Industrial policy — the use of governments’ fiscal powers to influence the level or direction of private-sector activity — has come back into focus in recent years, in light of developments such as the COVID-19 pandemic and the Russian invasion of Ukraine. These events have demonstrated some of the supply chain and economic risks associated with losing domestic manufacturing capacity. This has prompted some of our allies — particularly the United States — to undertake major industrial policy initiatives such as the Inflation Reduction Act and the CHIPS and Science Act.
There has also been a recognition that some of our biggest policy challenges require accelerated private-sector action and major capital investments. Addressing climate change and supply chain risk are two among many such challenges where governments need companies to respond in ways that support national policy objectives. Industrial policy is not the only tool in the toolbox, but it is an understudied one in Canada relative to legislative and regulatory interventions.
