Industrial policy has evolved from being viewed as market-distorting intervention to re-emerging as a central instrument of economic strategy. Major economies are actively deploying subsidies, local content requirements, supply-chain controls, and state-backed financing to secure strategic sectors ranging from semiconductors to clean energy. At the same time, discussions on reforming the World Trade Organization (WTO) are intensifying. The renewed centrality of state intervention, particularly amid geoeconomic rivalry and technological transformation, has brought industrial policy and WTO disciplines into direct tension. The debate has shifted from the legitimacy of industrial policy to its governance mechanism in the current rules-based trade order.

This tension reflects a deeper divergence in perspectives. Developed countries like the US and EU increasingly attribute global imbalances to unfair trade practices, excessive industrial subsidies, and market distortions that generate overcapacity and undermine competitive neutrality. From this standpoint, stronger disciplines under the Agreement on Subsidies and Countervailing Measures (ASCM) under WTO are essential to  enhance transparency, and stricter enforcement  and restore fairness in global trade. Reform proposals from these countries  therefore emphasise tightening subsidy rules and expanding notification requirements. From developing countries perspective, global imbalances are interpreted through the lens of structural inequities embedded in the international economic system.