Trade

   Though centrally placed in Europe, Austria was historically a side road in European and worldwide trading patterns. Vienna and Linz, both on the Danube River, had lively mercantile communities in the Middle Ages, but their turnover did not generate the revenues spun off by cross-border commerce in northern Italy, northern France, and the Netherlands, and along the basins of the North, Baltic, and Mediterranean seas. Prague, on the other hand, one of the urban hubs in the Habsburg Empire after 1526, was a prime business and manufacturing center of medieval east central Europe. The reorientation of European trade toward the Atlantic coast shunted commerce even farther from central Europe in the 16th and 17th centuries. At the same time, the repeated assaults of the Ottoman Empire on the region made towns and markets of eastern and southeastern Austria risky places to do business. The burdens of defense forced Habsburg governments to steer capital into military equipment and manpower rather than into commercial infrastructure and investment.

   By the latter third of the 17th century, Habsburg emperors and their advisors were concluding that other European rulers had enriched themselves considerably by revenues from foreign trade. In 1665, the regime in Vienna created a separate office to encourage commerce (Kommerzkollegium), the first such body in the Western world. Merchants from Constantinople—Jews, Turks, and especially Armenians—had been selling Levantine wares in Vienna and elsewhere in the Habsburg lands for some time. Contemporary Habsburg rulers, beginning with Emperor Leopold I (1640–1705), began to see the Ottoman Balkans and even the Levant as options for trading opportunities and partners.

   The first government-sponsored Oriental Company, founded in 1667, dealt in luxury goods from the east and cattle from Ottoman Hungary. It fell apart, however, in 1683 in the wake of the second, but final, Ottoman siege of Vienna. Another one was established in 1719, again to exploit trading possibilities with Constantinople and elsewhere in the Middle East. Undercapitalization led to its collapse in 1734. Though individual merchants from the Austrian lands often did well in Constantinople, their collective profits were modest compared to the earnings of their French and British competitors. A Habsburg effort to enter the colonial trade in Africa and the Far East on the Atlantic with the Ostend Company, set up in 1722, prospered briefly, but political concerns persuaded the government to disband it in 1731.

   More characteristically, the Habsburg Empire preferred to protect its own industry and agriculture. In 1775, the government of Empress Maria Theresa divided the dynasty’s holdings into two separate toll and tariff zones, one dominated by the Austrian lands and Bohemia, which were somewhat more industrialized; the other by Hungary and its crown lands, which were overwhelmingly agricultural. These areas were expected to trade between themselves rather than abroad. Although the Hungarians were very good at evading these regulations, the plan did nothing to encourage foreign trade, either. Her son and successor, Emperor Joseph II, understood the importance of exports in state finance—he promoted the sale of dairy cattle abroad for slaughter. Nevertheless, he was reluctant to work through overseas trading companies because the Habsburg Empire had no navy to defend them. They were also unwelcome competition for other mercantile states, especially Great Britain, which the Habsburgs occasionally cultivated as a military and diplomatic ally. Though the Habsburg government largely abandoned internal customs charges between 1817 and 1827, it was not until 1881 and the removal of tariffs charged on trade with Hungary that the dynasty’s empire was an internal economic unit.

   The liberal views that sparked the abolition of internal restrictions on trade also persuaded the Habsburg government to adopt the international free trade model followed by other European countries in the 1850s and 1860s. Free trade agreements were signed by Vienna with England in 1865, France in 1866, Italy in 1867, and Germany in 1868. Austria–Hungary became a heavy importer of manufactured goods. Competition from a rapidly industrializing Germany after 1871 and a savage economic crash in 1873 once again led the Habsburg Empire to shelter its own manufactures with protective tariffs. Hungary, poorer and much more agricultural than industrial, had an economic stake in preserving open competition between domestic manufactured products and their imported equivalents and much resented the program. Disagreement over toll and tariff policy would vex relations between the Austrian and Hungarian halves of the Dual Monarchy until its end in 1918. Governments in Vienna did not abandon foreign trade altogether; Germany and the newly emerging states in the Balkans such as Serbia and Romania remained significant trading partners. But the bulk of the exports from the Habsburg lands were agricultural, not industrial.

   The collapse of Habsburg rule in 1918 virtually wiped out foreign trade for the new Austrian republic. Seventy percent of the industrial infrastructure of the former Habsburg Empire stayed in Bohemia. Near-total devaluation of the currency in 1919 all but excluded the new Austrian republic from the operations of the world economy, thereby severely crippling what was left of Austrian industry as well. Fiscal pressures even forced the new government to abandon sovereignty over its borders for a time. In 1922, foreign creditors loaned Austria the money to reestablish its currency on the condition that the government in Vienna turn over revenues from customs duties and excise taxes on tobacco as collateral.

   With the success of the new and soon-solid schilling, adopted in 1923, Austrian industry began to recover. The First Republic’s neighbors, however, raised their own trade barriers and other fees, which discouraged Austrian exports directly and indirectly. In March 1930, Swiss and German railroads increased their charges for freight transit over their respective countries. Austrian shipments of wood to France fell accordingly. The gathering world economic crisis in the early 1930s pushed the Austrian balance of trade even further into the red. The only serious offset to this otherwise dismal scene was a temporary spurt in tourism, especially from Germany. On 12 April 1930, eight years before the Anschluss, Germany and Austria completed the preliminaries for a tariff union between them. From March 1938 to 1945, the Austrian and German economies were formally the same.

   Independent Austrian export activity started up quickly after World War II, although on a rudimentary level. The government begged citizens to cut down wood that could be converted to paper, which could then be bartered abroad for heating coal. Goods for goods exchanges did not end—in 1948 Austria exchanged Styrianmade Puch motorbikes with Brazil in return for coffee. Each zone of Allied occupation was encouraged to begin trading with neighboring foreign states. Western zones sent their goods to Switzerland, Germany, and Italy; Upper Austria restored economic relations with Czechoslovakia. By 1948, having signed trade pacts with Poland, Czechoslovakia, Hungary, and Yugoslavia, Austrian trade was strongly directed at first toward Eastern Europe. It dropped off markedly in the 1960s, as the Austrian economy improved and its manufactures became more attractive in the West. The very first Austrian trade agreement with France was signed on 29 October 1946. Austrian exports in 1947 were showing a substantial uptick. Especially active were textiles, manufactured in the Vorarlberg on the Swiss border, where factories established after 1938 were allowed to begin producing for export. By 1951, Austria was trading actively not only with European nations but also with South American and African countries. In that same year, Austria joined the General Agreement on Trade and Tariffs (GATT), a world organization that promotes nondiscriminatory tariffs and tolls. As long as the occupation lasted, some forced exporting went on of manufactured wares and commodities, oil for example. Even after the victorious Allies withdrew in 1955, Austrians had to be careful not to violate their official neutrality by exporting strategic goods to participants in the Cold War.

   Austria’s trade balances have often shifted between surplus and deficit, but the overall development of foreign trade has been positive. An intense period of economic growth in Austria in 1967 led to an upswing in exports, which by two years later were covering 86 percent of the cost of the country’s imports. Indeed, in 1969, Austria’s export growth exceeded that of both the European Free Trade Association, in which Austria participated, and the European Economic Community (EEC). All of this also depended on the recovery of Austrian industry.

   Trading within the single market of the European Union (EU) since 1995, Austria has profited considerably from the relationship. In 2005, the Austrian National Bank estimated that every Austrian had gained between 700 to 5,000 euros in profits on the basis of the country’s EU membership. Austria has also benefited from the globalization of world markets; the industrializing countries of Asia have been good customers for highly specialized Austrian tools and machinery. The obvious financial gateway to post-Soviet east central and eastern Europe, Austria has become a major exporter of Western goods, including its own apparel brands and supermarkets, to the Czech Republic, Croatia, and Hungary, among other countries. Austrian banks have also played a major role in bringing investment capital to these lands. In 2005, around two-thirds of the companies listed on the Vienna Stock Exchange were active in eastern Europe.

   In 2002, Austria began to run a favorable balance of trade that has not reversed its course. In 2007, the surplus was 8.8 billion euros, which amounted to 3.2 percent of the Gross Domestic Product (GDP). The alpine republic’s most important trading partner was Germany, which received a little over 31 percent of Austria’s exports. Germany also accounted for 41.5 percent of all Austrian imports. Austria’s second most significant customer abroad was Italy, which took 8.9 percent of its imports from its near neighbor to the north. Of Austria’s imports, 6.9 percent also came from Italy. The third best customer for Austrian exports—5.1 percent of them—was the United States. China, however, had risen to be Austria’s third most important source of imports.