What is meant by 'strategic trade' in international economics?

'Strategic trade' refers to the concept where governments intervene in specific industries to boost their competitiveness in international markets. This intervention can take the form of subsidies, tariffs, or other regulatory measures aimed at supporting certain sectors deemed vital for national economic interests. By doing so, governments aim to create a favorable environment for their domestic firms to succeed against foreign competition, thereby enhancing their overall economic power.

Countries that employ strategic trade policies often target industries that are characterized by high levels of research and development, significant technological advancements, or those that require substantial capital investments. The underlying idea is that by supporting these areas, a nation can establish a competitive advantage, leading to increased exports and improved trade balances.

The other options do not align with the concept of strategic trade. Unrestricted trade practices do not involve government strategy, while self-sufficiency does not consider competitiveness in international markets. Promoting free trade without government intervention contradicts the essence of strategic trade, which inherently involves active government involvement to shape market dynamics.