“The decision to join the (new) Silk Road was an improvised and atrocious act” that multiplied China’s exports to Italy but did not have the same effect on Italian exports to China, Crosetto told the Corriere della Sera newspaper.

I’m not saying that BRI involvement is a positive for Italy, but balance of trade isn’t normally the metric one would expect to use for determining whether a project is a good idea for a country.

That’s for two reasons.

First: the trade balance with the rest of the world.

When a country exports, it will normally maintain a long-run trade equilibrium with the rest of the world. If I run a persistent trade deficit, then my currency will tend to weaken; my wages will fall in real terms. It will become harder for me to import (since it’s harder for me to afford the things I want from abroad) and easier for me to export (since my labor costs parties abroad less). If I run a persistent trade surplus, then my currency will tend to strengthen, and the reverse happens.

Second, even aside from that, there’s nothing intrinsically problematic in running a trade deficit with specific trade partner; one will tend to run a surplus with another partner in that case. Country A can be a net exporter to Country B, Country B to Country C, and Country C to Country A. In fact, it’d probably be a bit odd if all countries maintained a neutral trade balance with each other; the gains in trade leverages comparative advantage, and unless each country produces the thing that it is particularly good at producing in relative terms and that thing is wanted by other parties in equal ratios, you would expect imbalances with individual trade partners to exist.

In Italy’s case, true, there are a few more complications because Italy is on the euro, but the same process happens, albeit less smoothly.

The way to win via trade isn’t via trying to run a persistent trade surplus with the rest of the world. Take a hypothetical world where a country banned imports, but exports were still permitted. People in that country either (less-efficiently) produce what they would have imported from the rest of the world, or simply go without. Over time, it will become harder and harder to export as the currency strengthens, and those exports will come to a trickle, and then stop, and you have an autarky.

A country overall wins via trade when it leverages comparative advantage – trying to get a given thing that one wants produced as efficiently as possible, and leveraging the fact that different countries can produce things more-efficiently. All else held equal, it tends to want fairly unrestricted trade to do that, including imports.

There are deviations from that. National security may be an externality. I may not want to rely on importing a strategic resource like steel from a country that might be my opponent in a war, for example. But the goal isn’t normally to try to maximize net exports.

A couple of hundred years back, the idea that that was how one maximized a country’s advantage was kind of common in Europe; that was mercantilism. But that was debunked hundreds of years ago.

Mercantilism is a nationalist economic policy that is designed to maximize the exports and minimize the imports for an economy. In other words, it seeks to maximize the accumulation of resources within the country and use those resources for one-sided trade. It promotes imperialism, colonialism, protectionism, currency manipulation, and tariffs and subsidies on traded goods to achieve that goal.

The policy aims to reduce a possible current account deficit or reach a current account surplus, and it includes measures aimed at accumulating monetary reserves by a positive balance of trade, especially of finished goods. Historically, such policies might have contributed to war and motivated colonial expansion.[1] Mercantilist theory varies in sophistication from one writer to another and has evolved over time.

Mercantilism promotes government regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers. High tariffs, especially on manufactured goods, were almost universally a feature of mercantilist policy.[2] Before it fell into decline, mercantilism was dominant in modernized parts of Europe and some areas in Africa from the 16th to the 19th centuries, a period of proto-industrialization.[3] Some commentators argue that it is still practised in the economies of industrializing countries,[4] in the form of economic interventionism.[5][6][7][8][9]

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