Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded.When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses and the other gains in proportion to its declension from the exact equilibrium.Both suppositions are false.A trade which is forced by means of bounties and monopolies may be and commonly is disadvantageous to the country in whose favour it is meant to be established, as I shall endeavour to show hereafter.But that trade which, without force or constraint, is naturally and regularly carried on between any two places is always advantageous, though not always equally so, to both.
By advantage or gain, I understand not the increase of the quantity of gold and silver, but that of the exchangeable value of the annual produce of the land and labour of the country, or the increase of the annual revenue of its inhabitants.
If the balance be even, and if the trade between the two places consist altogether in the exchange of their native commodities, they will, upon most occasions, not only both gain, but they will gain equally, or very near equally; each will in this case afford a market for a part of the surplus produce of the other; each will replace a capital which had been employed in raising and preparing for the market this part of the surplus produce of the other, and which had been distributed among, and given revenue and maintenance to a certain number of its inhabitants.Some part of the inhabitants of each, therefore, will indirectly derive their revenue and maintenance from the other.As the commodities exchanged, too, are supposed to be of equal value, so the two capitals employed in the trade will, upon most occasions, be equal, or very nearly equal; and both being employed in raising the native commodities of the two countries, the revenue and maintenance which their distribution will afford to the inhabitants of each will be equal, or very nearly equal.
This revenue and maintenance, thus mutually afforded, will be greater or smaller in proportion to the extent of their dealings.
If these should annually amount to an hundred thousand pounds, for example, or to a million on each side, each of them would afford an annual revenue in the one case of an hundred thousand pounds, in the other of a million, to the inhabitants of the other.
If their trade should be of such a nature that one of them exported to the other nothing but native commodities, while the returns of that other consisted altogether in foreign goods; the balance, in this case, would still be supposed even, commodities being paid for with commodities.They would, in this case too, both gain, but they would not gain equally; and the inhabitants of the country which exported nothing but native commodities would derive the greatest revenue from the trade.If England, for example, should import from France nothing but the native commodities of that country, and, not having such commodities of its own as were in demand there, should annually repay them by sending thither a large quantity of foreign goods, tobacco, we shall suppose, and East India goods; this trade, though it would give some revenue to the inhabitants of both countries, would give more to those of France than to those of England.The whole French capital annually employed in it would annually be distributed among the people of France.But that part of the English capital only which was employed in producing the English commodities with which those foreign goods were purchased would be annually distributed among the people of England.The greater part of it would replace the capitals which had been employed in Virginia, Indostan, and China, and which had given revenue and maintenance to the of those distant countries.If the capitals were equal, or nearly equal, therefore this employment of the French capital would augment much more the revenue of the people of France than that of the English capital would the revenue of the people of England.France would in this case carry on a direct foreign trade of consumption with England; whereas England would carry on a round-about trade of the same kind with France.
The different effects of a capital employed in the direct and of one employed in the round-about foreign trade of consumption have already been fully explained.
There is not, probably, between any two countries a trade which consists altogether in the exchange either of native commodities on both sides, or of native commodities on one side and of foreign goods on the other.Almost all countries exchange with one another partly native and partly foreign goods.That country, however, in whose cargoes there is the greatest proportion of native, and the least of foreign goods, will always be the principal gainer.