Chapter 630: Trade Wars and Deterrence
The day after Talleyrand left for Russia to attend Potemkin's funeral...
Second Floor, Tuileries Palace
Joseph frowned as he observed the grim expressions on Brienne and Mirabeau. Finally, his gaze settled on Trade Minister Bailly.
"So, which countries support Salzburg's proposal?"
Bailly took a deep breath and replied,
"Currently, only Baden has refrained from taking a position, as they're waiting for our response. Every other signatory appears to favor a vote on Britain joining the Rhine-Seine Trade Treaty."
Brienne, visibly frustrated, exclaimed,
"Britain has no need to join this Franco-German trade agreement! Someone is clearly pulling strings behind the scenes."
With its vast colonies and industrial power, Britain had little reason to open its markets to the small South German states out of goodwill.
Bailly nodded.
"I suspect the South German states see this as an opportunity to demand other concessions during negotiations. Both Bavaria and Salzburg have repeatedly asked to renegotiate tariff rates, but we've refused each time."
Mirabeau added,
"Your Highness, there have been large-scale protests recently in South German states—mostly by workshop owners. Their primary grievance is against our competitive advantages.
"These past two years, our products have been eroding their markets significantly."
Bailly expressed his concern.
"Based on current trends, if a vote is held, the majority of countries will likely support Britain's inclusion in the agreement."
The room fell silent for a moment. Brienne hesitated, then suggested,
"Your Highness, perhaps we could open preliminary talks with Austria and Bavaria and agree to modestly raise tariffs.
"If these two countries oppose Britain's inclusion, the proposal will surely fail."
Most South German states took their cues from Austria, while Bavaria was the second-largest player in the region.
Joseph contemplated this for a moment before shaking his head.
"Cardinal Brienne, how high do you think they'd want tariffs raised to achieve their desired trade balance?"
Brienne turned to Bailly for an answer.
Bailly quickly responded,
"Your Highness, my calculations suggest that Austria would demand a 40% increase in tariffs on our key industries and around 15% on other goods to feel satisfied. For the other states, the required increases would be even higher."
Joseph chuckled.
"That would surpass the tariff rates before we signed the Rhine-Seine Trade Treaty.
"Our industries are in a period of rapid expansion. Losing access to the South German markets would trigger a wave of factory bankruptcies, setting us back by at least three to five years."
Such was the nature of economic development. During periods of rapid growth, investor confidence surged, leading to significant loans and production expansion.
If the markets could absorb the increased output, profits would multiply. However, if demand faltered, surplus goods would pile up, and what had once been promising investments would turn into crippling debts.
Brienne sighed.
"Your Highness, but it's difficult for us to…"
Joseph narrowed his eyes and spoke firmly.
"When we signed the agreement, we offered them generous concessions.
"We've since worked hard to gain our competitive edge. We should not compromise simply because they've failed to keep up!"
Joseph's reforms—introducing advanced technologies, standardizing production, modernizing finance, and abolishing internal trade barriers—had created an economic powerhouse.
This systematic overhaul had left the South German states, which relied on "natural evolution," struggling to compete.
Even Britain, while still maintaining an edge due to its vast colonial markets, was beginning to fall behind France in terms of industrial techniques and domestic policies.
Bailly cautiously reminded him,
"Your Highness, even if we resist, if the majority of signatories vote in favor, Britain will still join the treaty."
Brienne exhaled sharply and declared,
"If that happens, we'll have no choice but to use war to make them reconsider."
Joseph immediately shook his head.
France's development trajectory was too promising to risk disrupting it with war. Moreover, Britain's eagerness to involve itself in Franco-German trade disputes suggested it wanted nothing more than for France to clash with the South German states.
The ministers exchanged uncertain glances.
Brienne reluctantly said,
"Your Highness, we may have to choose between compromise and war…"
Joseph, recalling the methods of the 21st century when great powers avoided direct conflict, smiled faintly.
"There's a third option between compromise and war: deterrence."
"Deterrence?"
Joseph nodded and turned to Bailly.
"Minister Bailly, when is Salzburg's proposed vote scheduled?"
"In two months, Your Highness, in Munich."
Joseph considered this before giving his orders.
"Inform the other nations that the vote will instead take place in Karlsruhe in 20 days."
Karlsruhe, located in northern Baden, was a key transit point between eastern France and South Germany.
Though unsure of the reasoning behind this change, Bailly trusted the Prince completely and bowed.
"Yes, Your Highness. I'll depart immediately to notify all parties."
Joseph continued,
"Additionally, engage in secret negotiations with Baden, Württemberg, Augsburg, and Hesse. Offer low-interest loans in exchange for their opposition to Britain's inclusion."
Bailly hesitated momentarily and then cautioned,
"Your Highness, with all due respect, the South German states likely view this as an opportunity to reshape the trade balance. A small loan might not suffice to sway them."
Joseph smiled.
"Then offer them larger loans. Baden and Württemberg can each receive 4 million francs, Augsburg 6 million, and Hesse 10 million. I'm sure they'll reconsider."
Brienne's face turned pale as he waved his hands in protest.
"Your Highness, we don't have the funds to offer such substantial sums!"
Joseph interrupted him.
"We do. Print 24 million francs in paper currency. As long as the money can purchase goods from France, they'll accept it."
Brienne tried to argue again.
"Your Highness, flooding our economy with so much paper currency will destabilize its value."
The Cardinal's thoughts turned to the terrifying days of the Mississippi Bubble, when French paper money lost half its value daily.
The memory of that financial disaster had haunted France for decades, making the nation wary of paper currency until Joseph's banking reforms had gradually restored trust.
If another currency crisis were to occur, it would not only reignite those fears but could lead to widespread rejection of paper money.
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