With a record at 16.8 billion euros in September, the deficit for trade in goods puts France on track for a historically poor annual balance sheet in terms of foreign trade and a still gloomy year 2023. The trade deficit of France reached 149.9 billion euros over one year, the largest of the countries in the euro zone. An endemic evil since the French trade balance has been in deficit for 20 years. So how to reverse the trend?
One country did it before the energy crisis: Italy, and in less than ten years.
Investments to modernize the industry
In 2004, the Italian trade balance showed a deficit of one billion euros. Eight years later, in 2012, it generates more than nine billion euros in surpluses. This success is primarily due to the modernization of Italian industry in the 2000s, according to economist Marc Touati, while France was slow to invest. “Italy has staked everything on its industry in the north, on certain textile products, but also on the level of certain capital goods. This is where Italy was able to go from a chronic deficit to a fairly large surplus. “, he says to Europe 1.
New economic disaster for the #France : in September, the French trade deficit reached a historic triple record: 17.5 billion euros over one month, 47.6 billion over 3 months and 149.9 billion over one year.
And the nightmare is unfortunately not over… pic.twitter.com/BH0w8QDrLV
— Marc Touati (@MarcTouati) November 8, 2022
This upscaling of Italian industry was driven by German and Swiss orders. But our Italian neighbor has also been able to bet on emerging markets, such as China, with which it signed trade agreements worth more than two billion euros in 2010.
Finally, Italy has carried out major reforms to reduce taxation, at the cost of reducing public spending. “By reducing the cost of labor, not by reducing wages but in particular the charges that weigh on wages in Italy, it has managed to regain a certain competitiveness”, notes Marc Touati.
However, these trade surpluses have not allowed Italy to return to the path of growth, which is still below its level before the financial crisis. And the energy crisis could also destroy the trade surpluses of Italy, which is very dependent on energy imports.