Forced to import oil, coal, and iron as a result of its lack of raw materials and under pressure from the United States, Italy opens its economy to the international market. Italy begins to focus less on agriculture and more on industrial exports to North America and Western Europe. Italy does retain, however, some protectionist tariffs.
Italy, Belgium, France, West Germany, Luxembourg, and the Netherlands create the European Coal and Steel Community (ECSC) to pool their coal, iron, and steel resources. They remove custom duties and quantitative restrictions on these raw materials. The low value of the lira and low labor costs make Italian goods competitive. All industries except for the food industry become export-oriented.
Italy is a founding member of the European Economic Community (EEC), which forms a customs union and a unified market with free trade among the member states. The creation of the EEC ends any remaining vestiges of protectionism in Italy. Italy's dependence on imported coal, petroleum, and other raw materials results in an unfavorable balance of trade which is offset by the tourism industry.
Italy's main exports continue to be machinery and transport equipment, textiles, and chemicals, but Italian goods become less competitive as technologies in other countries improve and wages in Italy rise.
Italy's imports become more expensive as a result of constant devaluations of the lira and the soaring price of oil. The terms of trade shift toward producers of primary products. Italy struggles to increase exports to prevent a negative balance of trade.
The balance of trade becomes negative for the first time in years as prices of imports continue to be high and tourism revenues drop as a result of political violence. The Mafia, with its narcotics, arms. and explosives deals, forms a substantial, albeit illegal, part of Italy's international trade.
Italy's trade balance remains largely in deficit, coming out of the red only occasionally with the drop in oil prices and the fall in the value of the U.S. dollar. A government crackdown on organized crime reduces the volume of illegal trade.
With the collapse of the value of the lira in September 1992, exports pick up. The top export sectors are fashion, furnishings, precision instruments, and transportation equipment. The balance of trade swings into a small surplus of $3.2 billion in 1992 which expands during the next four years to reach $60 billion in 1996. Italy joins the World Trade Organization upon its creation in 1995.
Italy conducts 60 percent of its total trade with the European Union. The trade balance remains highly volatile, reacting sharply to changes in the real exchange rate and the economic cycle. The decline of Fiat raises concerns for one of Italy's traditional lead exporters. The government promotes Italian culinary exports with a campaign to rate the authenticity of Italian restaurants abroad.
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