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Subject Area: Economics
Topic: Free Trade

CHAPTER XVII: TARIFF WAR BETWEEN FRANCE AND ITALY - Yves Guyot, The Comedy of Protection [1906]

Edition used:

The Comedy of Protection, trans. M.A. Hamilton (London: Hodder and Stoughton, 1906).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


CHAPTER XVII

TARIFF WAR BETWEEN FRANCE AND ITALY

Exchange of blunders takes the place of exchange of goods—Denationalisation of industry.

On the morrow of the Franco-Prussian war the reactionary majority in the National Assembly dreamed of repairing military disaster by declaring war on Italy for the re-establishment of the temporal power of the Pope.1 The Republican party made the mistake of combining its anticlerical policy at home with hostility to Italy, and the result was the Triple Alliance, by which his most Catholic Majesty the Emperor of Austria guaranteed keeping the Italian capital at Rome against the secular French Republic—a startling enough paradox. And economic relations followed political ones. On November 15, 1886, the Italian ambassador in Paris declared that the Commercial Treaty of November 3, 1881, must terminate on January 1, 1888. The Italian Government’s proposal of negotiations delayed the final breach till February 2, 1888. On February 28th the French Government levied differential duties on certain Italian goods, and on the 29th the Italian Government retaliated. Surcharges were laid on the navies; and the exchange of goods was replaced by the exchange of reprisals. The effect of this was immediately perceived. The total volume of trade, which had risen in 1887 to £20,000,000, fell in 1888 to £12,000,000. Such a fall was excessive, and in January, 1890, tariff war ended in favour of the application to each country of a general or maximum tariff. In May, 1897, the Italian Government approached the French with a view to the re-establishment of the most favoured nation clause. France excepted silks and wines from the minimum tariff, retaining differential duties on them, and demanded a reduction of the Italian Customs tariff on certain goods. Italy consented, and the agreement was signed on November 21, 1898. The Bill ratifying it was passed almost unanimously in Senate and Chamber by the end of January, 1899.

The result of this tariff war was, from the statistics of the French Customs House, that Italian exports to France, representing in 1887 a total value of £12,308,360, fell in 1888 to £5,269,520, a net fall of 57 per cent., while the total of French exports to Italy fell 50 per cent., namely, from £13,047,520 in 1887 to £6,220,560 in 1888, and £6,433,320 in 1897. The export of French woollens fell from £803,280 to £203,240; the export of Italian wines from £3,900,160 to £41,720, and of silks from £2,874,000 to £1,691,320. It is easy to close a market, but much more difficult to open it again.

The exports from France into Italy were in 1902 £6,992,250, and in 1903, £6,639,000. Those from Italy into France were £5,965,290 and £6,779,520. So the exports from France only slightly exceeded those of 1897, and the exports from Italy to France were about £6,000,000 less than they were in 1887.

One phenomenon resulting from Protection which has been insufficiently observed is the denationalisation of industry. To escape Customs duties foreign traders remove their industry to the country in which or against which they are protected. Thus Milan finally outstripped Lyons as a silk market, as a result of the influx of Lyons merchants, who transferred their capital and their business ability thither and then competed with their native town.

On the other hand, the tariff war led to the creation of local industries in Italy, which now drive French goods from the market.

[1]Cf. Yves Guyot, “The Separation of Church and State.”