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Victoria 3 - Dev Diary #54 - Trade Revisions

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Hello and welcome to another Victoria 3 development diary. Today is going to be a slightly different diary, as instead of bringing up a system we haven’t previously covered we’ll be talking about a whole bunch of changes that have happened to Trade, which was previously talked about in Dev Diary #38.

As is fairly common knowledge, we are constantly iterating on our systems, and even when something has been written about in a dev diary that doesn’t mean we’re a hundred percent happy with it or aren’t looking to tweak it in some way. For Trade specifically, there were two main issues that were brought up repeatedly from internal testing and feedback, but which we hadn’t had figured out the solution for yet by the time the Trade dev diary was written.

These issues were that first, managing the precise level of your trade routes was far too micro-intensive, and second, that Tariffs didn’t function as an effective trade barrier. These weren’t the *only* issues mind, but they were the two big ones that we needed to design some sort of solution for. Well, design and implement a solution we did, so here I am to tell you all about it.

So then, what has changed about trade? Well first of all, let’s go over what hasn’t changed. Namely, that trade routes are still established by a nation, from their market to another market, and can be either an import route (which creates buy orders in the foreign market and sell orders in your own market) or an export route (which does the opposite). Trade Routes also still require Convoys to transport goods along sea routes, and still create Trade Centers whose employees manage and profit from those routes.

Trade Routes are created from the Trade Lens, where you will get both a map and list overview of the most suitable markets to trade with
DD54_1.png

As to what has changed, probably the single most important difference is that you no longer directly manage the level of your trade routes. Instead, all newly established trade routes start at level 1, and will grow (or shrink) on a weekly basis based on market conditions. So if you’re playing as Britain and looking to import Wood from Brazil, instead of setting the exact level of Wood imports that makes sense for your needs right away, you simply establish the route and it will grow towards those needs over time. It’s also worth noting in this context that we have removed the national limit on the number of trade routes you can have, and replaced it with a fixed bureaucracy cost per route (which does not increase with route level) instead, to encourage countries to have fewer, more impactful trade routes.

So what are the market conditions that affect whether trade routes grow, shrink, or stay unchanged? Well, the single most important factor is profitability. A trade route makes money by buying goods that are cheap in the exporting market and selling them at a higher price in the importing market, but it isn’t as simple as just looking at the current market price. Instead, each trade route has a purchase price and sale price which are calculated based on the difference between the pre-trade and post-trade price of the goods in the two markets.

To maintain naval trade routes, you will need convoys. If your supply network is under strain due to lack of convoy production or attacks on your shipping lanes, your trade routes will start shrinking over time.
DD54_2.png

Confused yet? To try and explain, I’ll use the Wood import route to Britain from Brazil as an example. To get the purchase price in the exporting (Brazilian) market, we first calculate what the price of Wood would be in that market if it had no trade routes exporting or importing wood, i.e. if it was set only from local supply and demand. Let’s make up a number and say that the pre-trade price of Wood in Brazil is 10 (quite a low price) and the post-trade price of Wood in Brazil is 20 (a very average price). To get the purchase price, we simply calculate the midpoint between these two prices, aka 15. This means that we assume that our trade route is paying, on average, £15 for each unit of Wood they are exporting. The same calculation is then done in the British market to get the sale price, which I’m just going to arbitrarily set at £25. From here on, the math should be simple enough - each unit of Wood imported to Britain from Brazil generates £10 in profits for the Trade Center.

There’s a lot of factors that go into whether or a trade route will grow or shrink, but fortunately you don’t have to know them all by heart, since the level prediction tooltip will break them down for you!
DD54_3.png

Well, it would be that simple if it weren’t for Tariffs. Tariffs are collected on both ends of the trade route, with the exporting market collecting Export tariffs and the importing market collecting Import tariffs. Under the new system, Tariffs can be a highly effective trade barrier because they are calculated against the base price of the goods rather than the market price. What this means is that if the Import tariff on Wood is 25%, that Import tariff is always going to be £5.

If you have a degree in economics or you’re just surprisingly good at following along with my overcomplicated explanations, you may already have picked up on the reason that setting against the base price makes Tariffs a more effective trade barrier. Namely, that it disproportionately affects high-volume, low-revenue-per-unit routes. For our example Wood route above, a tariff of £5 means a full 50% reduction in profits, and as the route grows and the difference between the purchase and sale price shrinks, tariffs will take away more and more of that profit until it’s simply more profitable for the Pops in the Trade Center to stop growing the trade route level, and indeed may end up reducing the level in order to make more money for themselves.

It’s worth noting that Trade Routes can never shrink below level 1, and so will always trade a small number of goods even if doing so at a loss, so that for instance you can always import a small quantity of weapons or ships needed to kickstart your military or merchant marine - assuming that you’re willing to subsidize the Trade Center if it doesn’t have other, more profitable routes to make up for the losses.

So then, is creating trade routes and letting them do their own thing the only way you interact with trade now? Well, no. Since we’ve taken away the need to adjust routes manually, this means that we can now put emphasis on other, more indirect ways to manipulate the flow of goods between markets. These include strengthening Trade Agreements (which now remove both bureaucracy cost and tariffs from all trade routes between the two countries) and adding the ability to place Embargoes on countries you want to keep out of your market.

Mexico decides that it has had enough of American meddling in their market - it’s Embargo time!
DD54_4.png

However, probably the single most important tool we’ve added for controlling trade is Market Good Policies. There are 3 such policies, which you can set separately for each individual good in your market:
  • Protect Domestic Supply: This market good policy removes import tariffs and increases export tariffs, encouraging countries to supply more of this good to your market and discourages them from exporting it away from you, which might be useful if you for instance want to keep the price of Clippers low so that you’ll pay less to maintain your ports.
  • Encourage Exports: As the name pretty much explicitly states, this market good policy removes export tariffs and increases import tariffs, which is highly useful if you for instance want to drive up the price of Furniture so that your Furniture Industries will see increased profits.
  • No Priority: This is the default market good policy, which sets both Import and Export Tariffs at the baseline determined by your Trade laws. To give you a couple examples of what this baseline could be, under Mercantilism you have overall lower export tariffs and higher import tariffs, while Free Trade removes all tariffs altogether.

Well, that’s about all there is to say about the changes to Trade. Overall, we’re quite happy with the changes we’ve made and how much better it feels to play with compared to the old 100% manual system. Join us again next week, where I will cover Achievements!
 
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GrafKeks

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Sure, as I said I’m trying to understand why is designed like that. Because I would expect price in the exporting to be lower that in the importing market. Moving goods cost money and traders need to make a living too.

Also if I have understood it correctly prices in the exporting market could be higher than in the importing market and the route still profitable. This is an example assuming I have understood the system correctly:

I assume it's to faciliate trade and give better incentives to lower tariffs. I also implicitly assume that the conveys (the goods they're produced from, I can check if I find the info again) are paid for by the trade centre as an input, because IIRC that's how it worked .
Despite both prices being equal the route turns a profit, and it could still be profitable if the goods in the French market would be a bit more expensive for instance 21, with a profit of 5.
-operating costs yes.
 

Balesir

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If you're not the one exporting your goods, someone else's Pops are going to be the ones profiting. Trade Centers are only generated in the nation that owns the trade route.
Interesting. If there are parallel trade routes - if, for example, you have a trade route with the USA exporting wine to them and they have a route importing wine from you - how is the ratio calculated? The interactions on price and profit might be... interesting, I'd guess.
 

marmot01

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Why not allow the player to set the tarrif manually, in percentage points?
 

Oglesby

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Interesting. If there are parallel trade routes - if, for example, you have a trade route with the USA exporting wine to them and they have a route importing wine from you - how is the ratio calculated? The interactions on price and profit might be... interesting, I'd guess.
Both would have the same per unit profit as they are using the same purchase and sale prices since they are determined as the average of the no-trade to all-trade pricing. What we don't know is how the ratio of the trade 'levels' between those two trade routes would be determined.
 

Wizzington

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If with this new system I were to play France, and somehow make my way to conquering every single rubber producing state in the entire world and then embargo Germany, will, in that scenario, Germany simply not have access to rubber, or, at the very least, a minimal enough access to simulate smuggling and whatnot that they are effectively unable to compete with any country able to import rubber when it comes to rubber-reliant goods?

And thank you for the rework, the system does sound much better now than before.

Edit: Also, random question: Is the base price reliance moddable? Are we able to technically change it to use market price if we so desired?
In this case you could ensure Germany has no access to rubber and make them virtuallly unable to use rubber PMs (they would take a massive 50% output penalty)
 
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Wizzington

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If you have two countries that both have a level 1 trade route for a good in the same country with the same trade policy and tariffs (so all else being equal) and they both have the potential to expand to a level 2 route, but they can't both do it, how is it decided who gets the route? Or am I misunderstanding it?

And how granular are the different levels compared to how fast they can potentially expand?
They would likely grow to both be about half the level that just the one of them would be.
 
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kuba_mar

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Despite both prices being equal the route turns a profit, and it could still be profitable if the goods in the French market would be a bit more expensive for instance 21, with a profit of 5.
This is because its price of goods in market after they are traded but not the price they are traded for on average.
 

IsaacCAT

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If you mean 'see where the good I want is produced most cheaply', then it appears that this is built into the UI shown in the Dev Diary. You first select a good and are then offered a choice of possible markets ranked in profitability order.
Yes great.
Do you mean suppress the price in a market that the player is importing from? So something like the Banana Republics or the Western oil concessions in the Middle East, where the price of bananas/oil was artificially low in the country of production through monopsony (there was only a single buyer, so local farmers had to accept what they paid).

I guess the way to simulate that would be a diplomatic agreement (requiring a diplomatic play?) that gives a certain country the exclusive right to establish trade routes from a particular country/market. For example, the US has the exclusive right to trade bananas from Nicaragua. That sounds like a great idea that I don't think exists at the moment. It might be a perk of Great Power status.
Yes. I will have to reread the DD’s and see if that is possible. But defenitevely, this power play is something I would like to see in the game, as it is something that has been happening ever since.
 
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Wizzington

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So as a bulk answer to all the questions about the special purchase/sale price: Does it make perfect sense from a realistic standpoint? No. It's there to allow trade to change prices in a way that doesn’t always end up hovering around base price, and to allow countries that specialize in overproducing certain goods to benefit more from exports. We chose gameplay over realism in this case
 
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shoebird

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I assume it's to faciliate trade and give better incentives to lower tariffs. I also implicitly assume that the conveys (the goods they're produced from, I can check if I find the info again) are paid for by the trade centre as an input, because IIRC that's how it worked .
I don’t understand the first part. Why does using the midpoint between pre-trade and post-trade market prices to calculate route profitability incentives lower tariffs?

Regarding the second part, in the shipping lanes DD ports are showed to produce convoys with clippers as inputs. Ports don’t get any profit, as convoys are not sold, so I don’t thing trade centers has a monetary input cost for the convoys. Convoys don’t have a price after all, are like a capacity.


This is because its price of goods in market after they are traded but not the price they are traded for on average.
But people in the market are all paying that price, there’re no different prices for goods within the market so what does that mean for trade? A steel mill will be paying 12 for iron in the Spanish market but the cost for British traders buying iron in that market is let’s say 10 (assuming pre trade cost was 8), how’s that?

Edit:

And just Wiz answered it above. Thanks
 

Wizzington

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I will also mention that the first version of this system strictly used market price and it played much worse.
 
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NilsFabian

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The current plan is to make it so that land trade is limited by infrastructure, and any volume not supported by the infrastructure will have to be shipped by sea.
So a landlocked country is at a disadvantage?

Treaty ports let you bypass tariffs and embargos.
Even in wartimes?
So as long as my opponent doesn't manage to occupy my tradeport I can still buy my weapons from him?
 

Wizzington

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So a landlocked country is at a disadvantage?


Even in wartimes?
So as long as my opponent doesn't manage to occupy my tradeport I can still buy my weapons from him?
Yes and yes. Occupied treaty ports provide no benefit though.
 
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Greem_Alien

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I honestly wish the trade routes would just manage themselves. The fact that I have to oversee setting up or cancelling and then tarrif managing trade routes for every single type of goods, or even just 7 types of goods I have too much of and 7 types of goods I don't have enough of, with the entire world, the types constantly changing, to make sure my economy stays competetive, is a micro nightmare to me.
 
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kuba_mar

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But people in the market are all paying that price, there’re no different prices for goods within the market so what does that mean for trade? A steel mill will be paying 12 for iron in the Spanish market but the cost for British traders buying iron in that market is let’s say 10 (assuming pre trade cost was 8), how’s that?
The way i understand it its that to some extent trade gets to avoid its own impact on price, so someone might be early or get lucky and get the product at the pre-trade price and sell it at the pre-trade price, that of course increases/lowers the prices so someone else might be late and gets the product at the post-trade price and sells it at the post-trade price. So in theory it all gets averaged out and that's the trade price itself. Its not perfect but seems good enough and like a good incentive for trade.
 
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NilsFabian

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What happens to a treaty port if the nation granting it joins another market?
Do I gain a backdoor to the other (bigger) market as well and the market leader can't stop me?
 
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