Spain

In the fifteenth century Spanish foreign trade was carried out with Europe. Bilbao and Seville were the main commercial centers of the Kingdom of Castile. Castilian wool and Basque irons were exported from Bilbao to Flanders and England; imports consisted mainly of Flemish cloths. Seville exported to northern Europe and Italian manufacturing towns wine, olive oil, and wool. Although it experienced a deep and long crisis beginning in the 1420s, Barcelona remained the main trade center of the Crown of Aragon. It exported wool and cloths to Italy and the eastern Mediterranean, importing spices and dyes and Flemish cloths traded in the Champagne Fairs from that area. The trade balance of the Spanish kingdoms with Europe was negative, but the control of Basque and Canta-brian merchants and shipowners of the circuits of Spanish foreign trade, and their active involvement in northern European and Mediterranean trades, gave them sufficient income to cover the deficit.

Trade with Europe gradually was relegated to second place after Columbus discovered and the Spanish crown colonized America. Trade with America grew steadily until approximately 1610. From its American colonies, Spain obtained taxes and precious metals (silver, above all), which allowed it to finance the formation of a worldwide empire and covered the deficit of its trade balance. Spain exported raw materials (particularly quicksilver) and intermediate goods demanded by the colonial mining centers and luxury goods (imported from other European countries) to supply the needs of the Spanish colonists.

The Spanish crown imposed a complete monopoly on colonial trade. From 1503, the House of Trade (Casa de Contratación) in Seville supervised and regulated all the colonial trade, which was carried out by means of an organized system of convoys protected by a squadron of galleons. However, foreign merchants established in Seville ended by controlling most of that trade, buying with American silver luxury goods in Europe destined for the colonial market. Foreign merchants increased their control over colonial trade during the crisis of the seventeenth century. Moreover, smuggling, piracy, and privateering also eroded the monopoly of Seville. In the eighteenth century, the new Bourbon dynasty attempted to reduce smuggling and to recover control of the colonial trade. The monarchy relocated the House of Trade to Cadiz in 1717 and chartered several privileged companies for the trade with the Indies. The growth of trade with America resulted in the suppression of the system of convoys in 1735, and then for the breaking of the Cadiz monopoly in 1765.

The Spanish economy benefited from the rise of American trade in the eighteenth century. By 1792, 87 percent of Spanish imports came from America, and 73.5 percent of Spanish exports were directed there. However, approximately half of this trade was carried out between Europe and the Spanish colonies, with Spain serving only as an intermediary. European cloths were exported to America, and American colonial goods and silver was exported to Europe. Spain directly exported foodstuffs, raw materials, and some manufactured goods (paper, iron, and cloths) to its colonies and imported colonial products. The resulting trade balance was negative, but the deficit was covered by American silver.

The loss of American colonies (except Cuba and Puerto Rico) in 1820 had negative consequences for Spanish foreign trade and for the balance of trade and payments. On the one hand, it meant the loss of an essential market for Spanish exports, particularly for some finished products. On the other, the regular entry of precious metals that had covered the chronic commercial deficit disappeared. The Spanish trade with America, however, still accounted for between 30 and 40 percent of the foreign trade until 1850.

Spanish trade with Europe was gaining in importance in the nineteenth century. The Spanish economy supplied foodstuffs (wine, Sherry, oranges, cork) and raw materials—minerals—(65% of the exports in 1910) to the most industrialized European countries. France and the United Kingdom, in particular, received more than 60 percent of Spanish exports. The Spanish colonies of Cuba and Puerto Rico maintained their significance for some Spanish exports, such as olive oil, cloths, and foot-wear.

The industrial development of Spain in the last two decades of the nineteenth century increased the relative importance of manufactured goods in the total exports, from 6 to 12 percent between 1830 and 1910. However, this was the lowest percentage among European countries with a similar level of income. In contrast, manufactured goods dominated Spanish imports (43.5% in 1910), followed by raw materials such as coal, cotton, and other intermediate goods to be consumed by the Spanish industry (38% in 1910). France and the United Kingdom (and Germany, from the 1890s onwards) in Europe, and the Caribbean colonies and the United States in America, accounted for almost all of Spain's imports.

World War I accelerated an import-substituting industrialization process that had started with the protectionist Tariff of 1891. Exports of manufactured goods boomed during these years as well. The most remarkable change in Spanish foreign trade during the interwar period was the severe decline of the exports of minerals and the rise of agricultural products, whose share of the Spanish exports reached to more than 60 percent in 1929.

The darkest period for the Spanish foreign sector was the one between 1936 and 1951. It was caused by the Spanish Civil War (1936–1939), World War II, the combined effects of an autarchy policy by the Franco regime, and its international isolation in the following years. Spanish foreign trade decreased by 50 percent, and the degree of openness of the Spanish economy (exports plus imports as a share of Gross Domestic Product) was the lowest in its history. From 1951 onwards, the end of an international boycott of Spain and U.S. diplomatic and financial aid allowed the Spanish government to change its autocratic policy for one promoting an import-substituting industrialization. However, this boosted the trade deficit, putting Spain on the edge of a suspension of international payments between 1957 and 1959.

The Stabilization Plan of 1959 began a new period in the history of Spanish foreign trade, characterized by a progressive, increasing, and irreversible liberalization of the Spanish economy. Massive imports of capital goods and technology permitted the renewal of Spanish industrial equipment. Spain also became an attractive country to foreign investors due to low salaries and its domestic market's high potential for growth.

Spain's rapid economic growth and industrial development during the 1960s changed the commodity structure of its foreign trade. In 1975 Spain exported intermediate goods (26%), consumer products (25%), and capital goods (23%), foodstuffs having declined to 22 percent. Among imports, intermediate goods (29%), energy—crude oil—(26%), and capital goods (22%) were the most important. Approximately 70 percent of foreign trade was with the European Economic Community and OECD. Although the openness of the Spanish economy was still much lower than that of its trading partners, foreign trade rose faster than the OECD average in the years 1959–1975. The huge commercial deficit (imports doubled exports) was financed by foreign investments and by emigrant remittances and tourism.

The arrival of democracy and, above all, the entry of Spain into the European Economic Community in 1986 provoked the most intense liberalization of the Spanish economy ever (between 1978 and 2003 the degree of openness had increased 20 percentage points, reaching 58% in 2003).

The increasing integration of Spain into the European Union helps explain the EU's significance to Spanish foreign trade; the European Union accounted for 72 percent of exports and 64 percent of imports in 2003. Trade liberalization initially caused a rapid rise of imports, while exports did not change noticeably. The commercial deficit was covered by the surplus of the service balance and foreign capital. In fact, foreign investments are playing a substantial role in the renovation of the Spanish industry and in its increasing international competitiveness. Beginning in 1994, Spanish exports, as well as its share in the world market, grew remarkably. Most Spanish foreign trade in the first years of twenty-first century consists of semifinished goods, capital goods, and goods for the automobile industry.

SEE ALSO Agriculture; Balance of Payments; Barcelona; Board of Trade, Spanish; CÁdiz; Cargoes, Freight; Cargoes, Passenger; Columbus, Christopher; Common Market and the European Union; Empire, Portuguese; Empire, Spanish; Encomienda and Repartimiento; France; Free Trade, Theory and Practice; GATT, WTO;Great Depression of the 1930s; Industrialization;International Trade Agreements;Magellan, Ferdinand;Mediterranean;Mexico;Morocco;New Orleans;Philip II;Philippines;Privateering;Regional Trade Agreements;Seville;Slavery and the African Slave Trade;Venezuela;Wine.

BIBLIOGRAPHY

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Jesús M. Valdaliso