The Effect Analysis Of Industrial And Trade Policies For Emerging Industries

After the financial crisis of 2007, countries in the world have drawn up policies to promote their emerging industries, including China. Under this background, this paper is concerned with the various effects on the emerging industries imposed by industrial and trade policies, which are designed to provide a theoretical reference for the policy making of government.Based on the Cournot duopoly model under different products, this paper studied the effects of government R&D subsidies and export tax rebate policy theoretically, and then took the manufacture of medicines as an empirical example. The study chose policy variables, macroeconomic variables and industry development variables respectively to find the real effects of government trade and industry policies using the time series analysis. The main conclusions are as follows:(1) Government R&D subsidies and export tax rebate policy can both effectively increase their output and profits, thus contributing to the development of domestic industries, in the case of unilateral policies, showing the trade diversion effect and profit-shifting effect of industrial and trade policies. In addition, if the government uses R&D subsidy policy, it can invest less funds to reach equilibrium.(2) Under different policies, the degree of product differentiation can differently influence the domestic manufacturers. When the government adopts R&D subsidy policy, the effect of horizontal difference is unclear; if the vertical difference increases, the domestic firms'output, price of products will increase, then the profit will increase. When the government adopts export tax rebate policy, if the horizontal difference decreases, firms'output, prices and profits will decrease. The effect of horizontal difference in this circumstance is similar with that under government R&D subsidy policy.(3) In the long run, the country's overall economic development plays a decisive role for the industry. Government R&D subsidy policy can make the manufacturers increase investment in R&D. what's more, it can effectively promote the emerging industries. In the short run, the most significant factor for emerging industries is the country's exchange rate. Export price level and export tax rebate have significant impact both in the long-run and short-run.(4) In the policy radiation effects, mode of action, onset time and implementation modalities, there exists a lot of difference between the government R&D subsidy and export tax rebate policy. Compared to the export tax rebate policy, government R&D subsidy policy has stronger radiation effects and longer policy hysteresis. It can also improve product quality more effectively, but is more dependent on firms.Based on the above conclusions, this paper puts forward policy recommendations:Enhancing the manufacturers'independent innovation capability, and promoting the core competitiveness; Improving the export tax rebate policy to promote the position of emerging industries in the export tax rebate policy; Putting continuous attention to the reform of RMB exchange rate formation mechanism, and maintaining a stable trade environment; Accelerating industry restructuring and upgrading, and promoting our industry's position in the international industrial chain; Ensuring sustained, healthy and rapid development, and creating good environment to industry development.