Essai sur la Nature du Commerce in Général (Essay on the Nature of Trade in General)

PART THREE

Part III, Chapter I

Of Foreign Trade

When a State exchanges a small product of Land for a larger in Foreign Trade, it seems to have the advantage; and if current money is more abundant there than abroad it will always exchange a smaller product of Land for a greater.

When the State exchanges its Labour for the produce of foreign land it seems to have the advantage, since its inhabitants are fed at the Foreigner’s expense.

When a State exchanges its Produce conjointly with its Labour, for a larger Produce of the Foreigner conjointly with equal or greater labour, it seems again to have the advantage.

If the ladies of quality of Paris consume yearly Brussels lace to the value of 100,000 ounces of silver, a quarter of an acre of land in Brabant, which will grow 150 pounds weight of flax, to be made into fine lace in Brussels, will answer this value. This will require the yearly labour of about 2000 people in Brabant for the several parts of the work from the sowing of the flax to the final perfection of the lace. The lace merchant or undertaker at Brussels will advance the capital. He will directly or indirectly pay all the spinners and lace-women and the proportion of the labour of those who make their tools. All those who have taken part in the work will buy, directly or indirectly, their maintenance from the Farmer in Brabant who pays in part the Rent of his Landlord. If in this oeconomy the produce of the Land attributed to these 2000 persons be put at 3 acres per head as well for the maintenance of themselves as for that of their families who subsist in part upon it, there will be 6000 acres of land in Brabant employed for the support of those who have worked on the lace, at the expense of the ladies of Paris who will pay for and wear the lace.

The ladies of Paris will pay the 100,000 ounces of silver, each according to the amount she has bought. All this silver must be sent to Brussels in specie, less only the cost of remittance, and the Undertaker at Brussels must find in it not only payment of all his advances and the interest of the money which he has perhaps borrowed, but also a profit on his undertaking for the maintenance of his family. If the price which the ladies pay for the lace does not cover all the costs and profits there will be no encouragement for this Manufacture, and the Undertakers will cease to carry it on or become bankrupt; but as we have supposed this Manufacture is continued, it is necessary that all costs be covered by the prices paid by the Ladies of Paris, and the 100,000 ounces of silver sent to Brussels if the people of Brabant take no commodity from France to compensate this debt.

But if the inhabitants of Brabant are fond of Champagne wine and consume thereof annually the value of 100,000 ounces of silver, the heading under Wine will answer that under Lace, and the Balance of Trade with regard to these two branches will be level. The compensation and circulation will be effected through the agency of Dealers and Bankers taking a hand in it on each side.

The ladies of Paris will pay 100,000 ounces to him who sells and delivers to them the lace; he will pay them to the Banker who will give him one or more Bills of Exchange on his Brussels correspondent. The Banker will remit the money to the Wine merchants in Champagne who have 100,000 ounces of silver at Brussels and who will give him their Bills of Exchange of the same value drawn upon him by his Brussels correspondent. Thus the 100,000 ounces paid for the Champagne wine at Brussels will balance the 100,000 ounces paid for the lace at Paris, and in this way the trouble of sending to Brussels the money received at Brussels will be avoided. This balance is effected by Bills of Exchange, the nature of which I will try to explain in the next chapter.

Meanwhile this example shews that the 100,000 ounces which the Ladies of Paris pay for the lace, come into the hands of the Merchants who send Champagne wine to Brussels; and that the 100,000 ounces which the consumers of the Champagne pay for this wine at Brussels fall into the hands of the Undertakers or Lace merchants. The Undertakers on each side distribute this money to those whose Labour they employ, either on the wines or on the lace.

It is clear from this that the Ladies of Paris support and maintain all those who work on the lace in Brabant and cause money to circulate there, and equally that the consumers of Champagne wine at Brussels support and maintain in Champagne not only the Vineyard keepers and others who take part in the production of the Wine, the Cartwrights, Farriers, Carters, etc. who take part in the transport, and the Horses engaged in it, but that they also pay the value of the produce of the Land for the Wine, and cause a circulation of money in Champagne.

Nevertheless this circulation or trade in Champagne, which makes so great a stir, which maintains the Keeper of the Vineyard, the Farmer, the Cartwright, the Farrier, the Carter, etc. and which pays precisely as well the Rent of the owner of the Vineyard as that of the Owner of the pastures which serve to feed the Carthorses, is in the present case a burdensome and unprofitable trade to France in its results.

If the muid of wine sells at Brussels for 60 ounces of silver and if we suppose one acre of vine-land produces 4 muids there must be sent to Brussels the produce of 4166½ acres of land to correspond to 100,000 ounces of silver, and about 2000 acres of pasture and arable for the hay and oats consumed by the cart horses if they are solely employed on this work all the year round. And so there will be about 6000 acres of land abstracted from the maintenance of Frenchmen, and that of the people of Brabant increased by over 4000 acres of produce, since the Champagne wine which they drink saves more than 4000 acres which they would probably use to produce beer for their drink if they did not drink wine. However the lace with which all that is paid for costs the people of Brabant only one quarter of an acre of flax. Thus with one acre of produce allied to their Labour, the people of Brabant pay for more than 16,000 acres to the French, their conjoined labour being less. They obtain an increase of subsistence and give only an article of luxury which brings no real advantage to France, since the lace is worn and consumed there and cannot then be exchanged for anything useful. Following the rule of intrinsic values, the land used in Champagne for the production of the wine, the maintenance of the Vineyard-keepers, the Coopers, the Cartwrights, Farriers, Carters, Carthorses, etc., ought to be equal to the Land used in Brabant for the production of the Flax, the support of the spinners and lace makers, and all those who have taken part in the manufacture of this lace.

But if money is more abundant in circulation in Brabant than in Champagne Land and Labour will be dearer there and consequently, valuing in silver both sides, the French will lose still more considerably.

This is an example of a branch of trade which strengthens the Foreigner, lessens the number of inhabitants of the State, and without causing any circulating money to leave it weakens the same State. I have chosen it to shew more strikingly how one State may be the dupe of another in Trade, and the method of judging the advantages and disadvantages of Foreign trade.

It is by examining the results of each branch of commerce singly that Foreign TRADE can be usefully regulated. It cannot be distinctly apprehended by abstract reasons. It will always be found by examining particular cases that the exportation of all Manufactured articles is advantageous to the State, because in this case the Foreigner always pays and supports Workmen useful to the State: that the best returns or payments imported are specie, and in default of specie the produce of Foreign land into which there enters the least labour. By these methods of trading States which have very little raw produce are often seen to support inhabitants in great numbers at the expense of Foreigners, and large States maintain their inhabitants in greater ease and abundance.

But as great States have no need to increase the number of their inhabitants it is enough to make those who are in it live there on the raw produce of the State with more comfort and ease and to increase the strength of the State for its defence and security. To do so by foreign trade it is needful to encourage as much as possible the export of goods and manufactures of the State in exchange so far as may be for gold and silver in kind. If by abundant harvests it happened that there was in the State much produce over and above the ordinary annual consumption it would be profitable to encourage the exportation of it in return for its value in gold and silver. These metals do not corrupt and disappear like the produce of the Land, and with gold and silver one can always import into the State what is lacking there.

It would not however be profitable to put the State into the annual custom of sending abroad large quantities of its raw produce in return for foreign manufactures. It would be to weaken and diminish the inhabitants and the strength of the State at both ends.

But I have no intention of entering into detail as to the branches of trade which should be encouraged for the good of the State. Enough to say that it should always be endeavoured to import as much silver as possible.

The increase in the quantity of silver circulating in a State gives it great advantages in foreign trade so long as this abundance of money lasts. The State then exchanges a small quantity of produce and labour for greater. It raises its taxes more easily and finds no difficulty in obtaining money in case of public need.

It is true that the continued increase of money will at length by it abundance cause a dearness of Land and Labour in the State. The goods and manufactures will in the long run cost so much that the Foreigner will gradually cease to buy them, and will accustom himself to get them cheaper elsewhere, and this will by imperceptible degrees ruin the work and manufactures of the State. The same cause which will raise the rents of Landlords (which is the abundance of money) will draw them into the habit of importing many articles from foreign countries where they can be had cheap. Such are the natural consequences. The Wealth acquired by a State through Trade, Labour and Oeconomy will plunge it gradually into luxury. States who rise by trade do not fail to sink afterwards. There are steps which might be, but are not, taken to arrest this decline. But it is always true that when the State is in actual possession of a Balance of Trade and abundant money it seems powerful, and it is so in reality so long as this abundance continues.

Infinite inductions might be added to justify these ideas of Foreign Trade and the advantages of abundant money. It is astonishing to observe the disproportion in the circulation of money in England and in China. The Manufactures of the Indies, like silks and printed calicoes, muslins, etc. in spite of a sea voyage of 18 months, are at a very low price in England, which would pay for them with the thirtieth part of her articles and manufactures if the Indians would buy them. But they are not so foolish as to pay extravagant prices for our work while work is done better and infinitely cheaper in their own country. So they sell us their Manufactures only for ready cash, which we carry to them annually to increase their wealth and diminish our own. The Indian manufactures consumed in Europe only diminish our money and the work of our own Manufactures.

An American who sells beaver skins to a European is rightly astonished to learn that woollen hats are as serviceable as those made of beaver, and that all the difference, which causes so long a sea journey, is in the fancy of those who think beaver hats lighter and more agreeable to the eye and the touch. However as these beaver skins are ordinarily paid for to the American in articles of iron, steel, etc. and not in silver, it is a trade which is not injurious to Europe, especially since it supports workmen and particularly Sailors, who in the needs of the State are very useful, whilst the trade with the Manufactures of the East Indies carries off the money and diminishes the workmen of Europe.

It must be admitted that the East India trade is profitable to the Dutch Republic and that she makes the loss of it fall on the rest of Europe by selling the spices and manufactures in Germany, Italy, Spain and the New World, which return to her all the money which she sends to the Indies and much more. It is even useful to Holland to clothe her women and other folk with the Manufactures of India rather than with English or French fabrics. It suits the Dutch better to enrich the Indians than their neighbours who might profit by it to oppress them. Moreover they sell to the other peoples of Europe the cloths and small Manufactures of their own raw produce much dearer than they sell the Indian manufactures at home where they are consumed.

England and France would be mistaken to imitate the Dutch in this respect. These kingdoms have at home the means of clothing their women with their own raw material, and though their fabrics are dearer than those of Indian manufacture they should prevent their people from wearing the foreign material. They ought not to permit the falling off of their own articles and manufactures nor become dependent on the foreigner, still less allow their money to be taken away for that purpose.

But as the Dutch find means to sell Indian merchandise in the other States of Europe, the English and French should do the same, whether to diminish the naval power of Holland or to increase their own, and above all to do without the aid of Holland in the branches of consumption which a bad habit has rendered necessary in these kKingdoms. It is an evident disadvantage to allow the wearing of Indian fabrics in the kingdoms of Europe which have wherewith to clothe their people with their own products.

Just as it is disadvantageous to a State to encourage foreign manufactures so it is to encourage foreign navigation. When a State sends abroad its articles and manufactures it derives the full advantage if it sends them in its own ships. It then maintains a good number of sailors who are as useful to the State as workmen. But if it leaves the carriage of them to foreign vessels it strengthens the foreign shipping and weakens its own.

Navigation is an essential point in foreign trade. In the whole of Europe the Dutch are those who build ships the cheapest. Timber is floated down to them by river, and the proximity of the North supplies them at less expense with masts, wood, pitch, rope, etc. Their Windmills for sawing wood facilitate the working of it. Also they navigate with smaller crews and their sailors live very cheaply. One of their Windmills for sawing wood saves the labour of 80 men a day.

Owing to these advantages they would be the only sea-carriers in Europe if cheapness only were followed. And if they had enough of their own raw material to form an extensive commerce they would doubtless have the most flourishing maritime service in Europe. But the greater number of their seamen does not suffice without the interior strength of the State, for the superiority of their naval power. They would never arm warships nor sailors if the State had large revenues to build the ships and pay the men: they would profit in everything from extended markets.

England, in order to prevent the Dutch from increasing at her expense their advantage on the Sea by this cheapness, has forbidden any nation from bringing into England other merchandise than that of their own growth. In this way, the Dutch being unable to serve as Carriers for England, the English have strengthened their own shipping. And though they sail at greater costs than the Dutch the wealth of their overseas cargoes renders these costs less considerable.

France and Spain are maritime States which have rich produce sent to the North, whence goods and merchandise are brought to them. It is not surprising that their shipping is inconsiderable in proportion to their produce and the extent of their seaboard, since they leave it to foreign vessels to bring them all they receive from the North and to take away from them the goods which the States of the North receive from them.

These States, France and Spain, do not take into account in their policy the consideration of Trade in the way in which it would be advantageous. Most Merchants in France and Spain who have to do with the foreigner are rather Agents or Clerks of foreign merchants than Adventurers carrying on the trade on their own account.

It is true that the States of the North are, by their situation and the vicinity of countries which produce all that is needed for building ships, in a position to carry everything cheaper than France and Spain could do. But if these two kingdoms took steps to strengthen their shipping, this obstacle would not prevent them. England has long since partly shewn them the example. They have at home and in their Colonies all that is needed for the construction of ships, or at least it would not be difficult to get them produced there, and there is an infinity of methods that might be used to make such a policy successful if the legislature or the ministry would concur in it. My subject does not allow me in this Essay to examine these methods in detail. I will limit myself to saying that in countries where trade does not regularly support a considerable number of ships and sailors it is almost impossible for the Prince to maintain a flourishing navy without such expense as would be capable by itself of ruining the treasure of his State.

I will conclude then by observing that the trade most essential to a State for the increase or decrease of its power is foreign trade, that the home trade is not of equally great importance politically, that foreign trade is only half supported when no care is taken to increase and maintain large merchants who are natives of the country, ships, sailors, workmen and manufacturers, and above all that care must always be taken to maintain the balance against the foreigner.