it is with this point in mind that I turn to the second justification for strategic trade policy, which is the idea that certain key industries exhibit positive externalities that should be promoted by the government to increase national welfare. Although Brander implies that this kind of policy is not properly “strategic” because it does not condition or alter a strategic relationship between firms,14 most of the literature considers it under the same heading as “strategic tradepolicy,” and not without reason. In this case, the government still acts strategically, but under the pretext of competing with other countries to promote industries in which the social benefits of output are not entirely represented in private returns. The concern here is that the benefits to national welfare of these externalities will be lost if a government does not act strategically to ensure that such industries are located within the country’s borders. It is important to note that this is differs from the “infant industry” argument, which I will not consider here, because the goal is to ensure that established and sizeable firms in these industries do not relocate abroad for