An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

forcibly, in reducing the value of those metals there, than the

corn laws can do in Great Britain. And, secondly, this bad policy

is not in those countries counterbalanced by the general liberty

and security of the people. Industry is there neither free nor

secure; and the civil and ecclesiastical governments of both

Spain and Portugal are such as would alone be sufficient to

perpetuate their present state of poverty, even though their

regulations of commerce were as wise as the greatest part of them

are absurd and foolish.

The 13th of the present king, c. 43, seems to have established a

new system with regard to the corn laws, in many respects better

than the ancient one, but in one or two respects perhaps not

quite so good.

By this statute, the high duties upon importation for home

consumption are taken off, so soon as the price of middling wheat

rises to 48s. the quarter; that of middling rye, pease, or beans,

to 32s.; that of barley to 24s. ; and that of oats to 16s. ; and

instead of them, a small duty is imposed of only 6d upon the

quarter of wheat, and upon that or other grain in proportion.

With regard to all those different sorts of grain, but

particularly with regard to wheat, the home market is thus opened

to foreign supplies, at prices considerably lower than before.

By the same statute, the old bounty of 5s. upon the exportation

of wheat, ceases so soon as the price rises to 44s. the quarter,

instead of 48s. the price at which it ceased before; that of

2s:6d. upon the exportation of barley, ceases so soon as the

price rises to 22s. instead of 24s. the price at which it ceased

before ; that of 2s:6d. upon the exportation of oatmeal, ceases

so soon as the price rises to 14s. instead of 15s. the price at

which it ceased before. The bounty upon rye is reduced from

3s:6d. to 3s. and it ceases so soon as the price rises to 28s.

instead of 32s. the price at which it ceased before. If bounties

are as improper as I have endeavoured to prove them to be, the

sooner they cease, and the lower they are, so much the better.

The same statute permits, at the lowest prices, the importation

of corn in order to be exported again, duty free, provided it is

in the mean time lodged in a warehouse under the joint locks of

the king and the importer. This liberty, indeed, extends to no

more than twentyfive of the different ports of Great Britain.

They are, however, the principal ones; and there may not,

perhaps, be warehouses proper for this purpose in the greater

part of the others.

So far this law seems evidently an improvement upon the ancient

system.

But by the same law, a bounty of 2s. the quarter is given for the

exportation of oats, whenever the price does not exceed fourteen

shillings. No bounty had ever been given before for the

exportation of this grain, no more than for that of pease or

beans.

By the same law, too, the exportation of wheat is prohibited so

soon as the price rises to fortyfour shillings the quarter; that

of rye so soon as it rises to twenty-eight shillings; that of

barley so soon as it rises to twenty-two shillings ; and that of

oats so soon as they rise to fourteen shillings. Those several

prices seem all of them a good deal too low; and there seems to

be an impropriety, besides, in prohibiting exportation altogether

at those precise prices at which that bounty, which was given in

order to force it, is withdrawn. The bounty ought certainly

either to have been withdrawn at a much lower price, or

exportation ought to have been allowed at a much higher.

So far, therefore, this law seems to be inferior to the ancient

system. With all its imperfections, however, we may perhaps say

of it what was said of the laws of Solon, that though not the

best in itself, it is the best which the interest, prejudices,

and temper of the times, would admit of. It may perhaps in due

time prepare the way for a better.

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 silver would be annually returned to it. It is upon this

principle that the treaty of commerce between England and

Portugal, concluded in 1703 by Mr Methuen, has been so much

commended. The following is a literal translation of that treaty,

which consists of three articles only.

ART. I.

His sacred royal majesty of Portugal promises, both in his own

name and that of his successors, to admit for ever hereafter,

into Portugal, the woollen cloths, and the rest of the woollen

manufactures of the British, as was accustomed, till they were

prohibited by the law ; nevertheless upon this condition :

ART. II.

That is to say, that her sacred royal majesty of Great Britain

shall, in her own name, and that of her successors, be obliged,

for ever hereafter, to admit the wines of the growth of Portugal

into Britain; so that at no time, whether there shall be peace or

war between the kingdoms of Britain and France, any thing more

shall be demanded for these wines by the name of custom or duty,

or by whatsoever other title, directly or indirectly, whether

they shall be imported into Great Britain in pipes or hogsheads,

or other casks, than what shall be demanded for the like quantity

or measure of French wine, deducting or abating a third part of

the custom or duty. But if, at any time, this deduction or

abatement of customs, which is to be made as aforesaid, shall in

any manner be attempted and prejudiced, it shall be just and

lawful for his sacred royal majesty of Portugal, again to

prohibit the woollen cloths, and the rest of the British woollen

manufactures.

ART. III.

The most excellent lords the plenipotentiaries promise and take

upon themselves, that their above named masters shall ratify this

treaty; and within the space of two months the ratification shall

be exchanged.

By this treaty, the crown of Portugal becomes bound to admit the

English woollens upon the same footing as before the prohibition;

that is, not to raise the duties which had been paid before that

time. But it does not become bound to admit them upon any better

terms than those of any other nation, of France or Holland, for

example. The crown of Great Britain, on the contrary, becomes

bound to admit the wines of Portugal, upon paying only two-thirds

of the duty which is paid for those of France, the wines most

likely to come into competition with them. So far this treaty,

therefore, is evidently advantageous to Portugal, and

disadvantageous to Great Britain.

It has been celebrated, however, as a masterpiece of the

commercial policy of England. Portugal receives annually from the

Brazils a greater quantity of gold than can be employed in its

domestic commerce, whether in the shape of coin or of plate. The

surplus is too valuable to be allowed to lie idle and locked up

in coffers; and as it can find no advantageous market at home, it

must, notwithstanding; any prohibition, be sent abroad, and

exchanged for something for which there is a more advantageous

market at home. A large share of it comes annually to England, in

return either for English goods, or for those of other European

nations that receive their returns through England. Mr Barretti

was informed, that the weekly packet-boat from Lisbon brings, one

week with another, more than �50,000 in gold to England. The sum

had probably been exaggerated. It would amount to more than

�2,600,000 a. year, which is more than the Brazils are supposed

to afford.

Our merchants were, some years ago, out of humour with the crown

of Portugal. Some privileges which had been granted them, not by

treaty, but by the free grace of that crown, at the solicitation,

indeed, it is probable, and in return for much greater favours,

defence and protection from the crown of Great Britain, had been

either infringed or revoked. The people, therefore, usually most

interested in celebrating the Portugal trade, were then rather

disposed to represent it as less advantageous than it had

commonly been imagined. The far greater part, almost the whole,

they pretended, of this annual importation of gold, was not on

account of Great Britain, but of other European nations; the

fruits and wines of Portugal annually imported into Great Britain

nearly compensating the value of the British goods sent thither.

Let us suppose, however, that the whole was on account of Great

Britain, and that it amounted to a still greater sum than Mr

Barretti seems to imagine ; this trade would not, upon that

account, be more advantageous than any other, in which, for the

same value sent out, we received an equal value of consumable

goods in return.

It is but a very small part of