Italy

«The Economist», 2 marzo 1935, pp. 474-475

THE GOLD RESERVE AND IMPORT RESTRICTIONS. – The immediate antecedents of the decree of February 18^th, which drastically restricted imports, may be found in the publication of the latest statistics on foreign trade and of the Bank of Italy’s position:

There is no direct correlation between the import surplus and the decrease in gold reserves. During 1933 the total gold and gold exchange reserve increased by 252.7 million lire, while from January 1st to December 10, 1934, it decreased by 1,600.2 millions. Then there came into operation the decree of December 8th, which provided for the compulsory sale to the Bank of Italy of all foreign balances held by Italian citizens, firms and banks. The effect on the reserve was as follows:

After a series of increases the total reserve began again to decrease at the end of January. The biggest reserves that remain – foreign securities in the possession of Italian citizens – are still to be tapped, but the Treasury clearly deems it inexpedient to exhaust them at once.

The reappearance of the downward movement in the gold reserve has created the impression that the Government’s foreign exchanges monopoly is not enough and that imports must also be officially regulated. The new decree, therefore, enacts that after March 31st imports will only be permitted if a licence is obtained from the Finance Department in Rome. Until March 31st a provisional regime has been instituted by which goods are classified in several categories. In category 1) imports are absolutely prohibited. About 200 items fall into this category, including dyed cotton, warps, lints, cotton velvet, braidings, ribbons, various silk goods, locomotives, tenders, railway cars, aeroplanes, hydroplanes and their parts, ships, etc. Imports in category 2) may be admitted by the Customs offices in proportions varying from 10 per cent, to 35 per cent, of the quantities imported by each firm in the period from February 16th to March 31, 1934.

ITALY’S BALANCE OF TRADE BY COUNTRIES. – The immediate aim of the restrictions is to reduce the import surplus forcibly and stop the drain on the gold reserve. The ultimate effect will be to give the Treasury a flexible bargaining weapon. It is believed that countries exporting to Italy mainly raw materials and unmanufactured goods will be in a strong bargaining position. The idea of “balanced trade” with each single country is here regarded as unrealisable; but it is hoped that the larger import surpluses may be evened out. The situation varies much from country to country:

There is sufficient evidence of triangular trade, even in the above limited number of countries. But it is argued that the compensating invisible items of emigrants’ remittances, maritime freights and tourists’ expenditure are dwmdling or diminishing; and that the trade balance proper is in several cases, including Austria, France, Great Britain and Argentina, becoming more passive.

Turin, February 23.