The classic example of when this worked was with commercial aircraft. The United States did this with Boeing – by guaranteeing them military aircraft contracts, the US government effectively subsidized them, allowing Boeing to surmount the high costs of entry into the commercial aircraft market. Japan practiced this more directly through government intervention and through setting targets. Realists support strategic trade theory, because it tends to increase the relative economic power of the state. Green energy – an emerging market where strategic trade could perhaps work. Liberals argue that strategic trade doesn’t really work – there are only a few markets where it applies, and it is difficult, if not impossible, to predict which technologies will actually take off and become profitable – government investment in technologies that don’t make it in the consumer market is wasted – better to simply rely on trade. Furthermore, by subsidizing one domestic industry, the government is basically choosing
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This note was uploaded on 11/25/2011 for the course POLISCI 1003 taught by Professor Olson during the Fall '11 term at GWU.