Chapter 378: Chapter 65, Integration Process
The negotiations between the North and South were still not concluded, yet the American Civil War had essentially already ended. Neither the European powers nor the American populace wanted the war to continue.

It was beyond the reversal of any individual’s will; what remained was nothing more than negotiating terms and haggling over conditions.

To show sincerity, both the North and South ceased military operations, including any ongoing mobilization efforts.

Strategically, the goal of weakening America had been basically achieved. Now all that lacked was the final treaty to fracture the United States.

But this was not merely a good thing; it also came with a series of problems. For example, the cotton and cotton textile industries in Austria were bound to be impacted.

Taking advantage of the American Civil War period when cotton production was reduced and the international market faced a cotton shortage, Austria’s cotton textile industry, with ample cotton supply, surged unexpectedly and aggressively seized the British market in the European Region.

Now, in Eastern Europe, Southern Europe, and the Central European Region, the British’s cotton textile products were gradually being pushed out of the market.

Previously, due to the insufficient supply of cotton, the cotton textile products once faced a supply-demand imbalance, and the British were powerless to do anything about the Austrian market seize.

Now it was different; with the end of the civil war, America’s cotton production would soon recover. With an adequate supply of raw materials, British capitalists would naturally make a comeback.

The market is the lifeline of every industrial country. As the first to complete the industrial revolution, the British had amassed sufficient advantages, and their industrial power once surpassed half of the world’s.

With the completion of industrialization in France and Austria, the proportion of British industry in the global industrial output has declined, but it still firmly holds the position of the world’s leading.

However, an embarrassing fact was that the world’s factory, the Great Britain Empire, long stood in a state of trade deficit.

In 1864, the British exported goods worth a total of 215 million British Pounds, while their imports totaled at 275 million British Pounds, leading to a trade deficit of 60 million pounds.

During the same period, France’s exports totaled 2.963 billion Francs, with imports from abroad amounting to 2.523 billion Francs, yielding a trade surplus of 440 million Francs (approximately 17.6 million British Pounds).

Meanwhile, Austria’s exports totaled 2.85 billion Divine Shields, with imports amounting to 2.26 billion Divine Shields, resulting in a trade surplus of 590 million Divine Shields (approximately 29.5 million British Pounds).

Not only France and Austria were in a trade surplus, but Russia as well, with exports totaling 187 million Rubles and imports at 175 million Rubles in 1864, amounting to a trade surplus of 12 million Rubles.

In an era of small international trade volumes, Russian grain exports surpassed half of the total exports, securing a trade surplus with this singular advantage alone.

Austria’s significant trade surplus owed much to agricultural exports, a crucial component since people always need to eat; the British were among Europe’s top importers of food.

In order to address the trade deficit, successive British Governments expended great efforts. There was no choice; the long-standing trade deficit was the result of insufficient domestic resources.

Fortunately, John Bull had numerous colonies, which allowed for the plundering of colonial wealth to fill this gap, or else an ordinary country would have collapsed long ago.

The Opium Wars in history were initiated by the British to offset their trade deficit.

Now that Austrian capitalists had seized the market, the British certainly would not rest on their laurels. While they would not go as far as flipping the table, such minor conflicts were not enough to cause a complete rift between the two countries.

Of course, a confrontation would be of no use; this was fair competition in business. The British let the Austrians in due to their shortage of cotton textile products; John Bull lacked the capacity to keep the market waiting.

Now with the American Civil War over, cotton production in the South might return to normal in the next year. Thanks to the benefit of labor export, this production could even potentially increase further.

The United States of America was uniquely advantaged in geographic conditions, resulting in cotton yields per acre generally higher than other regions.

Of course, if per-acre yield was insufficient, expanding the planting area would compensate, although it would mean an increase in required labor input.

Historically, the North emerged victorious, and as the losers, Southern plantation owners lost their cheap labor, severely impacting cotton production and facing market competition from India and Egypt.

However, what mattered most was that Northern capitalists needed cheap industrial raw materials and resorted to tactics such as raising tariffs and railway freight rates to deprive America’s cotton of market competitiveness.

At the present, India has not yet ramped up its cotton production, and British efforts to promote cotton cultivation in Egypt were met with resistance from France and Austria as they opened the Suez Canal in pursuit of labor.

At this moment, the only real competitor for the United States in the cotton market was West Africa.

The international market supply of cotton was not yet in surplus, so in the short term, such competition was unwise; Austria alone could consume most of West African cotton output.

However, once Indian and Egyptian cotton entered the market in the future, this competition would become intense.

Competing in the cotton textile industry against the British, and in the cotton market against the United States, Egypt, and India, posed a series of economic challenges that Franz had to consider ahead of time.

Belvedere Palace

“The agenda today consists of only two items; first, how can we ensure that our cotton textile industry retains its market share on the European Continent; second, how do we protect the interests of the cotton farmers?”

In an era where industrial and commercial products were scarce, the textile industry dominated the economy. Austria’s core industries did not include the cotton textile industry, yet due to the American Civil War, it had surged; such an opportunity could not be surrendered.

At present, in regions such as Bavaria, Württemberg, Lombardy, and Veneto, industrial workers in the cotton textile industry exceed one hundred and twenty million, with over two hundred and fifty million people engaged in the industrial chain.

So many people depended on the textile industry for their livelihoods, which directly determined that the Vienna Government must safeguard this industry; the Anglo-Austria trade dispute was inevitable.

Protecting the interest of the cotton farmers went without saying; most of the plantation owners in the colonies were Nobility.

This was determined by the national conditions of Austria; limited by economic power, average citizens owned relatively small plantations if they had them at all, and capitalists had no interest in agriculture.

Due to the redemption of domestic land, many nobles lost their lands and received a sum of redemption money, which obviously couldn’t be left to idle away.

After the opening of the colonies, many conservative nobles set their investment sights on plantations. Perhaps in later generations, farming wouldn’t be highly profitable, but in this era, the return on investment for plantations was not much lower than that of other industries.

The cotton plantations were no exception, with a large gathering of nobility; as a spokesperson for the nobility’s interest group, Franz naturally had to consider their benefits.

This was also related to everyone’s enthusiasm for opening up the colonies. Where profits could be made, the ruling class would certainly go to great lengths to maintain the colonial system, and vice versa.

Economic Minister Andrew answered, “Your Majesty, our department of economics has already prepared an emergency plan. When necessary, we can use political means to defend our domestic market and the market in Russia without major problems.

The Italian Area in the south is in the midst of a civil war, its already small market has further contracted, and it won’t be a focus in the British counter-offensive.

What remains is the Central European Region, including the German Federation, Prussia, Switzerland, Netherlands, and other regions, which is where the trade war’s main battlefield lies.

French capital might also join in, as France’s economy has also developed quite well in recent years. Should their raw material supply be guaranteed, their cotton textile products also have market competitiveness.

To enhance the market competitiveness of cotton textile products, the Department of Economics believes that when necessary, tax rebate subsidies can be given to these front-line production enterprises.”

Simple, crude, yet extremely effective. With everyone’s production techniques being not much different and product quality indistinguishable, there isn’t much advantage in production costs. To gain an advantage in market competition, it had to be a fight over policies.

In history, the British cotton industry collapsed under subsidies from various countries. Manufacturing competition is all about cost and quality, and once the technological edge is lost, the competition becomes brutal.

In this regard, Franz was powerless. Competing for a part of the British market by exploiting a timing gap had been done, and now, it was time for a competition of real strength.

The only advantage was that the British cotton industry was of a larger scale; should a financial subsidy war break out, for every million Austria spent, the British would have to spend three million.

This mutually destructive strategy was, under normal circumstances, not something anyone wanted to engage in. After all, a country has so many industries; it’s impossible to focus resources on just one.

Agricultural Minister Christian said, “Cotton and the cotton textile industry are closely linked; as long as our domestic cotton textile industry holds up, the economy of West Africa’s cotton plantations will not collapse.

To enhance the competitiveness of West African cotton, we could think of ways to tweak the tax laws, such as reducing or even eliminating trade taxes between the colonies and the homeland.”

Looking across Europe, Austria definitely values the economic development of its colonies the most. But no matter how much they value them, they can’t compare to the homeland.

To prevent cheap colonial crops from impacting the domestic agricultural market, trade taxes have existed between the homeland and the colonies from the start, although they were slightly lower than foreign tariffs.

There have always been calls for economic integration within the Vienna Government; nobles who invested in plantations wanted to incorporate the colonies into the homeland for their own interests.

The current governance model in the regions of West Africa, Congo, and Nigeria has already begun to align with that of the homeland, with some colonial cities adopting the same laws as the homeland.

As the first generation of colonists, everyone has a strong connection to the homeland. Many are pushing for integration, and Franz himself is one of the supporters.

However, because it involves various aspects, the Vienna Government has not yet dared to rashly announce the incorporation of the colonies into the homeland, but the best-developed colonies have begun to implement provincial systems.

Compared to the homeland, these colonial provinces have greater power, and even possess certain military rights. Now, by lowering trade taxes between the colonies and the homeland, there is undoubtedly more progress in the integration process.

After mulling over for a moment, Franz raised a question, “In theory, there is no problem, but lowering the trade taxes between the homeland and the colonies also involves the integration process of the Second German and the homeland.

Let’s release some hints about this issue first to gauge the reactions from various circles within the country. At the same time, organize economists to conduct comprehensive validation; we must clarify how much impact this will have on the homeland.”

This was about making the issue apparent. The legal basis previously pushed for the integration process of the colonies with the homeland was the Second Home of Germany, proposed by Franz.

Since the African colonies were the Second Home of Germany from the beginning, merging with the first home should also be unproblematic.

However, these were all speculations from the people; the official stance was never expressed. The driving force behind the integration process was mainly from civilians, with groups and individuals involved in colonial interests pushing this plan.

The driving force was significant, but the opposition was even more powerful. It was mainly constituted by the middle and lower nobility and peasants from the homeland, who feared that the cheap agricultural products from colonies would be sold back to the homeland, jeopardizing their interests.

However, the current situation was somewhat surprising, as the produce from Austrian colonies was not cheap. At least in comparison with domestic crops, they lacked competitiveness.

On one hand, there was a labor shortage in the colonies, leading to high labor costs; on the other, it was mainly new lands under cultivation, and the initial yields were not high.

The most crucial aspect was that the two major grain-growing areas in Austria had very fertile land with complete water conservation and transportation infrastructure, incomparable to the colonies.

As for the future? Franz could responsibly say that once fertilizer was invented, the profitability of farming would decline even further.

Whether or not there were impacts from colonial agricultural products, the domestic agriculture would be affected. Many grain-importing countries were increasing their grain output with the use of fertilizer, leading to a sharp, short-term shrinkage in the international grain market.

From this perspective, Austria could not develop fertilizer, and even if it were invented, they could not put it into production.

The longer it drags on, the more advantageous it is for Austria. It would be very risky to make changes rashly before the industry has developed to a certain level.

Grain production is not a matter of more being better; there’s a limit to market capacity, and once that limit is exceeded, it leads to regret.

This is evident from the fact that the inventor of chemical fertilizers was German, which speaks volumes. For major grain-exporting countries like the United States, Austro-Hungarian, and Russia, wouldn’t the invention of fertilizer be self-defeating?

Of course, the Germans could not have dreamed that their invention of fertilizer would benefit their number one enemy, France, the most, directly turning France into one of Europe’s primary grain-exporting countries.