Holy Roman Empire

After six months of negotiations, Britain and Austria finally reached an agreement. On November 12, 1877, representatives of both nations signed the Anglo-Austrian Free Trade Agreement in Paris, officially bringing Austria into the free trade system.

It must be said that the Paris Conference was a joke of sorts. Originally intended to reconcile international conflicts and ease tensions among nations, it failed to achieve its primary objectives. Instead, it gave birth to numerous unrelated treaties.

In hindsight, this outcome is understandable. After all, such a high-level meeting of nations couldn’t possibly conclude without producing any results. How would the attendees justify their efforts upon returning home?

Going off-topic was inevitable. It was all for the sake of political achievements. As of now, the Paris Conference has already yielded eight treaties involving most European countries.

And that’s just on the surface. Who knows how many secret agreements were reached behind closed doors? In any case, the Paris Conference was far from a wasted effort.

…

At the Palace of Versailles, Napoleon IV smashed a cup in anger and cursed, “Damn the British! Damn those Austrian fools! They must have done this on purpose!”

Napoleon IV’s suspicions were spot on. The actual Anglo-Austrian free trade negotiations had taken place in Vienna, but the treaty signing was deliberately moved to Paris at Britain’s insistence.

The reason was obvious. After all the slander the French had directed at Queen Victoria, the British government couldn’t remain silent forever!

Diplomatic protests were ineffective in silencing the French. French newspapers were bold enough to publish even the emperor’s personal scandals, how could they hold back from targeting the British queen?

What started as curses had evolved into sensational gossip and even explicit novels filled with scandalous content. These unflattering publications, brimming with salacious details, crossed the English Channel and spread secretly in Britain, adding fuel to the fire.

While some readers might have found the stories entertaining, they were a blatant insult to national dignity, infuriating the British public. Calls grew for the British government to stop the French with their outrageous behavior.

Undoubtedly, the British royal family played a significant role in pressuring the government to act. Under mounting pressure from all sides, the British government had to respond.

Since silencing the French wasn’t feasible, the British decided to make a big splash, shifting public attention while delivering a warning to France.

The Anglo-Austrian Free Trade Agreement proved to be the perfect weapon, striking directly at France’s vital interests. Mishandling this development could spell disaster for France, already lagging behind its European competitors. If things worsened, it might truly be the beginning of France’s decline.

Finance Minister Alain said, “Your Majesty, now is not the time to dwell on grievances. The immediate priority is to minimize the impact.

The Anglo-Austrian agreement is already in place, and it won’t be long before the two nations take steps to draw more countries into the free trade system.

As it stands, the only major European powers outside the free trade system are Spain and us. At this moment, we must do whatever it takes to keep the Spanish aligned with us, or we’ll be in serious trouble.”

There was no denying the brilliance of British diplomacy. Over the past decades, they had successfully brought the Netherlands, Belgium, Portugal, Prussia, Russia, the Nordic Federation, and others into the fold.

Now that Austria had joined the free trade system, it was only a matter of time before Switzerland, the German Federal Empire, Greece, and Montenegro followed suit.

France found itself isolated once again and retaining Spain’s support became an absolute necessity. Fortunately, the Spanish monarchy owed its position to Napoleon III, making it staunchly pro-French.

Foreign Minister Montreux added, “It’s not that simple. This time, Spain may not stand with us. The Anglo-Austrian bloc has too many bargaining chips at its disposal, and the price they can offer will far exceed ours.

Our main advantage is the pro-French stance of the Spanish government, but in the face of substantial interests, it’s hard to say how much weight that advantage will carry.

The current situation is crystal clear and it’s our turn to make a decision. The semi-free trade model we’ve been using was viable in the past, but now it has become the worst possible choice.”

The “semi-free trade system” was an economic policy devised by Napoleon III, drawing on the economic strategies of other European nations while tailoring it to France’s specific circumstances.

In simple terms, it involved eliminating or lowering tariffs on industrial raw materials needed by France while implementing trade protection policies for domestically produced goods.

To some extent, France and Austria had similar economic policies before this, both focused on protecting their domestic industries and commerce.

However, Austria seized the opportunity presented by the Second Industrial Revolution, completing its industrial transformation early. With agriculture as a strong foundation, Austria is now capable of competing in the international market.

France, on the other hand, faced a different situation. Not only was it resource-poor, but French capitalists also showed little interest in investing in manufacturing.

Even with Napoleon III’s encouragement to develop manufacturing, the inherent preference of French capital for usury persisted.

The lack of investment in manufacturing led to sluggish industrial development. At its core, this problem stemmed from the severe shortage of industrial raw materials in France.

Although France is also a colonial empire, it is, to a significant degree, a “desert empire.” Much of its vast colonial territories are arid deserts, and the overall output from these colonies is limited.

This situation was further exacerbated by France’s annexation of Italy, a region even more resource-deficient, worsening the country’s resource crisis and increasing its reliance on imports.

Currently, over 70% of the world’s industrial raw material exports are monopolized by Britain and Austria. To suppress their competitors, these two nations, wielding pricing power over raw materials, have deliberately inflated market prices.

Relying on imported raw materials for industrial development naturally drives up costs. As a result, French industrial and commercial products are significantly less competitive in the international market.

Finance Minister Alain remarked, “Lord Marquis, while joining the free trade system sounds simple, in practice, our first concern would be whether our domestic industries and commerce can withstand the impact.

According to statistics from Le Parisien, the overall production cost of our industrial and commercial goods is 2.9% higher than Britain’s and 2.7% higher than Austria’s.

The reality is that our industrial production costs are indeed high. If we dismantle market protections and face international competition directly, we will be at a disadvantage.”

High industrial production costs are an unsolvable challenge. Unless the prices of raw materials can be reduced, there’s no solution.

Napoleon IV remarked, “If the industrial production cost difference is just 2-3%, it doesn’t seem impossible to address.

British and Austrian capitalists also need to make profits so they won’t sell at cost price. In that case, domestic businesses will simply earn less.

The government can help by reducing taxes to narrow the gap. As long as we survive the initial wave of impact, I believe our domestic enterprises can establish themselves in the competition.

At worst, we can rely on our geographical advantage to secure the domestic market and prevent things from worsening further.”

Hearing Napoleon IV’s words, Finance Minister Alain was startled and hurriedly cautioned, “Your Majesty, it’s not that simple. That gap is an overall average across all industries.

For specific industries, the cost difference could expand to 20-30%, which is far beyond what adjusting tax rates can address.”

This was no joke. The data published in the newspapers had who-knows-how-much embellishment. Whether it was based on actual analysis or mere conjecture, no one could tell.

The French government lacked a dedicated statistical agency, and whenever data was needed, it relied on economic experts for estimates, with the government further “embellishing” the figures as required.

Alain had no intention of changing this. As Finance Minister, he knew far too much of the truth. Yet French citizens refused to accept the reality that they were lagging behind Britain and Austria.

It wasn’t just now, even in the original timeline after the Franco-Prussian War, the French people refused to admit they were inferior to Germany.

The First World War, said to have been caused by Franco-German tensions, was in reality largely driven by French pride. It wasn’t until World War I shattered that pride that France resigned itself to a more passive role during World War II.

Instead of calculating the real numbers and being too afraid to release them, it might be better not to calculate them at all and let everyone feign ignorance together.

The idea of a free trade system sounds good in theory, but taking it seriously could be the death of a nation.

Apart from its advantage in finance, most of France’s industries would face severe impacts. The emergence of the “empire of usury” in France did not happen without reason.

Napoleon IV furrowed his brows deeply. Once again, he felt humiliated. This was extremely frustrating, making him appear ignorant as an emperor.

“So, how should we deal with the current situation? With Britain and Austria jointly pushing the free trade system, most European nations have already joined, and the remaining countries won’t hold out much longer.

At that point, it won’t just be Europe, the entire world will be encompassed by the free trade system. Can France truly remain uninvolved?”

Napoleon IV understood this all too well, perhaps even too clearly. The free trade system being promoted by Britain was a conspiracy, one that couldn’t be stopped even if it was exposed.

For now, as France’s industry had yet to fully explode, the country could still remain on the sidelines. However, as its domestic industries continued to grow, reality would eventually force France to join.

Of course, there was always the option to challenge the global order. In the original timeline, Germany had been driven to war because it lacked raw materials and markets, and had no voice within the free trade system. Desperation led to conflict.

France’s current position was certainly much better than that of the German Empire, but the crisis still loomed. Unless France stopped developing its manufacturing sector altogether, the crisis would eventually explode.

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