Book IV: Chapter 6

CHAPTER VI.

OF TREATIES OF COMMERCE.

When a nation binds itself by treaty, either to permit the entry
of certain goods from one foreign country which it prohibits from
all others, or to exempt the goods of one country from duties to
which it subjects those of all others, the country, or at least
the merchants and manufacturers of the country, whose commerce is
so favoured, must necessarily derive great advantage from the
treaty. Those merchants and manufacturers enjoy a sort of
monopoly in the country which is so indulgent to them. That
country becomes a market, both more extensive and more
advantageous for their goods: more extensive, because the goods
of other nations being either excluded or subjected to heavier
duties, it takes off a greater quantity of theirs; more
advantageous, because the merchants of the favoured country,
enjoying a sort of monopoly there, will often sell their goods
for a better price than if exposed to the free competition of all
other nations.

Such treaties, however, though they may be advantageous to the
merchants and manufacturers of the favoured, are necessarily
disadvantageous to those of the favouring country. A monopoly is
thus granted against them to a foreign nation; and they must
frequently buy the foreign goods they have occasion for, dearer
than if the free competition of other nations was admitted. That
part of its own produce with which such a nation purchases
foreign goods, must consequently be sold cheaper; because, when
two things are exchanged for one another, the cheapness of the
one is a necessary consequence, or rather is the same thing, with
the dearness of the other. The exchangeable value of its annual
produce, therefore. is likely to be diminished by every such
treaty. This diminution, however, can scarce amount to any
positive loss, but only to a lessening of the gain which it might
otherwise make. Though it sells its goods cheaper than it
otherwise might do, it will not probably sell them for less than
they cost; nor, as in the case of bounties, for a price which
will not replace the capital employed in bringing them to market,
together with the ordinary profits of stock. The trade could not
go on long if it did. Even the favouring country, therefore, may
still gain by the trade, though less than if there was a free
competition.

Some treaties of commerce, however, have been supposed
advantageous, upon principles very different from these; and a
commercial country has sometimes granted a monopoly of this kind,
against itself, to certain goods of a foreign nation, because it
expected, that in the whole commerce between them, it would
annually sell more than it would buy, and that a balance in gold
and