Industrial policy has re-emerged as a central tool for policymakers and is increasingly justified in terms of national security.[1] Beneath this securitized framing lies a more specific logic: States are no longer just supporting industries, but engineering chokepoints of a different kind than those classically associated with geography or infrastructure. Where traditional chokepoints control physical passage – a strait, a border, a port – industrial policy chokepoints operate through control over inputs, technologies, and production capacity themselves, deliberately concentrated to gain leverage over rivals or to insulate against being leveraged in turn. This distinction runs through the rest of this piece: subsidies that pull strategic production inward, and export restrictions that withhold critical inputs outward, are treated here as two faces of the same underlying logic – industrial policy as chokepoint. This dynamic defines the US-China geoeconomic rivalry, and export dependencies are shaping the EU's industrial policies in turn.[2]
Engineering Domestic Chokepoints Through Industrial Policy
Since 2018, the US has pursued technological leadership over China through an expanding array of industrial policies designed to control, rather than merely participate in, strategic supply chains.[3] The 2022 Inflation Reduction Act (IRA) exemplifies the inward-pulling variant of this logic: it subsidizes domestic clean-technology development and seeks to reshore battery production, shifting a critical chokepoint back onto US soil. The EU responded in kind with the 2023 Green Deal Industrial Plan, enabling Member States to provide support schemes for clean technology industry while de-risking from certain countries by restricting access to them – an acknowledgment that dependency itself is a vulnerability, and an implicit admission that the EU, too, is building chokepoints of its own. As part of the GDIP, the EU's Net-Zero Industry Act embeds resilience criteria into public support schemes, capping reliance on any single third-country supplier at 50% for strategic technologies, precisely to prevent any one supplier from becoming a chokepoint over the Union.[4]
The instrument of choice for engineering these inward chokepoints is the local content requirement (LCR), which remains widely used despite stringent GATT/WTO restrictions and their trade-reducing effects. Past GATT/WTO jurisprudence has delegitimized even government-directed "voluntary" commitments to local content, aimed at preventing circumvention of trade disciplines through disguised LCRs. The IRA became a test of this jurisprudence: in March 2024, China challenged several IRA tax credits – including the Clean Vehicle Credit and various renewable energy credits – arguing they favoured US products over Chinese ones. China claimed this violated the national treatment rule under Article III:4 of the GATT 1994, the TRIMS Agreement, and the prohibition on subsidies conditioned on using domestic over imported goods under the Subsidies and Countervailing Measures Agreement (SCM Agreement), with the Clean Vehicle Credit also breaching the most-favoured-nation principle under Article I:1 GATT. The Panel ruled against the US, finding the domestic-content credits breached Article III:4 GATT and were prohibited subsidies under Articles 3.1(b) and 3.2 SCM, conditioned, even if not solely, on favouring domestic over imported goods[5]. Yet the US has appealed, leaving the ruling unimplemented – a sign that legal condemnation alone does little to deter States from using discriminatory subsidies as chokepoints, exposing the limits of trade law in the face of industrial policy driven by economic coercion.
Export Controls and the Externalization of Chokepoint Power
Where subsidies pull strategic capacity inward, export restrictions withhold it outward – the other face of the same logic. Supply chain exposure to critical raw materials, where third-country dominance creates coercive potential, illustrates this clearly. China exercises this through export controls that stop short of outright bans, yet whose approvals can take months, leaving companies without a licence in prolonged uncertainty. In retaliation for the US "Liberation Day" tariffs, China added lithium-battery materials, superhard materials, and rare earth elements to its export control list on 9 October, asserting extraterritorial reach for the first time. This is not without precedent: in China - Rare Earths (DS431), a WTO Panel found China's export duties, quotas, and trading rights restrictions on rare earths, tungsten, and molybdenum inconsistent with Articles XI:1 and X:3(a) of the GATT 1994 and China's Accession Protocol, rejecting China's claim that the restrictions were justified as conservation under Article XX(g), finding instead that they secured preferential access for domestic industry.[6] That dispute already exposed how control over upstream raw materials functions as an industrial policy tool in its own right – one capable of being repurposed as a geopolitical chokepoint to constrain downstream manufacturing, from semiconductors to clean technology.
Export restrictions on critical materials are ultimately self-defeating: they drive up global prices, distort markets and supply, and invite retaliation in kind, entrenching the very zero-sum, geoeconomic chokepoint dynamics they were meant to counter. The latest OECD inventory of Export Restrictions on Critical Raw Materials confirms this trend, recording a fivefold increase since 2009 and a record high in 2024.[7]
A recent example, following the EU's July 2026 sanctions package against Russia, which designated a number of Chinese entities, illustrates this dynamic clearly. Beijing retaliated within days by imposing export controls on dual-use items targeting fourteen EU defence and technology industries, while prohibiting third-country companies from transferring China-origin dual-use goods to those same entities.[8] The episode shows how control over upstream chokepoints lets Beijing coerce the EU not only by targeting its industrial base directly, but by threatening, over time, to cut off the inputs on which that base depends.
From Geographic to Regulatory Chokepoints
Taken together, these episodes point to a broader shift in what economic coercion, national security, and chokepoints actually mean. Chokepoints are decreasingly a matter of physical geography, borders, or military capability alone, and increasingly a matter of who controls the supply chains, infrastructure, and industrial inputs on which modern economies depend - the essence of geoeconomics. Leverage here is coercive in a different sense: influence over rare earths, refining capacity, or critical industrial inputs confers quiet but far-reaching power over defence, energy, and advanced technology sectors, constituting a non-physical chokepoint alongside more traditional ones like a strait or a border crossing.
