Italy minister: joining China's Belt and Road was 'atrocious' decision
www.reuters.com
The "improvised" decision multiplied Chinese exports to Italy, but failed to do the same for Italian exports, he said.

The decision to join the Silk Road multiplied China’s exports to Italy but did not have the same effect on Italian exports to China, Italian Defence Minister Guido Crosetto said. “The issue today is: how to walk back [from the BRI] without damaging relations [with Beijing], because it is true that China is a competitor, but it is also a partner,” Crosetto added. Italy signed up to the BRI under a previous government, becoming the only major Western country to have taken such a step.

  • tal
    5•11 months ago

    “The decision to join the (new) Silk Road was an improvised and atrocious act” that multiplied China’s exports to Italy but did not have the same effect on Italian exports to China, Crosetto told the Corriere della Sera newspaper.

    I’m not saying that BRI involvement is a positive for Italy, but balance of trade isn’t normally the metric one would expect to use for determining whether a project is a good idea for a country.

    That’s for two reasons.

    First: the trade balance with the rest of the world.

    When a country exports, it will normally maintain a long-run trade equilibrium with the rest of the world. If I run a persistent trade deficit, then my currency will tend to weaken; my wages will fall in real terms. It will become harder for me to import (since it’s harder for me to afford the things I want from abroad) and easier for me to export (since my labor costs parties abroad less). If I run a persistent trade surplus, then my currency will tend to strengthen, and the reverse happens.

    Second, even aside from that, there’s nothing intrinsically problematic in running a trade deficit with specific trade partner; one will tend to run a surplus with another partner in that case. Country A can be a net exporter to Country B, Country B to Country C, and Country C to Country A. In fact, it’d probably be a bit odd if all countries maintained a neutral trade balance with each other; the gains in trade leverages comparative advantage, and unless each country produces the thing that it is particularly good at producing in relative terms and that thing is wanted by other parties in equal ratios, you would expect imbalances with individual trade partners to exist.

    In Italy’s case, true, there are a few more complications because Italy is on the euro, but the same process happens, albeit less smoothly.

    The way to win via trade isn’t via trying to run a persistent trade surplus with the rest of the world. Take a hypothetical world where a country banned imports, but exports were still permitted. People in that country either (less-efficiently) produce what they would have imported from the rest of the world, or simply go without. Over time, it will become harder and harder to export as the currency strengthens, and those exports will come to a trickle, and then stop, and you have an autarky.

    A country overall wins via trade when it leverages comparative advantage – trying to get a given thing that one wants produced as efficiently as possible, and leveraging the fact that different countries can produce things more-efficiently. All else held equal, it tends to want fairly unrestricted trade to do that, including imports.

    There are deviations from that. National security may be an externality. I may not want to rely on importing a strategic resource like steel from a country that might be my opponent in a war, for example. But the goal isn’t normally to try to maximize net exports.

    A couple of hundred years back, the idea that that was how one maximized a country’s advantage was kind of common in Europe; that was mercantilism. But that was debunked hundreds of years ago.

    Mercantilism is a nationalist economic policy that is designed to maximize the exports and minimize the imports for an economy. In other words, it seeks to maximize the accumulation of resources within the country and use those resources for one-sided trade. It promotes imperialism, colonialism, protectionism, currency manipulation, and tariffs and subsidies on traded goods to achieve that goal.

    The policy aims to reduce a possible current account deficit or reach a current account surplus, and it includes measures aimed at accumulating monetary reserves by a positive balance of trade, especially of finished goods. Historically, such policies might have contributed to war and motivated colonial expansion.[1] Mercantilist theory varies in sophistication from one writer to another and has evolved over time.

    Mercantilism promotes government regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers. High tariffs, especially on manufactured goods, were almost universally a feature of mercantilist policy.[2] Before it fell into decline, mercantilism was dominant in modernized parts of Europe and some areas in Africa from the 16th to the 19th centuries, a period of proto-industrialization.[3] Some commentators argue that it is still practised in the economies of industrializing countries,[4] in the form of economic interventionism.[5][6][7][8][9]

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    • tal
      4•11 months ago

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      Mercantilism became the dominant school of economic thought in Europe throughout the late Renaissance and the early-modern period (from the 15th to the 18th centuries). Evidence of mercantilistic practices appeared in early-modern Venice, Genoa, and Pisa regarding control of the Mediterranean trade in bullion. However, the empiricism of the Renaissance, which first began to quantify large-scale trade accurately, marked mercantilism’s birth as a codified school of economic theories.[2] The Italian economist and mercantilist Antonio Serra is considered to have written one of the first treatises on political economy with his 1613 work, A Short Treatise on the Wealth and Poverty of Nations.[10]

      England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in Discourse of the Common Wealth of this Realm of England, 1549: “We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.”[11] The period featured various but often disjointed efforts by the court of Queen Elizabeth (r. 1558–1603) to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping.

      Scholars debate over why mercantilism dominated economic ideology for 250 years.[42] One group, represented by Jacob Viner, sees mercantilism as simply a straightforward, common-sense system whose logical fallacies remained opaque to people at the time, as they simply lacked the required analytical tools.

      The second school, supported by scholars such as Robert B. Ekelund, portrays mercantilism not as a mistake, but rather as the best possible system for those who developed it. This school argues that rent-seeking merchants and governments developed and enforced mercantilist policies. Merchants benefited greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers. Governments benefited from the high tariffs and payments from the merchants. Whereas later economic ideas were often developed by academics and philosophers, almost all mercantilist writers were merchants or government officials.[43]

      Monetarism offers a third explanation for mercantilism. European trade exported bullion to pay for goods from Asia, thus reducing the money supply and putting downward pressure on prices and economic activity. The evidence for this hypothesis is the lack of inflation in the British economy until the Revolutionary and Napoleonic Wars, when paper money came into vogue.

      A fourth explanation lies in the increasing professionalisation and technification of the wars of the era, which turned the maintenance of adequate reserve funds (in the prospect of war) into a more and more expensive and eventually competitive business.