation driven by security-oriented trade and investment measures can impose measurable long-term output losses across the global economy[2]. Overly broad localization requirements or sweeping trade restrictions may raise costs and slow technological diffusion without materially strengthening security. **3.** **Preserving multilateral discipline and limiting systemic spillovers** Trade-restrictive measures, including tariffs and industrial subsidies, have increased in frequency in recent years, contributing to greater policy uncertainty and slower trade growth[3]. Local content measures and subsidy escalation can further distort competition and reduce efficiency across integrated supply chains[4]. In this context, governments should anchor strategic protection in transparent notification, review, and dispute settlement frameworks. Strengthened subsidy disciplines, improved transparency, and operational dispute resolution mechanisms are central to preventing retaliatory cycles and limiting systemic fragmentation. Where consensus-based multilateral reform remains slow, open plurilateral arrangements can help update rules while preserving institutional coherence. Protection that remains consistent with World Trade Organization principles is less likely to trigger destabilizing retaliation. **Conclusion** Governments should intervene in strategic industries and critical technologies where market failures, security vulnerabilities, and systemic externalities are substantial. Effective intervention should be targeted, transparent, time-bound, and performance-based, prioritizing ecosystem development, supply-chain resilience, and innovation capacity rather than permanent insulation from competition. Excessive or open-ended protection risks subsidy escalation, fragmentation, and weaker productivity growth. Conversely, insufficient intervention may result in technological dependency and strategic exposure.
