**Introduction** Industrial policy can drive both international competition and cooperation because governments use it to strengthen domestic industries while remaining dependent on global trade, investment, and supply chains. Policies targeting sectors such as semiconductors, clean energy, and critical minerals intensify competition for technological leadership and market share, while also creating incentives for cross-border coordination and strategic partnerships. **Contextual background** Industrial policy refers to government measures designed to shape economic activity and strengthen specific industries through tools such as subsidies, public investment, regulation, tax incentives, and strategic planning. Since the late 2010s, industrial policy has expanded significantly as governments respond to supply chain disruptions, geopolitical tensions, and climate transition goals. Industrial capacity is increasingly viewed as a strategic asset linked to economic security and resilience[1][2]. At the same time, global production networks remain highly interconnected, making international cooperation necessary even amid growing economic rivalry. **How industrial policy drives competition** **1.** **Competition for technological and industrial leadership** Industrial policy intensifies international competition by encouraging governments to build dominance in strategic sectors. States compete to attract investment, secure technological advantages, and expand export capacity in industries considered critical for future economic growth and national security. China’s industrial policy illustrates this dynamic clearly. Large-scale state support, ecosystem coordination, and targeted investment helped China establish dominant positions in solar photovoltaic manufacturing, electric vehicle batteries, and advanced manufacturing sectors[3]. In response, other economies introduced their own industrial strategies to reduce dependence on foreign suppliers and strengthen domestic production capacity. This competitive dynamic has contributed to subsidy races, export controls, and local content requirements across sectors linked to semiconductors, clean energy technologies, and advanced manufacturing[4]. **2.** **Strategic competition over supply chains and critical minerals** Industrial policy also drives competition through efforts to secure supply chains and critical inputs. Governments increasingly seek preferential access to critical minerals, advanced components, and high-technology manufacturing ecosystems. Competition over lithium, cobalt, rare earth elements, and semiconductors reflects concerns about economic vulnerability and geopolitical leverage[5]. Countries now use industrial policy tools such as investment screening, export restrictions, reshoring incentives, and strategic stockpiling to reduce external dependence and strengthen resilience. These measures reshape comparative advantage and alter trade flows by prioritizing strategic alignment alongside economic efficiency. **3.** **Fragmentation of trade and investment systems** As industrial policy becomes more interventionist, it can fragment international trade relations. Subsidies, tariffs, and domestic preference measures often create tensions within the multilateral trading system, particularly when countries perceive foreign industrial support as unfair or trade-distorting. World Trade Organization monitoring reports show sustained growth in trade-restrictive measures and rising tensions linked to industrial subsidies and strategic trade policies[6]. This has increased disputes over market access, state support, and competitive neutrality, contributing to a more fragmented global trading environment. **How industrial policy drives competition** **1.** **Cooperation through integrated supply chains** Despite intensifying competition, industrial policy also creates incentives for cooperation because modern industries depend on globally distributed production networks. No major economy possesses all the resources, technology, processing capacity, and manufacturing capabilities required for sectors such as semiconductors or clean energy. As a result, governments increasingly pursue “friend-shoring” and strategic partnerships to diversify supply chains while maintaining reliable access to essential inputs[5]. Cooperation emerges through joint investment projects, long-term procurement agreements, and coordinated industrial strategies among politically aligned economies. For example, critical minerals partnerships and semiconductor cooperation frameworks seek to balance resilience objectives with continued cross-border integration. **2.** **Cooperation on climate and clean energy transitions** Industrial policy linked to climate goals has encouraged cooperation in clean energy deployment and technology diffusion. Subsidies and public investment in renewable energy, batteries, and low-carbon technologies have accelerated global production capacity and reduced costs internationally. China’s large-scale industrial expansion in solar photovoltaic manufacturing contributed significantly to global declines in solar module prices over the past decade, increasing affordability worldwide[3]. Although this created competitive tensions, it also supported broader international climate objectives by expanding access to renewable energy technologies. Cross-border cooperation is also necessary for developing energy infrastructure, harmonizing standards, and financing climate-related industrial transformation. **3.** **Institutional and plurilateral cooperation** Industrial policy has increased the importance of international coordination mechanisms to manage trade tensions and maintain economic stability. Governments increasingly rely on plurilateral arrangements, regional agreements, and issue-specific frameworks to coordinate industrial and trade policies. Examples include cooperation on digital trade standards, supply chain resilience initiatives, and strategic technology governance[7]. While these arrangements sometimes emerge outside traditional multilateral institutions, they demonstrate that industrial competition often requires parallel forms of institutional cooperation to reduce instability and preserve market access. **Conclusion** Industrial policy increasingly functions as both a competitive and cooperative tool in the global economy. Governments use it to strengthen strategic industries, secure technological leadership, and reduce vulnerabilities, intensifying competition over markets and supply chains. At the same time, the interconnected nature of modern production systems requires continued cooperation through partnerships, coordinated investment, and shared industrial and climate objectives.
